Great Depression Dbq

The 1920’s was a wild time, full of parties, an increased standard of living, and new innovative gadgets. It was an era of peace and prosperity for Americans nationwide. But every party must come to an end. The thinly veiled failing economy during the 1920’s would ultimately come crashing down right before the dawn of the thirty’s. However, an economy takes a long time and a lot of pressure to fail to the extent of the Great Depression. The main causes of the Great Depression were the income maldistribution which created an unstable economic environment, extreme debt brought about by speculation and installment buying habits, and overproduction that made wages drop even lower than before.

The large gap of wealth between the classes was a large

contributor to the start of the Great Depression. By the 1920s the ideas of paying for goods and services via credit and debt as an acceptable state in which everyone was constantly living in, were new ways of thinking.

As previously stated, the 20’s were a time of prosperity for America, be as it may, a dangerous illusion. During this time, the standard of living dramatically increased as factories were able to mass produce more and more innovative gadgets, such as the radio and the vacuum cleaner. While the price to live steadily rose, the average annual income, did not. In a table constructed by the data in Frederick Lewis Allen’s The Big Change (Document 9), the annual income and the percent of American families making that income are listed. If “in 1929, a $2000 income was considered the minimum necessary for meeting basic needs of the average US family.” The chart displays how only 60% of American families at the time made made less money than was needed to provide food, water, and shelter for themselves, let alone the new commodities that made life easier. Despite not being able to inherently afford the perks of the era, in attempts to keep up with the established social standards, many people began to live off credit. As William

E. Leuchtenburg said in his 1958 edition of The Perils of Prosperity, “consumers bought goods on installment at a rate faster than their income was expanding,” (Document 6). The problem with masses of Americans accumulating such great amounts of debt all at once, is that, eventually, the banks will want the money they are owed. Even at the dawn of the twentieth century, the American economy was dependant on people buying goods and services, as it still is today. Once people stop buying goods and services, the economy fails. That is what happened with the Great Depression, once people realized that they needed to cut down expenses in order to pay back their debts, they stopped buying as much. This means that about 60% of the population below the poverty line, millions more fell below as well to pay off debts. That left only the upper class, the ones mostly unaffected by this turn of events, to keep the economy going by buying goods and services.
As bad as that was, it was escalated even more by the speculation and installment buying used to invest in the stock market.

Despite having been around for over one hundred years, people began developing poor judgement when it came to investments in the late nineteenth century. Out of desire to participate in the ever growing popularity of the stock market, people took out large amounts of stock on an installment plan, with money they did not have. As Harry J. Carmen and Harold C. Syrett described in their publication of A History of the American People, as investing in stocks increased in popularity, “the exchange became more of a betting ring.” (Document 5) and “security prices were forced up by competitive bidding rather than by any fundamental improvement in American (business).” (Document 5). The stock market became a game, a challenge that was not fully thought through. This lead to certain businesses getting ahead of others, not due to their success, but because of the uneducated support they were getting from those who knew nothing about the businesses they were investing in, trying to get rich quick. Since those who took out stocks on installment could not pay them off, the stock market eventually collapsed all together. On October 29, 1929, the New York Times published an issue with the headline “STOCK PRICES SLUMP $14,000,000,000 IN NATION-WIDE STAMPEDE TO UNLOAD” (Document 3). Leading up to the ultimate crash, people began to see it coming and at the last second

on the 29th of October, 1929, people en mass attempted to get rid of their shares in the stocks, only contributing to the bleak aftermath left at the dawning of the Great Depression.
Before the official commencement of the Great Depression, many farmers had already entered a depression of their own and it was due to the prospect of overproduction. During World War I, new farming opportunities were opening up to Americans due to European countries being too enthralled in a war to produce enough food for their citizens at home and the soldiers away. However, as the fighting drew to a close and Europe was able to settle down once again, America was not prepared for their lack of oversea markets. Demands had gone down, but farmers were still producing the same amount. This made prices go down so as to get rid of the excess supplies quicker. A political comic from Current History in St. Paul Daily News, makes a comment on how terribly the farm industry had begun failing due to overproduction and price reductions.Then when things became worse, many farmers decided to produce and sell more goods, in attempts to make a better profit. The only thing this ended up doing was lowering prices more, therefore dropping their profits even lower. At this point, when most farmers began to be unable to pay for their farms, they had their properties taken by the bank,and were successfully stripped of their home, source of income, and source of food. Not only did overproduction affect the farming industry, but the manufacturing as well. In an ad from Fortune, Gar Wood Inc. was advertising personal boats for anywhere ranging from “$35,000” (Document 8) to “$10,000,” (Document 8). These boats are so ridiculously expensive that the majority of the population would not even be able to afford this even if they saved every penny all year. With such a small demographic, premade boats would most likely go mostly unsold. It was businesses like Gar Wood Inc. that would be forced to drop their prices until there was a point that they were no longer able to make any profit at all. Since businesses had begun to fail en mass, there were few to keep the economy going, only worsening the whole situation further.
Income maldistribution, speculation and installment buying, and overproduction are the three main causes of the Great Depression. Although there were many signs throughout the twenties of the oncoming doom, and even economists who predicted such a deep depression would occur, the twenties went on as if life were a party and America was at the very center. If the correct measures had been done, such as regulating businesses more and helping farmers get back on their feet after the war, the Great Depression may have been avoided. However, not all is bad from such a devastating time in American history, fore it changed American views on how the economy should be done and it serves, to this day, as an invaluable lesson as to how to take better care of our nation’s economy.