The Great Depression in the United States brought an end to a long era of economic expansion and social progress which had been in full bloom since the 1890s (Mitchell 1947). There had been monetary recessions in 1907, 1913 and 1921, but these reversals were never severe enough or long enough to shake the deeply rooted confidence in the American economic system or to generate any widespread national discontent. Many history books tell of the depression of the ’30s; they often begin with the stock market crash of October 1929 (Estey 1950).

Among economists, a tendency to decry the importance of the crash as a cause of the depression: “The crash was part of the froth, rather than the substance of the situation” (Shannon 1960). The fundamental difficulty was America’s failure to readjust to the developments arising from World War I, which culminated in the depression of 1929. One cannot overlook the profound importance of the Wall Street crash. It shrank the supply of investment funds and at the same time shook the confidence on which investment expenditures depend (Hacker and Zahler 1952).

Personal expenditures were reduced and international trade and capital flows were disrupted. There were many complicated forces that combined to cause the depression. To clearly understand the circumstances preceding the depression, these influences must be explained. In the first place, there was the familiar business cycle recession (Galbraith 1954). For industry, the 1920s had been marked by prolonged prosperity. This was particularly notable in the field of construction and other capital production.

The Cause, Effect and Aftermath of the Great Depression

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