THE GREAT DEPRESSION AND THE STOCK MARKET CRASH
To better understand this terminology it is important to know what stocks are, why there is
a market for them, and what their significance in the economy is. The economy we live in could
not have been successfully engaged with very many organizations and businesses if it were not for
the stock market. The stock market is a public market where investors and organizations can take
part in buying and selling stocks. This is very important because the capital investments that are
placed in these stocks are used to create and increase economic development in various sectors.
The stock market forms a large portion of the capabilities that a country has over its development
and growth economic policies. The stock market is essential for the success of a country and also
it can be the demise of a country that is under poor economic management. This was very much
seen and experienced in 1929, and the stock market crash that occurred in the United States
(Amadeo). The stock market crash showed how the United States economy was very dependent
and influenced by the activities that were taking place in the stock market. The crash of 1929 had
a negative effect on society, due to permanent negative effects on the economy, a rise in
unemployment and homelessness, and serious effects on future politics and civic trust in
government.
The stock market crash of 1929 happened between March and October of that year. Despite
the assurances that came from the government and bankers, the eventual collapse of the stock
market created negative ripple effects that cascaded to various sectors of the economy. The stock
market crash brought with it the following effects that were repercussions the government had to
deal with in the aftermath. This caused the United States to dive into economic depression which
created elements that contributed to the country going through an economic recession.
The first reason why the Great Depression was negative to society was the crippling effect
the stock market crash had on the U.S economy. On October 18 1929 when the fall started the
share prices at the stock market were being sold at a declining rate and as it approached black
Thursday on October 24 the prices were dropping fast and the stock market was losing ground fast
in trying to recover and maintain the prices in the stock market. By black Monday, October 28th,
the stock market was losing value swiftly and by black Tuesday 29 October, the stock markets in
the United States collapsed completely. Earlier before the market crash, there was a lot of market
speculation that the stock market would grow and improve with good margins. Due to
misinformation about the stock market, a lot of investors and business people lost a lot of their
investments in the stock market. This caused a lot of business to collapse and the value of the
dollar to drop. The economic machinery that was working to carry on the trade was not able to
efficiently manage all the demands that were coming into the stock market. This caused the market
to collapse due to over-speculation and in turn, caused billions of dollars to be lost which ended
up affecting the economy negatively by causing depression and recession.
Moreover, the stock market crash further increased unemployment and homlessness rates
following the event. The United States economy was primarily driven and influenced by the stock
market. It gave a platform for many businesses to trade and increase their business profits and
portfolios. However, the collapse of the stock market led to lots of businesses that were dependent
on it to collapse.. The investments lost in the market crash caused many employers to dismiss
many workers from their businesses. This created a lot of unemployment among the population.
As time went by and the recession was becoming more apparent and a lot of employees also lost
their jobs and livelihoods. This contributed to increased unemployment levels and the high rate of
people being homeless to increase.
In closing, the damage and permanent negative reputation of the stock market crash of
1929 had negatively impacted future politics and civic trust in government. The United States
government failed to stimulate the economy to grow. As manufacturers of various goods and
services saw that the market demands were reducing they also reduced their performance in
production. These actions dropped down to all these factors and eventually a depression period
was experienced gradually. The fact that the government failed to capture and monitor various
economic changes in the market contributed directly to the collapse of the stock market
(Britannica). The citizens lost their trust in the government to offer an earlier solution to prevent
the collapse from happening. The only solution that the government had was to put in place
economic policies that were designed to protect the economic and livelihood interests of the
people.
The stock market crash of 1929 in the United States was a crisis that demonstrated how
important the stock market is to both the local and international market platforms. Stock markets
are crucial for the smooth running of a country's economy. The stock market brings in a lot of
investment which is bought and traded for the betterment of a country's economy. In the United
States case, the stock exchange market shows that it is a very important sector in economic
development and how fragile it is to market changes. Therefore each country needs to be very
cautious about how they manage their stock markets.
Reference
Amadeo, Kimberly. “Stock Market Crash of 1929 Facts, Causes, and Impact”. The
Balance (2018). https://www.thebalance.com/stock-market-crash-of-1929-causes-effectsand-facts-
3305891#:~:text=The%20stock%20market%20crash%20of,24%2C%201929.&text=29%
2C%201929%2C%20the%20Dow%20Jones,led%20to%20the%20Great%20Depression.
History. “Stock Market Crash of 1929”. (2010). https://www.history.com/topics/greatdepression/1929-stock-marketcrash#:~:text=The%20stock%20market%20crash%20of%201929%20was%20not%20the
%20sole,30%20percent%20of%20the%20workforce.
Britannica, The Editors of Encyclopaedia. “Stock market crash of 1929”. Encyclopedia
Britannica. (2021). https://www.britannica.com/event/stock-market-crash-of-1929.