Great economic depression is an economic crisis within the capitalist economy which is caused by over production starting from 1929 – 1933. The causes of Great Depression are as follow;-
1. Effects of the WWI of 1914 – 1918; This led to the decline of European nation while economy of U.S.A was gain momentum at the end of the war the purchasing power of European nations declined while production of raw materials and commodities increased. In U.S.A production become non sellable and profitless which accelerated to price fractuation in U.S.A hence this led to G.E.D of 1929 – 1933.
2. Over production; U.S.A produced manufactured goods because U.S.A thought that her markets were stable as it was before and during WWI e.g. U.S.A produced more food, zinc, copper, cocoa etc. This led to the fall of process in U.S.A and European nation were not able to absorb all manufactured goods this led several industries bankrupt and closed, farmers also were not producing more because they had no money to run agricultural activities, all these led to profit less among the formers and industrialist hence the G.E.D in U.S.A.
3. Socialist revolution of 1917: Russia introduced the socialist revolution after the Bolshevik revolution of 1917 whereby began to spread different parts of the world, this led imperialist nations to lose markets to those socialist nations, hence over production of raw materials and manufactured goods in USA and the fall prices which led to the occurrence of G.E.D.
4. The effect of protectionist policy: Immediately after the WWI U.S.A was economically stable which helped other European countries to revive their own economies, however the European countries used the loans from U.S.A to restrict their industries and stabilize the economy & at the same time European nations initiated protectionist policy to defend their industries and agricultural production, this led USA to lose market in European nations hence it increased agricultural productions and industrial productions in U.S.A leading to overproduction, profitless among the farmers and industrialist hence the G.E.D in U.S.A.
5. The collapse of the New York exchange in Oct 1929: Because this had a lot of impacts on U.S.A economy e.g. the poor people spend their savings to buy few shares while shares were not sold due to lack of money among the traders and workers. Also stock exchange lost value whereby shares were sold on credits, banks were run bankrupt due to the fact did not return the money because shares were not sold as a result links were closed, this led to unemployment to the people worked in industries and financial institutions, also farmers who borrowed money from the banks to buy shares did not return the money to banks because shares lost value and were not sold, asa result of farmers to undergo crisis and their farms were taken by bankers due to the failure of paying back the debt hence G.E.D in U.S.A