Many historians are beginning to show that it really wasn't Wall Street's fault that the Great Depression occurred. Really, only 2-3% of Americans had money in stocks. An article by The Economist states that "However, historians in other parts of the world have pointed out that the global economy was already on a downward path before stock prices in New York started falling. American house prices peaked by the mid-1920s and the construction industry had gone into a tailspin by 1929. Industrial production in Germany and Britain, Europe’s largest economies, was already falling by mid-1928. The redirection of capital towards the overheating stock market in America exacerbated credit shortages elsewhere in the world before the crash. Businesses in Europe and Latin America were already facing a credit crunch by the start of 1929. As with the rise of protectionism, it seems that the Wall Street crash was a symptom of problems in the global economy, rather than the underlying cause of them." The article talks more in depth about how today's problems should not be compared to the Great Depression, as that was a completely different time period.
Here's the link
First things first, a larger font size would be much appreciated. Other than that this does a really good job at explaining why the stock market crash was not the fault of Wall Street. By telling us that europe's largest economies were already starting to fall, it helps to show that the crash was really inevitable.
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ReplyDeleteI agree that the accumulation of several economic issues was the cause of the great depression rather than the stock market crash. However, I do think it is important to mention that the crash caused much panic amongst the consumer class, who held most of the spending power, and therefore drastically decreased economic stimulation. It was also the reason why companies lost profits because production had come to a halt, therefore much of the middle class (another spending group) was unemployed. But I do agree with you that pre-existing conditions worsened the situation.
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http://www.pbs.org/wgbh/americanexperience/features/general-article/dustbowl-great-depression/
I agree with Megana; I think she talked about the same issue in one of her posts, where she said something along the lines of how the 2-3% who held money in stocks controlled the general health of the economy. At the time, there was also a huge wealth disparity. Right before the stock market crash, the top 10% of Americans held 84% of the wealth of the entire country. It seems to me that the upper class would be the ones investing in the stock market, so it's entirely possible that even if a small fraction of Americans invested, they were investing a large proportion of wealth. When that was withdrawn, investment would have tanked.
ReplyDeleteChristian Science Monitor, 11-10-2014, "Economic inequality in the US reaches levels not seen since Great Depression," http://www.csmonitor.com/USA/USA-Update/2014/1110/Economic-inequality-in-the-US-reaches-levels-not-seen-since-Great-Depression