Many historians disagree on the causes of the Great Depression, which occurred in the late 1920s and lasted over a decade. Some believe it was a result of international economic disparity, and some claim it was due to the lack of consumer spending. Nevertheless, one thing is certain. The social and economic issues that took place in the U.S. during the 1920s were greatly reflected in and responsible for the causes of the Great Depression.
One major economic issue was the plight of the farmers across the nation during this time period. The farmers’ ordeal took place because new technologies in agriculture had developed thanks to scientific discoveries, such as Gregor Mendel did, which created hybrid crops that were more resistant to drought and pests. Also, farmers bought these new tractors, hybrid seeds, chemical fertilizers and pesticides and it seemed beneficial because it increased production. However, it resulted in overproduction of crops and these surpluses were called “Bumper Crops” (European Dictatorships). It created a negative economic effect because there was a high supply of food and there was too little demand by consumers. In turn, this decreased the prices of the crops and farmers received less profit. The farmers then could not afford to make payments on their loans they received from banks to purchase all the new expensive farming equipment. This resulted in banks, mostly the smaller ones, starting to fold. Farmers began renting land and this put them more in debt. As the banks folded, it led to a decline in purchasing power because there was even less money supply. This reflected greatly in the cause of the depression because it revealed the weaknesses in the credit structure and banking system.
Another issue was the rise in consumption. There were new ideals, such as buying on credit. The concept was “buy now, pay later” (European Dictatorships). People began taking out loans to purchase large items such as cars and they bought stocks on margin with credit. The new values of the time were based on prosperity and what people owned. This culture of consumption caused people to believe they needed these items, and it led to reckless spending. Also, banks and brokers carelessly invested in the stock market. This reflected in the cause of the Depression due to the stock market crash, which was the first visible sign in 1929 of the economic collapse. Furthermore, after the WWI, Germany was decimated and the Treaty of Versailles demanded a great deal of funds.
In conclusion, the impact of the social and economic issues that pelted the United States in the 1920s led up to the Great Depression and all of its causes such as the Stock Market Crash of 1929 and the newly formed credit system.
Todd, Allan. The European Dictatorships: Hitler, Stalin, Mussolini. Cambridge: Cambridge UP, 2002. Print.