Great Depression Essay Example | Topics and Well Written Essays - 1250 words

Great Depression - Essay Example The citizens, on the other hand, cut down their expenditure. It then spread to the other parts of the world because of the relationships the US had with other countries. Both the poor and the rich countries felt the effects of the great depression. Cities were affected and mostly the ones which depended on heavy industry. Construction and farming were hit hard. The level of joblessness rose. Citizens blamed the president in power for the economic depression they were facing and were not willing to re-elect him back to power. This led to the election of President Roosevelt, a democrat, who applied some changes in the economy of America and adopted new policies. In the mid 1930s, some economies began to recover with some recovering after the end of the World War 2. This essay will look into the causes of the Great depression and the reasons it lasted so long. Causes of the Great Depression The economic depression happened because of a number of causes. The crash of the stock market is said to be the spark that ignited the fire of the economic depression. A number of scholars agree that it is the leading cause of the great depression. At the end of the market day on 24 October, the market had declined by 21 percent from the high. The market fell by several points in the first three quarters of the year. A selling panic occurred. By the year 1932, when the crash was completed, stocks had lost almost 90 percent of their value. The great depression could not be avoided despite the fact that the stock market recovered some of its losses (Walton 424). Another cause of the depression was the reduction in purchasing. After the fall in the stock market, people of both the upper and lower classes stopped purchasing items. This was due to the fear of probable future economic problems. No one was ready to risk his property. Resultantly, the production of items decreased leading to need of a smaller work force. Employees had to sack a number of their employees to reduce the w orkforce resulting in a rise in the number of the unemployed to a percentage of around twenty-five. The people who lost their jobs could not continue paying for the items they had bought hence led to repossession of their items (Walton 425). Another great cause of the depression was bank failures. Over nine thousand banks failed throughout the 1930s. This failure led a massive number of people losing their savings and rendering them broke. The few surviving banks were concerned with how they will be able to continue. They hence had to come up with new strategies on how they will continue without failing. One of the strategies was they are not extending loans. This lead to a worse situation than it was after savings got lost because of bank failures. People spent less since they had lost savings in the failed banks and the surviving banks were not ready to give them loans. Hence, the demand went down (Walton 429). Things got more difficult and businesses started failing. The American government thought that creating an American economic policy with Europe will save the situation but it did not. This policy was called the Smoot-Hawley Tariff and was created in the 1930. Its aim was to help protect the American companies. The policy increased the import tax charge. This increase in the import tax led to less trade between America and foreign countries. Countries found it expensive to trade with America after the increase in the i