Fear in the Great Depression We have every reason to believe that fear played an important role in
the Great Depression. I would not go as far as to say that it caused
it; it is more analogous to the fuel that fed a tiny flame into the
conflagration, it exacerbated it, but did not cause it. Nor do I
believe that the depression is in any way caused by the stock market
crash. The crash was merely a symptom of a failing economy, not the
cause. The cause of the Depression should not be treated as an
American problem because its origin was global. The Depression was
prevalent in Europe years before the Great Depression came to America.
Then, you might ask: How did the Depression start? The Depression was
mainly caused by the devastation of World War I, factories were in
shambles in Europe, and crops failed to grow on war torn ground.
However, at this crucial time, US adopted a policy of isolationism.
All the presidents of the 20s, Harding, Coolidge and Hoover, combined
to raise tariffs to an all time high. Thus, Europe's factories cannot
sell their produce, since everywhere else (other than US), people were
poverty-stricken and cannot afford luxury products; hence Europe's
economic system start to fail. While Europe sank into Depression, U.S.
experienced unprecedented growth in the roaring 20s, production
increased, and many industries began to mechanize with new
technologies. However, that was not always beneficiary. As McElvaine
remarked, "The prosperity of the decade was real enough, yet it was
anything but evenly spread"(14). For example, in the agriculture
sector, the farmers were producing so many crops that prices hit the
bottom, "The gross farm income fell from nearly $12 billion in 1929 to
$5 billion in 1932" (Leone 127). In the mean time, many farmers
destroyed parts of their own produce in the hopes that the price will
go up. The economy now showed the first signs of strain.
The second telltale sign came from the stock market. During the
Roaring 20s, the boom was dependent almost entirely upon confidence of
the investors. Since the stock market was unregulated, many people
bought and sold stocks of companies that never existed. More appalling
was that many people bought stock on margin------ sometimes they only
paid 10% price to buy a stock in the hopes that the stock value will
increase and pay off their debt. These were certainly unhealthy
practices. The hopes of quick wealth was all that matter in those
booming times. The following quote from McElvaline neatly summarizes
the attitudes of the investors before the Crash:
It was a telling analogy. Stock speculation provided a legal spirit of
intoxication in a time when intoxicating spirits were prohibited by
the Eighteenth Amendment. By the fall...