Causes of Great Depression in USA

Running head: AMERICAN HISTORY
American History
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1AMERICAN HISTORY
A. Causes of Great Depression in USA
There are a few specific reasons that are contributing factor for the Great Depression
in USA after the World War I. The major causes of Great Depression are-
Economic policies
The Great Depression mainly started after the stock market crash in USA in the year
of 1929. However it is started as a simple recession in the summer of 1929 and converted into
a severe condition on a black Tuesday of 1929.In the October,1929 the share market started
to decline and by 1932 the market crashed completely. The share values of the companies
started to decrease. Lack of proper employment policies in the American economy was also
another reason of Great depression as in 1930 there was almost 4.3 million unemployed in
US and by 1933 the number touched the figure of 13 million(Pells & Romer, 2018).
Trade Concerns
After the share market crash in 1929, the industrial production was greatly hampered
in US and the industrial production declined by 47%. As a result, the gross domestic product
(GDP) was also drastically downed by 30%. A downfall in GDP caused declination of the
wholesale price index (almost 33% declination) and such decline was referred to as
deflation(Pells & Romer, 2018). In addition to this, the increasing rate of unemployment also
altered the buying capacity of the people in USA. The general price deflation was directly
associated with the trade concern of the US economy.
Banking practices
Banking practices of USA had a major role in the Great depression of USA. The
banking system of USA is greatly relied on the capital of their own. After the great
depression, people lost confidence on banking system and they started to withdraw all their

2AMERICAN HISTORY
money from the bank. Banks had only a few amount of money as cash and they must
liquidate loans for increasing the cash amount. This process caused failure of the banks and
the US had faced several incidents of banking panics throughout the great depression.
International Commerce
The Great Depression greatly affected the international economy and business and
that resulted in end of the international gold standard. Before the great depression, many
European countries had faced enhancement in the union membership and they had also
introduced government pension schemes. These two trends were greatly increased due to the
great depression. In addition, in many countries in the world, the financial market was
substantially increased(Pells & Romer, 2018).
B. New Deal
The New deal was introduced by Franklin D. Roosevelt in order to combat against the
condition of Great Depression in USA.
Major legislation
The first new deal was first introduced in 1933 and it was ended in 1934. In the first
new deal the major legislations were The Agricultural Adjustment Act, The Civilian
Conservation Act, The Federal Emergency Relief Act, The National Recovery Act,The
Federal Deposit Insurance Corporation. The second phase of the New Deal was introduced in
1935 and lasted for 3years that is from 1935 to 1938. In the second new deal the major
legislations were The Works Progress Administration (WPA), The Wagner Labour Relation
Act, The Social Security Act, The Fair Labour Standards Act, and Resettlement Act. The
Third New Deal was introduced in 1937 and in this there were United States Housing Act,
Farm Tendency Act, and Farm Security Administration (Amadeo, 2018)