The Four Causes Of The Industrial Depression And Depression In 1929
Although all economists seemed to know what business cycles look like, they didn’t really agree about what caused them. Some credited cycles to the effects of the weather on agriculture. Some economists also claimed that climatic changes had delicate psychological effects on many people, at times causing them to be positive, at other times to be negative, with corresponding effects on their economic performance. Most economists, however, saw a more direct connection between economic activity and the cycles. Some located the source of change in banking …show more content…
During the flourishing times, the rich were unable to spend all their income. They saved more, which resulted in increased investment, more production, and eventually in more goods than the rest of the civilization had the money to consume. Then goods piled on shelves and in warehouses, prices dropped, production was delayed, and workers were fired. As a result, the economy entered the depression phase of the cycle.
Other elements were related to production. However, people insisted that the main reason why the Depression had not ended was that monopolistic corporations and cartels, labor unions, and government controls were prying with the free functioning of market forces. Rigid prices, rigid wages, and government regulations such as tariffs had stifled new investment, kept inefficient producers from going bankrupt, and prevented prices from falling low enough to encourage demands. These explanations of the business cycles varied mainly in emphasis. They complemented rather than disputed one