Summary
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| Gross National Product 1920-1940 |
Initial issues involved assessing the cause of the depression. Some speculated the lack of credit and some contemplated the rate of interest, but much concentration was directed to faith. Professor Dice observed that people no longer look upon the cardinals of industry as benevolent leaders. Such feelings of trust were believed to be fundamental for a boom. Furthermore, an abundance of savings was viewed as essential for prosperity. However the ensuing collapse
automatically destroys the very conditions that conduce such results. Despite such predictions, the causes were still viewed with uncertainty. Some skeptics believed that depression was inevitable because the extent of time in which it occurred or that there was an inevitable rhythm to which depression must follow. Neither of these dubious beliefs can be seriously supported. A plausible explanation was the notion that the economy required an occasional rest.
However, more efforts were devoted in revealing the reasons the economy continued to remain low for a full decade. Some believed that production had outrun consumer and investment demand as corporations misjudged the prospects of consumers. As a result, businesses curtailed their inventory and invested insufficient amounts, failing to keep pace with the steady increase in profits. Others pinpointed the bad distribution of income. With a third of the America's income dispensing into 5%, the economy was dependent on a high level of investment or luxury consumer spending from the elites. Furthermore, structures of corporations were corrupted with openings for swindlers, frauds, and impostors.
On the other hand, some deemed the actual infrastructure of the bank. There was implicit weakness with the chain reaction banks faced. When one bank failed, the assets of the other failed like a domino effect. Others took a more honest approach with the poor state of economic intelligence. As Hoover announced a cut in taxes, he requested business firms to keep up their capital investment and maintain wages. However, tax reductions were negligible except to higher income brackets and maintaining wages and investments only occurred as long as they were not financially disadvantageous. Furthermore, a commitment to a balanced budget meant a drastic reduction in government expenditures, which led to the limitation of efforts to increase low interest rates, plentiful credit, and smooth borrowing of funds.
As a result, the Great Crash of 1929 manifested quite a few far reaching effects. With the collapse of securities, the wealthy are the first to take hit and expenditures to support the economy are abandoned. Furthermore, the weakness of corporations are exploited and the people suffer from a sense of utter hopelessness. As a economic historian, Galbraith asserts that the task of him and this book is only to address what happened in 1929. And it is that misfortune awaits those who presume to believe that the future is revealed to them, and that capitalism is indeed a threat.
Analysis
The theme presented in the chapter aligns with work, exchange, and technology, and specifically with economic values and the role of the government in affecting society. As a result of the Great Crash of 1929, economic values are shifted more into becoming aware of possibilities of overproduction of goods and cautiousness of over speculation of stocks. Furthermore, the government is less liberal for Laissez Faire Capitalism and devoted more into expenditures for the economy's well being.
A time period which is similar to the chapter is Period 7: 1890-1945 (Key Concept: 7.1-I.C)
Despite credit and market instability with the uneven distribution of wealth, over speculation of stocks, and over production of goods, a stronger financial regulatory system arises with leaders such as Hoover.
Citations
automatically destroys the very conditions that conduce such results. Despite such predictions, the causes were still viewed with uncertainty. Some skeptics believed that depression was inevitable because the extent of time in which it occurred or that there was an inevitable rhythm to which depression must follow. Neither of these dubious beliefs can be seriously supported. A plausible explanation was the notion that the economy required an occasional rest.
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| Major Causes of the Great Crash of 1929 |
However, more efforts were devoted in revealing the reasons the economy continued to remain low for a full decade. Some believed that production had outrun consumer and investment demand as corporations misjudged the prospects of consumers. As a result, businesses curtailed their inventory and invested insufficient amounts, failing to keep pace with the steady increase in profits. Others pinpointed the bad distribution of income. With a third of the America's income dispensing into 5%, the economy was dependent on a high level of investment or luxury consumer spending from the elites. Furthermore, structures of corporations were corrupted with openings for swindlers, frauds, and impostors.
On the other hand, some deemed the actual infrastructure of the bank. There was implicit weakness with the chain reaction banks faced. When one bank failed, the assets of the other failed like a domino effect. Others took a more honest approach with the poor state of economic intelligence. As Hoover announced a cut in taxes, he requested business firms to keep up their capital investment and maintain wages. However, tax reductions were negligible except to higher income brackets and maintaining wages and investments only occurred as long as they were not financially disadvantageous. Furthermore, a commitment to a balanced budget meant a drastic reduction in government expenditures, which led to the limitation of efforts to increase low interest rates, plentiful credit, and smooth borrowing of funds.
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| Great Crash of 1929 |
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| John Kenneth Galbraith |
Analysis
The theme presented in the chapter aligns with work, exchange, and technology, and specifically with economic values and the role of the government in affecting society. As a result of the Great Crash of 1929, economic values are shifted more into becoming aware of possibilities of overproduction of goods and cautiousness of over speculation of stocks. Furthermore, the government is less liberal for Laissez Faire Capitalism and devoted more into expenditures for the economy's well being.
A time period which is similar to the chapter is Period 7: 1890-1945 (Key Concept: 7.1-I.C)
Despite credit and market instability with the uneven distribution of wealth, over speculation of stocks, and over production of goods, a stronger financial regulatory system arises with leaders such as Hoover.
Citations
"A Case of Unemployment." The Great
Depression. Accessed March 14, 2015.
http://ingrimayne.com/econ/EconomicCatastrophe/GreatDepression.html.
"Biographical Profiles: John Kenneth Galbraith." - John F. Kennedy Presidential Library
& Museum. Accessed March 14, 2015. http://www.jfklibrary.org/Research/Research-
Aids/Ready-Reference/Biographies-and-Profiles/John-Kenneth-Galbraith.aspx.
Galbraith, John Kenneth. "Cause and Consequence" In The Great Crash, 1929,
168-194. Boston: Houghton Mifflin, 1955.
Mugey, Admin. "A Brief History Lesson: The
Great Stock Market Crash of 1929, 82
Years Ago Today. » Mugsy's Rap
Sheet." A Brief History Lesson: The Great Stock
Market Crash of 1929, 82
Years Ago Today. » Mugsy's Rap Sheet. October 29, 2011.
Accessed March 14, 2015.
http://mugsysrapsheet.com/2011/10/29/a-brief-history-
lesson-the-great-stock-market-crash-of-1929-82-years-ago-today/.
"Speculation Great Depression - Viewing Gallery." Speculation Great Depression -
Viewing Gallery. Accessed March 14, 2015.
