LONG TERM CAUSES OF
THE GREAT
DEPRESSION
1929-1941
1. INDUSTRY
 Certain industries were no longer making profits (railroad,
steel, and coal), due to foreign competition (Why would
European industries be cheaper?)
 Also, new sources of energy caused the decline in the use of
coal.
 New home construction also declined, which had a trickle
down effect on other industries such as lumber, furniture, and
appliances.
AGRICULTURE
 Farming suffered the most throughout the 1920s. (result of
World War I)
 During WWI, farmers grew a surplus of food. To meet the
demand farmers took out loans to buy more land or equipment.
However, after the war, demand for farm products fell. This also
led to the closing of small banks because farmers could not pay
back their loans after the war.
CONSUMER SPENDING
 The 1920s seems prosperous for most Americans, but most
were actually living beyond their means.
 Many lived on credit, “buy now and pay later” (installment
plan). This created large debt, which led to consumers cutting
back on spending.
UNEVEN WEALTH
DISTRIBUTION
 “The rich get richer, and the poor get poorer.”
 Top 5% of Americans controlled all of the wealth in the
nation. Whereas, nearly half of the nation’s families earned
less that $1,500 per year, then considered the minimum amount
needed for a decent standard of living.
STOCK MARKET
 Many investors engaged in speculation, the buying and
selling of stock to make a quick profit, and buying on margin,
paying a small percentage of a stock’s price as a down payment
and borrowing the rest.
 This generated great wealth, but only on paper. People
believed that stock prices would continue to rise, so they could
sell the stock, make a profit, and still pay off their debt from
buying on margin.
 October 29, 1929- Black Tuesday- The stock market crashes
& the Great Depression begins!