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Geschichte / Historik

North London Collegiate School Jeju, Jeju City

13/15, Grade 11

Petra P. ©
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How far was the Wall Street Crash the most important cause of the Great Depression?


As one of the many causes of the Great Depression, the Wall Street Crash of 1929 has been acknowledged, to some degree, as the leading factor. However, it remains challengeable to affirm that the Crash had the most significant influence, as there were other numerous factors including excessively high tariff barriers, overproduction, and misguided U.S. policies, which need to be considered as even more momentous.

This essay will evaluate how these factors gave massive impact on encouraging the way to the Great Depression, and assess the relative importance between them based on the significance of the Wall Street Crash of 1929.


To begin with, the Wall Street Crash was not the most important cause but an alerting sign of the Great Depression. Initially, the U.S. Stock Market was the symbol of national success. Yet, this became devaluated as the U.S. economy deteriorated due to the Crash. By “buying on the margin”, people were easily able to borrow money to invest in the stock market – creating bank loans for stock purchases – because the margin requirement was only 10%.

Consequently, it attracted a lot of the population to invest in large sums. However, with increasing business profits, stock prices were also overproduced due to extensive speculation, which indicated a fall in stock values. This especially brought extreme disarray to the banks that exacerbated the situation by failing to secure people’s savings.

The failure determined an incredible loss of money, causing a massive destruction of the economy. Although this led to the collapse of U.S. businesses and contributed to stimulating the Great Depression, it can only be considered as a symptom, because there were several other stock market crashes before the Wall Street Crash that didn’t cause any depression.

Hence, rather than referring to this as a direct factor, it is more reasonable to say that it signaled the start of the Great Depression with previous crashes.


Furthermore, the most significant factor of the Great Depression was, in fact, the high tariff barriers. After World War I had ended, European countries were owed approximately $10 billion to the U.S This aroused a sense of chaos amongst the nations, as they were unable to pay them back, due to the severe damage that war had caused their economies to suffer from.

When the U.S. nonetheless demanded the payments, it triggered the European countries to force Germany to pay their reparations issued by the Treaty of Versailles. This debt later accumulated along with the financial crisis, where Europe was banned from buying goods from the U.S This was initially sparked by the Fordney-McCumber Act in 1922, which established high tariffs on industrial products and eventually made it increasingly difficult for European countries to pay off their debts and be involved in international trade.


Moreover, overproduction was also a major cause of the Great Depression. The accessibility to a vast amount of consumer goods during the “Roaring Twenties” of the U.S. provided people with great convenience, but also raised the demand for such goods. This caused industries to produce more products in order to meet the demand; however, while the number of products escalated, wages did not increase enough for workers to buy them.

Thus, there weren’t enough workers able to purchase the industrial output. Moreover, the surplus couldn’t become part of overseas trade due to the high tariff barriers and the lack of money in European nations. There was also overproduction in farming, causing a sharp decline in the farmers’ incomes: the price of agricultural land decreased from being $69 in 1920 to $31 in 1930 per acre.


Lastly, the economic policies of Herbert Hoover played an important role in triggering the Great Depression. Hoover was misguided in making political decisions. He had solid confidence in rugged individualism and the laisse-faire, which was a policy that banned the interference of the government in the markets.

In addition, he strongly believed that if wages were kept high, workers would be able to purchase more goods, thus improving U.S. economy. Hoover trusted the economy to run in its own accord, but this approach failed to make progress as his policies showed little effort and practicality.

For example, Hoover made dramatic increases wages and insisted that they were kept that high, even though prices were falling noticeably. The Smoot-Hawley Tariff of 1930 directly reflects the misguidedness of Hoover’s policies as he raised tariffs on U.S. imports to 50%.

Therefore, Hoover’s economic policies never made progress but instead worsened U.S. economic conditions, which can be considered as an important aspect of the Great Depression.


In brief, there were far more principal factors of the Great Depression than the Wall Street Crash of 1929. Although the Crash played a role in exacerbating economic conditions by failures in such as the U.S. bank systems, speculation, and management of stock prices, these failures were not direct consequences of the Wall Street Crash.

Likewise, there had been instances of stock market crashes prior to the one in 1929, and the Wall Street Crash was only one of which foreshadowed the Depression. Thus, the Wall Street Crash was not the most important cause of the Great Depression but an important indication of it.


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