You are viewing a free preview of this lesson.
Subscribe to unlock all 10 lessons in this course and every other course on LearningBro.
The Wall Street Crash of October 1929 brought the economic boom of the 1920s to a sudden and devastating end. It triggered the Great Depression, a period of severe economic hardship that affected millions of Americans. This lesson covers the causes of the crash, what happened during it, and the impact of the depression on American society.
The stock market had been rising throughout the 1920s, and millions of Americans invested in shares, many of them speculating (buying shares to sell at a profit rather than as a long-term investment).
| Cause | Explanation |
|---|---|
| Overproduction | American factories produced more goods than people could buy. Warehouses filled with unsold stock |
| Speculation | Millions of ordinary Americans bought shares, often "on the margin" (borrowing up to 90% of the share price) |
| Weak banking system | Many small banks had lent recklessly and were vulnerable to a downturn |
| Unequal wealth distribution | The richest 5% of Americans earned 33% of all income. Many ordinary Americans could not afford to keep buying |
| Agricultural depression | Farmers had been struggling throughout the 1920s, reducing demand in rural areas |
| Republican policies | Laissez-faire meant the government did not regulate the stock market or banking sector |
Exam Tip: When explaining the causes of the Wall Street Crash, distinguish between long-term causes (overproduction, inequality) and short-term triggers (panic selling in October 1929). This shows analytical thinking.
| Date | Event |
|---|---|
| September 1929 | Share prices begin to fall |
| 24 October 1929 | Black Thursday — 13 million shares are sold in a panic |
| 29 October 1929 | Black Tuesday — 16 million shares are dumped; the market collapses |
| 1929–1932 | Share prices fall by almost 90% |
| 1932 | Unemployment reaches approximately 13 million (25% of the workforce) |
On Black Thursday (24 October 1929), panic selling began and 13 million shares were traded. Bankers stepped in to buy shares and briefly stabilised prices. However, on Black Tuesday (29 October), the market collapsed completely. Over 16 million shares were sold, and share prices went into freefall.
By mid-November 1929, investors had lost approximately $30 billion — more than the total cost of American involvement in WWI.
The crash triggered a chain reaction that plunged the USA into the worst economic depression in its history.
Share prices fall → Investors lose money → Banks collapse → Businesses lose funding →
Factories close → Workers lose jobs → People cannot afford to buy goods →
More businesses fail → More unemployment → Deeper depression
| Impact | Detail |
|---|---|
| Unemployment | By 1933, around 13–15 million Americans were unemployed (approximately 25%) |
| Bank failures | Over 5,000 banks collapsed between 1929 and 1933 |
| Homelessness | Thousands lost their homes. Shanty towns called Hoovervilles (named mockingly after President Hoover) appeared in cities |
| Poverty | Breadlines and soup kitchens became common sights in American cities |
| Farming crisis | Farm prices fell so low that some farmers burned crops because they could not sell them |
| Psychological impact | Rates of suicide, mental illness, and family breakdown increased |
Exam Tip: Learn specific statistics (e.g., 13 million unemployed, 5,000 banks collapsed) to support your answers. Specific evidence strengthens your arguments and demonstrates detailed knowledge.
President Herbert Hoover (in office 1929–1933) believed in rugged individualism — the idea that Americans should help themselves rather than rely on the government. He was reluctant to intervene directly.
| Action | Detail |
|---|---|
| Voluntary cooperation | Asked businesses not to cut wages (largely ignored) |
| Hawley-Smoot Tariff (1930) | Raised tariffs on imports; other countries retaliated, reducing international trade and making the depression worse |
| Reconstruction Finance Corporation (1932) | Lent money to banks and businesses, but too little too late |
| Bonus Army (1932) | WWI veterans marched on Washington demanding early payment of war bonuses. Hoover sent the army to disperse them, damaging his reputation |
Exam Tip: AQA may ask you to evaluate Hoover's response to the Depression. Be balanced: acknowledge he did take some action, but explain why his measures were inadequate and why his philosophy of rugged individualism made it worse.
A Q2 might read: Explain the significance of the Wall Street Crash of October 1929. A developed answer should argue that the significance of the Crash lies not only in the scale of the financial collapse but in the way it exposed, rather than caused, the underlying weaknesses of the 1920s economy. In purely market terms the Crash was catastrophic: on Black Thursday (24 October 1929) 12.9 million shares changed hands in panic; by Black Tuesday (29 October) over 16 million shares were dumped, and by mid-November investors had lost roughly $30 billion — more than the entire cost of American participation in WWI. However, the deeper significance is that the Crash converted structural fragility into systemic crisis. Throughout the 1920s, American factories had produced more goods than domestic consumers could absorb; overproduction and chronic agricultural depression had already hollowed out demand. The Crash triggered a cascade: shareholders, many of whom had bought "on the margin" with borrowed money, defaulted on loans; banks that had lent to those shareholders collapsed (over 5,000 banks failed between 1929 and 1933); depositors lost savings because there was no federal deposit insurance; surviving banks called in loans to businesses; factories closed; unemployment rose to roughly 25% by 1933. The Crash is therefore significant as the inflection point at which the American state's laissez-faire philosophy became untenable: Hoover's attempts to encourage voluntary cooperation failed, and by 1932 voters elected Roosevelt on an explicit promise of federal intervention. Internationally, the Crash spread depression to Europe through the collapse of American lending, contributing to the conditions in which Nazism rose in Germany. Its long shadow reached as far as the financial regulation of 1933–1934 and the post-war Bretton Woods system.
Question: "The main cause of the Great Depression was the Wall Street Crash." How far do you agree?
A Grade 4 candidate describes the Crash, notes that share prices fell and people lost money, and concludes that "yes, the Crash caused the Depression." Factual content is broadly accurate but used to narrate rather than argue, and the distinction between cause and trigger is not made.
Subscribe to continue reading
Get full access to this lesson and all 10 lessons in this course.