How significant was the loss of foreign markets as a cause of the Depression in the USA?
Level
O LEVEL
Year Examined
2019
Topic
THE UNITED STATES, 1919–41
👑Complete Model Essay
How significant was the loss of foreign markets as a cause of the Depression in the USA?
The Significance of Lost Foreign Markets in the US Depression
The Great Depression, a period of unprecedented economic decline in the 1930s, had a devastating impact on the United States. While the loss of foreign markets contributed to the economic downturn, arguing it was the most significant cause is debatable. This essay will explore the role of foreign market loss alongside other contributing factors to assess its overall significance.
The Impact of Lost Foreign Markets
Post-World War I European recovery did lead to a decline in demand for US goods. European nations, previously reliant on American imports, began rebuilding their own industries and agriculture, reducing their reliance on US products. American farmers, in particular, faced stiff competition from cheaper Canadian grain, impacting agricultural exports. Furthermore, the US government's implementation of tariffs, like the Smoot-Hawley Tariff Act of 1930, backfired. This protectionist policy aimed to shield domestic industries but provoked retaliatory tariffs from other nations, further shrinking international trade and harming US industries reliant on exports.
Overproduction and Domestic Factors
However, focusing solely on foreign markets overlooks significant domestic issues. Overproduction plagued both US industry and agriculture. Technological advancements, coupled with readily available credit, led to surplus production that outstripped consumer demand. This saturation of the domestic market led to falling prices, reduced profits, and ultimately, business closures and unemployment.
Financial Instability and Government Policy
The Wall Street Crash of 1929, triggered by overspeculation and inflated share prices, played a more direct role in the Depression. This financial crisis wiped out investor savings, crippled the banking system, and severely contracted credit availability, further deepening the economic crisis. Additionally, the prevailing laissez-faire economic policies, advocating minimal government intervention, proved inadequate in mitigating the crisis. The stark income inequality of the time, with 42% of Americans living below the poverty line, further limited consumer spending and exacerbated the impact of the economic downturn.
Conclusion
While the loss of foreign markets undeniably contributed to the economic instability of the 1930s, attributing the Depression solely to this factor presents an incomplete picture. Overproduction, financial instability fueled by speculation, income inequality, and inadequate government response played more significant roles in the depth and duration of the Great Depression. The convergence of these factors, both domestic and international, ultimately created the perfect storm that plunged the United States into economic hardship.
**Sources:**
"The American Pageant," Thomas A. Bailey and David M. Kennedy
"A People's History of the United States," Howard Zinn
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Outline: Significance of Lost Foreign Markets as a Cause of the Depression in the USA
I. Argument in Favor of Significance
- Post-war European recovery reduced demand for U.S. exports, creating surplus production in agriculture and industry.
- Canadian grain exports undercut U.S. prices, leading to lost market share for American farmers.
- U.S. tariffs provoked retaliatory foreign tariffs, restricting access to international markets for U.S. goods.
- Overproduction and decreased exports led to a decline in prices and profits, exacerbating the economic crisis.
II. Counter Argument
- Overspeculation and overconfidence in stock prices caused the Wall Street Crash, triggering a chain reaction of economic decline.
- Overproduction and saturation of domestic markets contributed to the surplus situation, independent of foreign markets.
- Income inequality in the USA, with 42% below the poverty line, reduced domestic demand for goods.
- The lack of government intervention and adherence to laissez-faire principles allowed the crisis to escalate.
Extracts from Mark Schemes
How significant was the loss of foreign markets as a cause of the Depression in the USA? Explain your answer.
YES
- Post-war European recovery led to loss of markets; farmers competed against Canadian grain which was cheaper; US tariffs led to foreign tariffs on US goods; led to overproduction in industry and further overproduction in agriculture, etc.
NO
- More significant – overspeculation and overconfidence in share prices led to Wall Street Crash; overproduction and saturation of domestic markets; inequality of income in USA – 42% below poverty line; lack of government intervention – laissez-faire, etc.