Why did the Great Depression happen?

The Great Depression was the most severe economic downturn in the history of the industrialized world. It began in 1929 and lasted until the late 1930s, causing widespread unemployment, poverty, and social unrest. There were many causes of the Great Depression, and they varied by country. In the United States, the stock market crash of October 1929 is often cited as the trigger that set off the chain of events that led to the Depression.

One of the main causes of the Great Depression was the overproduction of goods in the 1920s. As consumer demand began to decline, manufacturers continued to produce goods, leading to a glut of products that could not be sold. This led to a decrease in prices, which made it even more difficult for manufacturers to turn a profit.

Another contributing factor was the unequal distribution of wealth in the 1920s. The wealthy had a large share of the nation's wealth, but they did not spend as much of their income as the middle class and the poor. This reduced overall consumer demand, which in turn led to a decrease in production and employment.

The banking system also played a role in the Great Depression. Many banks had invested heavily in the stock market, and when the market crashed, they lost significant amounts of money. This led to a wave of bank failures, which further decreased the availability of credit and made it more difficult for businesses to operate.

The Great Depression had a profound impact on the world and led to major changes in economic policy. Governments began to intervene more heavily in the economy, and the welfare state emerged as a way to protect citizens from the worst effects of economic downturns. The lessons of the Great Depression continue to inform economic policy to this day.