Causes of the Great Depression and the Effectiveness of Franklin Roosevelt New Deal

The Great Depression , which lasted for over a decade , was the longest and most devastating economic collapse seen in the history of the modern world . Originating in the United States , it eventually spread to many other countries , destroying their economies and industrial sectors . To understand the effect it had on the societies of America , as well as abroad , it is important to understand the major factors that led to its arrival

In the 1920s , America was experiencing a great boom in terms of its economy . It had come out of World War

I intact , and was now focused on strengthening itself . However , in doing so , it became a country that was quite introverted . The focus was on getting rich and enjoying new fads , new inventions , and new ideas . The traditional values of rural America were being challenged by the city-oriented Jazz Age (McElvaine , 1

This self-centered attitude and behavior seemed to fit well with the needs of the American economy at the time . The goal of the many businesses and manufacturing companies was to create a demand for the many products they produced . To accomplish , advertising methods that had been used to promote support for World War I were now used to promote the many new products that emerged . The tactic worked , and it resulted in the mass consumption that kept the economy going through most of the 1920s (McElvaine , 1

However , there was a drawback . Despite a booming economy , there was an uneven distribution of income . As the 1920s progressed , the ratio of income going to the wealthy increased , while the ratio of income going to the poor decreased . This was the result of two factors . First , even though businesses were showing a remarkable level of productivity , the workers were only getting a small portion of the resulting wealth Second , huge income tax cuts in the top bracket allowed the wealthy to keep a bigger portion of their profits , while the poor lost a bigger portion of their pay . This , in turn , led to the creation of credit which allowed the poor to purchase items their meager incomes would not allow them to buy outright

Another factor that played a role in the outbreak of the Great Depression was the new role America took on as the `creditor ' of the international community . The bankers and financiers , however , were not prepared for this new role . As a result of lending heavily and unwisely to borrowers in Europe .who would have difficulty repaying the loans (McElvaine , 2 , the financiers and bankers laid the foundation for the massive economic downturn that would occur during the 1930s Furthermore , high tariffs maintained on imports made it quite difficult for foreign countries to sell their goods in America . Without doing so they would be unable to repay their loans or buy American products Thus , this vicious cycle would keep repeating itself until something gave

The final factor was the growth of the stock market , which was the result of the wealthiest Americans investing their money...