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and during the crisis of the 1930’s, are still being debated today while the country suffers through a similar economic situation due to similar causes. Unfortunately most of what the government did then, as some would argue today, did little to help either people or business and only acted to make the situation worse. This paper examines what caused the Great Depression, its effects on the country and the results of the government’s reaction to it.
Many things contributed to causing the Great Depression but there were two key reasons, the lack of financial oversight and the country’s wealth was unevenly distributed among its citizens. The 1920’s was a prosperous period for the country but a middle class, as we know it now, did not exist. Those with money kept the economy going due to their voracious consuming habits but when the rich slowed or stopped spending the economy followed suit. While businesses had significant productivity gains during the 1920’s, its employees shared a relatively small portion of the wealth they produced. “Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent.” (Collazo, 2005). During this period, corporate profits rose by 65 percent and the government gave huge tax breaks to the wealthy allowing them to keep much of those profits. The Revenue Act of 1926 lowered the taxes of persons making $1 million per year by about 70 percent. By 1929 the total earnings for the top one-tenth of one percent of American households was equal the bottom 42 percent.
The U.S. economy became more unstable as the income inequality grew. The health of the country’s economy depended on how much the rich spent but during the late 1920’s this very small portion of society began to decrease not only its spending but investment expenditures too which greased the wheels of the economic decline. “Since there were relatively few persons of great wealth, a
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