Analyze: causes of the Great Depression

Essay by ilnet2000High School, 10th gradeA+, April 2004

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The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the agricultural distress of the farmers. The misdistribution of wealth in the 1920's existed on many levels. Money was unequally distributed between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy.

The uneven distribution of income in the United States depicts one significant cause of the depression. Income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded.

This was due largely to two factors: While businesses showed remarkable gains in productivity during the 1920s, workers got a relatively small share of the wealth this produced. At the same time, huge cuts were made in the top income-tax rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers' wages grew by only 8 percent. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds.

The rising incomes of the wealthiest Americans fueled rapid growth in the stock market, especially between 1927 and 1929. Soon the prices of stocks were rising far beyond the worth of the shares of the companies they represented. People were willing to pay inflated prices because...