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Causes Of The Great Depression Essay

1355 Words6 Pages

Scientific research methods in Economics

Xuan Chinh Mai

Matriculation number: 3089076

Bremen - 3rd December, 2016

From the Great Depression to the Great Debate: How the science of economics changed.
The Great Depression of the 1930s was a severe international economic event that had disastrous effects on the life of people in many countries. Its causes have been extensively discussed by many economists, but still remain an actively controversial topic. This context sharpened the conflict of many schools of economic thought because of their different perspectives and explanations. In this situation raised the famous clash between the Austrian economic view whose representatives were Ludwig von Mises and Friedrich von Hayek and the …show more content…

The crisis had its root from the previous decade and started by the devastating crash of the Stock market in October 1929 in the US. It was continued by a chain of events. From 1929 to 1932, the unemployment rates increased by 607%, 129%, 214% and 232% respectively in the United States, Great Britain, France, and Germany . These catastrophic events went on and pulled the whole US economy to its bottom. By the year 1933, there were more than 13 million unemployed workers and nearly half of the US banks had closed down . Despite many policies of the US government, the economy still would not recover until before the World War …show more content…

Hayek argued that the cause of this depression was from the easy credit policies of the US government in the previous decade, which made the economy become more sensitive to the economic fluctuation. He also criticized the government’s interference following the big crash as it slowed down the recovery of the market . In his book The Road to Serfdom (1944), the Austrian economist then developed his arguments about the role of the state further. He argued that the increase of government intervention is the beginning of the rise in the restriction of individual freedom, which will unavoidably result in the emergence of dictatorial systems. The winning of Hayek’s ideas over Keynes’s could be observed since the eightieth when many changes adapting the liberal market ideas happened . Sequentially, the last several decades witnessed the dominance of the neoliberalism in the economic policy and the public’s attention

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The United States entered a period of economic catastrophe known as the Great Depression following the 1929 stock market crash. The political, economic, and social institutions of the United States were terrible during this period of time .Though there is not a specific reason for the Great Depression there are obviously contributing factors such as the overproduction of goods and the 1929 Stock Market Crash which is often said to have been the main leading factor to this catastrophe. The American people and the American government looked for solutions to the issues that Americans faced throughout the 1930s. Among the solutions, President Roosevelt introduced programs known as the ‘New Deal’ which were meant to relieve the American people and get the economy back on track.

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Because of the nature of the depression, the people’s personal responsibility were little to blame. As Roosevelt put it, when private facilities cannot provide jobs for the public, it is the government’s role to provide relief. This marked a three term cycle between aiding the working class, and emerging social programs, that inherently strengthened the powers of the federal government. Altogether, this changed the people's interaction with government from being fairly limited before the twentieth century, to federal government control over monetary policies and workforce standards, which enacted long lasting changes in the upcoming form of government (Biles 3).

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