The Great Depression of the 1930s is the product of several economic factors which left the world in a major crisis. The crash of the stock market in 1929 swept money away and curbed consumer confidence. Excess in the stock speculation resulted in a weak financial system and an economic instability.
The weakness of the banks also added to the poverty. Most banks put a lot of capital in the stock market and provided unsecured lending. At the time of the crash, the banks collapsed causing millions to lose their savings. Such decrease in savings resulted in less consumer spending and indirect utility of the economy.
The situation became worse because of international trade issues. The Smoot-Hawley Tariff was one of the high tariffs resulting in restricted trade in the world. Factories were not in a position to sell products leading to lower production and unemployment. These trade barriers further extended the time of stagnation in several countries.
This was further pressurized by agricultural problems. Declining crop prices as well as increasing debt meant that farmers could no longer have livelihoods. This was aggravated by droughts and poor agricultural conditions. Farms were lost and that led to migration among many families creating social tensions.
Implications of the great depression were far reaching. Unemployment rates were high, establishments shut down and poverty increased. Pressures were on governments to give relief. Social instability increased, and economic policies were reformed in order to avoid such occurrences in future.
Conclusion
The Great Depression was caused by economic instability, trading problems and collapse of the agricultural industry. It led to tremendous unemployment, poverty and social disturbances transforming economies and political policies of the world.
