This paper examines the causes and legacy of the Great Depression, one of the most devastating economic crises in American and world history. Drawing on historical scholarship, the paper identifies three primary contributing factors: financial causes rooted in Federal Reserve policy and laissez-faire governance, ecological causes stemming from the Dust Bowl, and speculative causes driven by unchecked stock market fever. The paper traces how these forces converged to produce the catastrophic crash of October 1929 and the prolonged economic suffering that followed, ultimately concluding that the legacy of the Great Depression endures in the American consciousness to this day.
Although there are few Americans alive today who actually lived through the Great Depression, the event exacted an enormous toll on the country's — and ultimately the world's — economy in unprecedented ways, and some contemporaries questioned whether recovery was ever possible. To determine the facts, this paper reviews the literature concerning the Great Depression to identify its causes, including the financial, ecological, and speculative reasons for the collapse of the American economy. A discussion of the gradual recovery that spelled the end of the Great Depression is followed by a summary of the research and important findings concerning this seminal event in American history.
Although precise figures remain elusive, historians estimate that at least one-quarter — and perhaps even more — of the American workforce was unemployed during the period following the stock market crash in October 1929 through 1932, and 9,000 banks failed (Byas, 2016). This dismal period in American history was characterized by so-called "Hoovervilles" populated by desperate, impoverished people, as well as soup kitchens and bread lines (Byas, 2016). Notwithstanding the lack of precise figures, Byas emphasizes that "no one disputes that it was a desperate time" (2016, p. 34). Just as historians do not agree on precise figures, they are also divided concerning the causes of the Great Depression, as discussed further below.
Despite deepening financial problems across the country — including a shrinking gross domestic product for four years straight and the failure of more than 100,000 American businesses — Warren Harding refused to take action while he was president, preferring a laissez-faire approach based on his belief that a free market economy would right itself in time (Byas, 2016). Although Harding's inaction did not single-handedly "cause" the Great Depression, just as President Franklin Roosevelt alone did not "bring us out of it," Harding did set the stage for this enormous economic downturn (Byas, 2016).
For instance, during his tenure, Harding oversaw the creation of the Federal Reserve System ("the Fed"), which responded to slumps in the economy with massive infusions of cash rather than permitting normal market corrections to occur (Byas, 2016). As Byas concludes, "When the bust finally came in 1929, it was much more serious than it would have been had the Fed taken its foot off the money accelerator earlier" (p. 34). There were other causes of the Great Depression as well, including the Dust Bowl discussed below.
As if Americans did not have enough to contend with during the Great Depression, nature itself seemed to turn against the country. The Dust Bowl years during the early 1930s caused more than 2.5 million people to flee from the devastation in Oklahoma, Texas, Kansas, and Colorado to California, where they hoped to find work (Joseph, 2003). This massive domestic migration only further exacerbated the deprivations of these displaced people, who came to be called "Okies" regardless of their actual states of origin (Joseph, 2003).
A so-called "speculative class" emerged during the 1850s that morphed into a "fever of speculation" during the late 1920s, fueled by the expectation that the stock market bubble would continue to expand indefinitely (Salamon & Ebrahimi, 2014). This speculation, combined with the aforementioned financial causes, resulted in "Black Thursday" on October 24, 1929, signaling the beginning of the Great Depression (Salamon & Ebrahimi, 2014).
The research showed that financial, ecological, and speculative factors were all contributing causes of the Great Depression. Although the onset of the Great Depression was rapid, recovery required several years. It is reasonable to conclude that the legacy of this event remains firmly embedded in the American consciousness, even for those who did not live through it themselves.
Byas, S. (2016, December 5). The Great Depression: Why it started, continued, and ended. The New American, 32(23), 33–37.
"Stock market speculation and Black Thursday crash"
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