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Answer.

Great Depreaaion was the crisis of 1929 1932 was the most profound crisis of capitalist production. It took European economies for four years. The crisis struck deeper in the United States of America. Various causes account for the occurrence of the Great Depression;-

(a) Wall street crushes; Wall Street is a street in New York City where buying and selling of shares takes place. The Wall Street crush marked the beginning of the Great Depression. The prices of shares were increasing rapidly forcing people to buy more and more shares, but suddenly the prices of shares started to fall drastically and the people had bought so many shares started to sell them at give away prices. Large number of individuals and enterprises who had lent out money to the capitalists to make an interest ran bankrupt because the capitalists failed to pay back the loans.

(b) Over production in the United States of America; After world war one the USA became the leading economic power. In the 1920s American factories and farmlands produced more and more products expecting world trade to continue to expand. Due to increased production that lacked enough demands, prices of commodities declined reducing profits, capitalists responding by cutting down production which led to reduction of the work force leading to widespread unemployment.

(c) Nature of capitalists production; The capitalists believed in the Laissez faire policy whereby the government does not intervene in economic activities, due to the tendency of capitalists to compete with one another; they tend to produce more than the existing demands which leads to fall in prices and therefore the fall in profits forces the capitalists to reduce production and close their factories which leads to unemployment.

(d) Concentration of wealth in the hands of the minority and poverty in the hands of the majority This lead to disproportion between investment and consumption. Due to poverty there will be inadequate demand which forces prices to fall leading to reduction in profits thus the capitalists are forced to reduce production and reducing the workforce which leads to widespread unemployment.

(e) Interdependence of countries; Due to the interdependence of countries, a crisis in one country was bound to have serious consequences in another country. This explains why the Wall Street crush in the USA forced her to withdraw the loans that she had lent out to European countries hence having disastrous consequences in the European countries for example Germany failed to pay the war reparations.

(f) Protectionist policies; Poor economic policies like protectionism were also for causing the Great depression. The USA during the inter war period pursued protectionism whereby it carried out discriminative policies against world economies. The USA introduced the MC cumber tariffin 1922 to shelter her economies against imports from other nations.

(g) Effects of World War 1; The effects of world war one also contributed to the outbreak of the Great Depression.World war one lead to high production, low prices and profits hence was contributing to the Great Depression.

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