What Impact Did the Crash Have on the Economy? (AQA GCSE History)
Revision Note
How Significant were the Economic Impacts of the Wall Street Crash in 1929? - Summary
The Wall Street Crash of 1929 had significant economic impacts that affected many people's lives. The crash occurred on 29th October 1929. It marked the beginning of the Great Depression. This was a decade of severe economic crisis.
One of the most significant economic impacts of the Wall Street Crash was the widespread loss of jobs. As stock prices plummeted, companies across various industries faced financial ruin. Countless businesses went bankrupt. They were unable to survive the sudden depression in the economy. This led to mass redundancies. Millions of workers became unemployed. They struggled to support themselves and their families.
The banking system was severely affected by the Wall Street Crash. As panic spread among shareholders, people rushed to withdraw their savings from banks. Many banks, unable to meet the demand for withdrawals, were forced to close their doors permanently. The collapse of banks wiped out the savings of many individuals and businesses. This worsened the economic crisis.
The effects of the Wall Street Crash were not limited to the USA but felt around the world. The crash triggered a global economic downturn. This lasted throughout the 1930s.
Causes of the Great Depression
The Wall Street Crash was only one of the many reasons why there was a Great Depression in the 1930s:
Long- & Short-Term Causes of the Great Depression
Long-Term | Short-Term |
|---|---|
Overproduction in industry and agriculture. Mass production meant there were too many goods in the USA for the demand. Many people had lost their jobs and could not afford to purchase consumer goods | The Wall Street Crash led to a depression. The stock market collapsing, reducing people’s ability to spend. This lowered the demand for products and caused unemployment |
Decline in traditional industries. Mechanisation caused a reduction of jobs available in these industries. Many US citizens were unemployed before the Wall Street Crash | The response of President Hoover and the US government to the Wall Street Crash. Hoover feared that too much intervention would not allow the economy to recover. By not interfering, he did not pass policies that could have prevented the USA from entering a depression |
Laissez-faire and protectionism of the US government. The Republican government did not ensure that the economy was safe. Their policies, like tariffs on foreign goods, made US citizens vulnerable to economic difficulties | The response of bankers to the Wall Street Crash. The banks could not survive if people could not repay their loans |
Increased amount of debt. More US families were relying on hire-purchase schemes and buying shares “on the margin.” This only worked if the economy was thriving |
Impact on Big Businesses
The Wall Street Crash impacted the output of big businesses
By 1932 Industrial production had fallen by 45%
Car production fell by 80%
Over 100,000 businesses went bankrupt
Businesses could not earn a living in these conditions
Some businessmen saw no other way to escape their financial difficulties than to commit suicide
Banking was hit particularly hard by the crash
Impact on Workers
The Wall Street Crash led to higher unemployment
People no longer brought as many products
This drop in demand resulted in around 25% (14 million) of US citizens being unemployed as businesses did not need as many workers
Some places and industries were hit more severely. For example, there were no jobs for coal miners in Illinois
Immigrants and African-Americans were worst hit with unemployment
The US government did not help the unemployment crisis
There was no economic support for unemployed people
Many people were forced to travel across the USA looking for employment
They were called ‘hobos’
It was rare that this strategy led to people finding work
Farmers were in severe economic hardship
They already struggled with overproduction before the crash
The government had also convinced many farmers to take out loans to mechanise
After the crash, food prices fell and they continued to overproduce
Due to tariffs on US goods, they could not sell to overseas markets
Interest rates rose between 1929 and 1932
This meant that farmers had to pay the banks more money back to pay off their debts
The fall in their incomes together with higher interest meant farmers could not afford to make payments on their loans
Approximately 750,000 farmers lost their land
Worked Example
Describe two problems faced by people in America during the Depression
[4 marks]
Answer:
One problem that people faced during the Depression was the failure of farming (1). Farmers were encouraged to take out loans to mechanise their farms. When interest rates rose between 1929 and 1932, around 750,000 farmers lost their land to the banks (1).
Another problem that people faced was banks collapsing (1). After the Wall Street Crash, people feared that banks would also collapse and withdrew their money. A lack of cash caused 700 banks to collapse and thousands of people to lose their life savings (1).
Exam Tip
When answering ‘Describe…’ questions, the four marks are given to you for:
Identify - write a relevant point based on the question topic (1)
Describe - add some specific own knowledge about the point you have made (1)
To achieve full marks, you must do these steps twice
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