The Great Depression was caused by weaknesses in the New Era economy. The most damaging factor was the unequal distribution of wealth and income. A second factor was that oligopolies dominated American industries. Their power led to "administered prices," prices kept artificially high and rigid rather than determined by supply and demand. .
Weaknesses in specific industries had further contributed to the Great Depression. Agriculture suffered from overproduction, declining prices, and heavy debt; so did the coal and textile industries. Banks also had contributed to the Great Depression and the instability of prosperity because they were poorly managed and regulated. They now threatened to spread the panic and depression.
Another contributing factor to the Great Depression were international economic difficulties. Shut out from U.S. markets by high tariffs, Europeans had depended on American investments to manage their debts and reparation payments from the Great War (World War I). The crash of the stock market in 1929 was the triggering event of the Great Depression. It also dried up the flow of American dollars to Europe, causing financial panics and industrial collapse and making the Great Depression global. In turn, European nations curtailed their imports of American goods and defaulted on their debts, further debilitating the U.S. economy.
In order to solve the problems that resulted from this economic crisis, FDR and his administration introduced the New Deal, which created the Alphabet Agencies. This New Deal was introduced in order to provide reform, relief and recovery to the nation. The FERA (Federal Emergency Relief Administration) was run by Harry Hopkins and was created to furnish funds to state and local agencies. The FERA spent over $3 billion before it ended in 1935. The CCC (Civilian Conservation Corps) was created to provide work relief on reforestation and conservation projects.
