What caused the Great Depression of the 1930s?

The Great Depression was a prolonged depression from 1930’s until the early 1940s, with unemployment levels of up to 25%, with mass bank and business failures.

What was the cause of the Great Depression of the 1930’s? Anti-capitalist economists and historians claim the crash was the trigger of the Great Depression of the 1930s.

In fact, the government’s Great Intervention into the economy was the cause of the Great Depression of the 1930s. The recession of 1929/1930 became prolonged by the government’s “great intervention”— from the Smoot-Hawley Tariffs to “The New Deal”– that prevented the market from restoring normalcy. Observe that in the 1920 and 1987 Stock Market crashes there was no Great Depression, but minor recessions, because there was no Great Intervention.

What was the New Deal?

The New Deal was an attempt by Franklin Delano Roosevelt to use the crisis surrounding the recession following the Stock Market Crash of 1929 as an excuse to intervene in the economy.

Interventions of the New Deal included: the National Industrial Recovery Act (1933) which controlled industrial prices and wages; the Agricultural Adjustment Act (1933) to control agricultural prices and output (paying farmers not to produce); the National Labor Relations Act (1935) to control wage prices by forcing employers to negotiate with government empowered unions; the Glass-Steagall Act which created the FDIC, federally insuring deposits; and many others.

FDR also made thousands of executive orders which created further uncertainty and disruption of the economy. Uncertainty led to people to hold onto their money (“hoarding”) as opposed to investing it as they were waiting to see what the government would do next.