The 1929 Stock Market Crash

18.06.2020 in History Essay
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The Stock Market Crash of 1929 bears great significance not only in American history but also in the history of the entire world. The event took place after the United States economy had experienced steady growth for a period of close to a decade. The impacts of the crash were greatly felt in every sector of the American economy, which only gave weight to the event. After the decline, several attempts to revive the economy were made, and they led to the increased growth that was partially disrupted in 1937 and that resumed in 1939. Different scholars attribute the problem to various issues, while politicians blame the administration for messing up with the economy at that time. The researcher intends to conduct a library study to unearth the causes and the impacts of the problem on American society. Some of the causes to be captured are weak economic regulation and taxation. This paper seeks to examine the various aspects of the crash and mainly how it impacted on the United States as well as enriching her history. The paper also discusses the impacts such as a decline in the urban areas, political changes, and the 1937 economic recession.

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In the early 1920s, the United States experienced a period of a rapidly developing economy that depicted the country as an economic giant. However, in 1929, the stock market crash, also called Wall Street Market Crash, took place and it was preceded by a couple of months of the declining Gross Domestic Product. The event ruined all the economic success that had been realized in the previous years, which brought the economy back to its knees. The crash induced a period of deflation, low profits, poverty and unemployment, and the general economic recession. The rapid industrialization and economic advancement that had preceded the event were messed up, and a downward spiral was the norm in that period. People blamed the lack of proper market regulation and high consumer debt among other reasons for the distress. The impact was felt across all sectors, mainly the construction, mining, agriculture, transport, logging, and manufacturing sectors (Norton, Sherriff, & Katzman, 2011). The impact of the crash and the consequent recession were felt not only in the United States but also in other countries across the globe. 

The Causes of the Recession

Scholars attribute the cause of the problem to the improper market regulation that had led to the bank issuance of numerous and huge investment loans to individuals (Fuller, 2012). The declining GDP that preceded the crash as well as the crash itself lowered the agricultural earnings; thus, farmers were unable to service their loans. The country lacked insurance for the banking sector, which caused people in this period to fear to lose their money, and thus, they opted to withdraw their wealth from banks. The withdrawals exceeded deposits so the shortage of money compelled banks to sell some of their assets. The shortage of money shrunk the economy and frustrated investments as people lacked the required purchasing power to sustain the desired consumption patterns. Therefore, the businesses endured losses, thus lowering the economic development (Fuller, 2012). However, recent research indicates that other factors such as the impact of capital taxation on excess profits, property, and dividends among other factors also contributed to the economic distress (McGrattan, 2010).

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The Consequences for American Society

Cities Lost their Glory

The economic development trend experienced in the previous period of the early to mid- 1920s following World War I brought the development and prosperity in the United States urban areas. The areas experienced high rates of upward growth in investment, consumption, and education. However, after the crash, a downward spiral began, and as a result, the private construction industry deteriorated due to the bankruptcy of investors. Many landlords lost their rent, and consequently, they were left penniless. People were severely impoverished; thus, the majority could no longer enjoy the comfort of decent housing in rental apartments. For them, the only option was setting up tents and temporary housing in the empty portions of urban land to act as their housing. Food became a luxury for the majority, which made people resort to begging from those who had the ability to feed themselves (Poppendieck, 2014). The people blamed the problems on the then President Herbert Hoover. The level of unemployment increased, but the figures were spread all over the country. Most of the affected workers were from the food, cloth industry, salespersons, and civil servants. 

Political Changes 

The Administration of President Herbert Hoover received intense criticism from people who associated their woes with the policies of the Republican Party Government. When the elections came in 1932, the party easily lost to the Democrats under the leadership of Franklin Roosevelt. The new president initiated programs such as construction projects to create employment and restore the economy. He also established the National Reconstruction Administration that focused on reviving the market demand and employment through increased government expenditure (Norton, Sherriff, & Katzman, 2011). In 1938, the Republican Party renewed its power, and Roosevelt almost lost the grip, but he survived narrowly.  

The 1937 Recession

By 1936, the economy had started to experience prosperity except in the employment sphere, as the problem seemed to worsen. In 1937, the economy deteriorated again, and a decline in profits and production suddenly began while unemployment rose to the worst levels. The problem was blamed on the Federal Reserve for tightening the monetary policy, hence leading to the reduced money supply that shrunk the economy. However, Roosevelt was able to jumpstart the economy in 1939 through facilitating employment for the youth in the military as well as in the industries (Watkins, 2008).


The Stock Market Crash of 1929 came to ruin the benefits of the Post World War I economic development in the United States. The major cause of the problem was improper market regulations, while other factors such as taxation played a minor role. The impacts of the recession were felt not only in the United States but also in the rest of the world. The issue had some impacts in the United States ranging from the economic to social and political spheres. The catastrophe led to the economic decline of the urban areas and the consequent impoverishing of the residents. The other impact was political changes as the Hoover regime was kicked out. Lastly, the problem also led to a further recession in 1937 and this lasted up to 1939.

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