The Great Depression: Income Distribution, Consumption Demand And Consumer Credit(1919～1929)

The outbreak of the great depression make the analysis model of the classicaleconomics under serious challenge,so the Keynesian occupy the mainstream.Meanwhile, the economic thoughts of monetarism and Austrian School has continuedto develop to compete with it. However, many non-Keynesian view have beenmarginalized for a long time. The innovation of the new Keynesian scholars is largelyon the basis of absorption these ideas which was ignored to develop. Although thestudy of the great depression had a substantial progress, but we can not say theacademic study of the Great Depression has reached the acem, and can not say wehave totally understudied the great depression’s lesson and experience. Along thesteps of Keynesian, this paper from the perspective of consumption and incomedistribution, to try to discuss and explain the cause of the outbreak of the greatdepression. Keynesian economics mainly from the amount’s perspective to analysisthe great depression’s outbreak, which basically did not cover the structure.This article attempts from the perspective of the consumption structure toexplore the Great Depression, and to prove the necessary connection between theUnited States and the current distribution of income through the method of logicalanalysis and statistical.Firstly, through the analysis of large amounts of statistical data,we found that there is a huge problem of income distribution before the greatdepression’s outbreak, and most Americans are not satisfied with the law ofdiminishing marginal income, so the reducing of American’s consumption may comefrom the the unfair income distribution. With this idea, we analysis American’sconsumption date before1992, but we find that the USA’s consumption demand notonly decline, but increase. Through analyze the consumption’s structure, we find thatthe occurrence of credit consumption delays the distensible problem of distancebetween the production and consumption capacity, which is caused by the incomedistribution problem. And then the collapse of the stock market caused the future’sincome and employment uncertainty, which result in the reduction of durable andexpensive goods spending and the dramatically decease of credit consumption. Thegap between production and consumption capacity return to the real state, then theUnited Status’s depression began to burst.So the article’s conclusion is very simple:One of the roots of America’s great depression lies in its worst income distribution,and credit consumption can delay the effect of insufficient consumption for a short time. But when the stock market crash, supporting credit consumer confidencedisappear, so the depression is inevitable.