The so-called “good life” in the United States seemed infinite before the Great Depression occurred. However, companies overproduced goods and farms failed, giving rise to the economic disaster in the United States. At the time, President Hoover wanted businesses to volunteer to help the American people while the government stepped back. Meanwhile, American citizens were losing their jobs and their life savings. The Great Depression’s leading causes were the problems of overproduction of goods, the hope of stock market prices rising, and Hoover’s poor economic policies including favoring the wealthy.
Many economists have decided that the overproduction of goods was a crucial contributor to the Great Depression. At the start of the 1920s, many people bought goods they desired on credit or on the installment plan which required partial payments over time. Towards the end of the decade, many people could no longer afford to buy goods as often due to mounting personal debt. Because of the decline in consumerism, factories and farms were producing goods faster than people could buy them. Many industries suffered because of the lack of spending.
Since wages had risen during the increase in production, families wanted to save or invest the oney they had. After the overproduction of goods hit the market, businesses had to lay off workers because companies were not making enough of a profit to provide good wages, and so some workers began to lose their jobs. The automobile industry failed in 1925, leading to the slump of the steel, rubber, and glass industries. After Congress passed the Hawley-Smoot Tariff, the rates went up on the prices of goods.
The intention of the tariff was to create a protection for American manufacturers from foreign competition; however, it was unsuccessful and it weakened American sales of products abroad. European ountries could not afford the tax, due to their own economic issues, and they were unable to buy or sell goods in America. In addition, the overproduction of goods made it increasingly difficult for companies to remain in business. The economy began to fail because Americans, as well as Europeans, were no longer purchasing goods from U. S. industries.
Moreover, many struggling lower and middle-class families chose to invest much of their money in the stock market with the hope of becoming wealthy. Unfortunately, this mindset was more hopeful than realistic. Many Americans took risks in the stock market, hoping o quickly fix their financial problems. People would buy stocks on margin by paying a fraction of the price and borrowing the remaining cost from the bank. Bankers could charge high interest rates and ask for their money back at any time. Investors took an opportunity to sell their stocks at a higher price so that they could pay back the loans and gain a profit.
However, the risks many Americans took in the stock market were unsuccessful. Since most people did not have the money to pay the bank loans back, many banks closed down. Many Americans from the lower classes invested their entire life avings in the stock market, so they were left with nothing when it crashed on October 29, 1929. Everyone tried to pull their money out of the banks before the stock market crashed, and the ones involved in the stock market crash felt the effects of the crash first.
Risky speculation and easy credit undermined the backbone of the U. S. conomy which ultimately led to the Great Depression. Another major contributing factor to the Great Depression were the weak incentives of the federal government under President Hoover to help the citizens of America. The incentives put forth did not contribute to the solving of the nation’s problems. Unemployment rose, businesses closed, banks failed, and many families lost their homes during this time. The richer seemed to be getting richer and the poor were stuck in a cycle of poverty. Corporations were taking over smaller businesses and controlled the industry.
A small percentage of the population was extremely wealthy during this time and had incomes of about $100,000. On the other hand, 71% of families in American earned less than $2,500 a year and had no savings. Millions of Americans were homeless and were forced to live in shanty towns with houses made of scrap material and garbage. These towns were often called Hoovervilles” so named to mock the president. President Hoover felt that people should be masters of their own fate and that businesses should help the people through volunteer programs.
Showing a laissez faire (or let it be) approach, Hoover also felt the business community should regulate itself instead of asking for and expecting government aid. Hoover soon became became unpopular amongst the American population because he did not use his executive power in the way the people thought he should have. He refused to give the people money directly, and, instead, wanted them to invest in businesses and projects. The American people felt that Hoover did not care enough for the poor and most did not agree with his philosophy of limited government action.
Churches set up places where families could get a free meal. Although churches and ethnic communities organized their own relief efforts, the number of people in poverty grew and there were so many people looking for a handout that all this became too much for the charities. On Black Tuesday, the stock market lost over 30 billion dollars. This put a lot of citizens in distress in the United States during the Depression, especially those who invested their money in the stock market. The Depression disproportionately affected the impoverished, putting them into more severe poverty than ever before.
Homeless people were living in Hoovervilles and depended on soup kitchens for their meals. Many Americans held Herbert Hoover responsible for putting America in this economic emergency. With little access to food, the poor faced starvation and health issues. Men were embarrassed to be unemployed and would sometimes abandon their families out of guilt. Women were worried about how to feed their children, and if a woman had a job, she would sometimes be shunned by others because they felt as if she was aking a job of a man who needed the job to help his family.
Firing married women soon became the norm, and men would eventually take over their jobs. Trying to find a job during the Depression was very difficult. There was a lot of competition. Groups such as African Americans, Hispanics, and Asian Americans scrambled to find work, while white male workers took the low paying jobs that were previously performed by minorities. Many Hispanics and Asian Americans got deported because of certain American legislation. In the South, discrimination became even worse, and African Americans were refused basic civil rights.
The Great Depression harmed Americans in many different ways. The Great Depression was a very difficult and significant time in American history. When the stock market crashed, millions of dollars slipped out from under many families that trusted the market. Economists came up with a philosophy that if Hoover had prevented the overproduction of goods, placed less trust in the stock market, and presented constructive policies during his presidency, this economic disaster would not have happened to our country. Without the rise of these problems, there would have been a different outcome in the 1920s.