GREAT DEPRESSION
Great Depression, worldwide economic downturn that began in 1929 and lasted until about
1939. It was the longest and most severe depression ever experienced by the industrialized
Western world, sparking fundamental changes in economic institutions, macroeconomic policy,
and economic theory. Although it originated in the United States, the Great Depression caused
drastic declines in output, severe unemployment, and acute deflation in almost every country
of the world.
Dates of the Great Depression in various countries
(year and quarter)
Depression Recovery
Country
Began Began
United States 1929 Q3 1933 Q2
United Kingdom 1930 Q1 1932 Q4
Germany 1928 Q1 1932 Q3
France 1930 Q2 1932 Q3
Italy 1929 Q3 1933 Q1
Japan 1930 Q1 1932 Q3
Canada 1929 Q2 1933 Q2
India 1930 Q1 1931 Q4
Causes Of Great Depression:
What caused the Great Depression, the worst economic depression in US history? It was not
just one factor, but instead a combination of domestic and worldwide conditions that led to the
Great Depression. Here is a list of the top reasons that historians and economists have cited as
causing the Great Depression.
Stock Market Crash of 1929:
On October 24, 1929, as nervous investors began selling overpriced shares en masse, the stock
market crash that some had feared happened at last. A record 12.9 million shares were traded
that day, known as “Black Thursday.”
Five days later, on October 29 or “Black Tuesday,” some 16 million shares were traded after
another wave of panic swept Wall Street. Millions of shares ended up worthless, and those
investors who had bought stocks “on margin” (with borrowed money) were wiped out
completely.As consumer confidence vanished in the wake of the stock market crash, the
downturn in spending and investment led factories and other businesses to slow down
production and begin firing their workers. For those who were lucky enough to remain
employed, wages fell and buying power decreased.
Many Americans forced to buy on credit fell into debt, and the number of foreclosures and
repossessions climbed steadily. The global adherence to the gold standard, which joined
countries around the world in a fixed currency exchange, helped spread economic woes from
the United States throughout the world, especially Europe.
The Dust Bowl:
The Dust Bowl is a natural disaster that devastated the Midwest in the 1930s. It was the worst
drought in North America in 1,000 years. Unsustainable farming practices worsened the
drought’s effect. It killed the crops that kept the soil in place. When winds blew, they raised
enormous clouds of dust. It deposited mounds of dirt on everything, even covering houses.
Dust suffocated livestock and caused pneumonia in children. At its worst, the storm blew dust
to Washington, D.C.
The drought and dust destroyed a large part of U.S. agricultural production. The Dust
Bowl made the Great Depression even worse.
Reduction in Purchasing Across the Board :
With the stock market crash and the fears of further economic woes, individuals from all classes
stopped purchasing items. This then led to a reduction in the number of items produced and
thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with
paying for items they had bought through installment plans and their items were repossessed.
More and more inventory began to accumulate. The unemployment rate rose above 25% which
meant, of course, even less spending to help alleviate the economic situation.
Smoot-Hawley Tarrif Act:
The Smoot-Hawley Tariff Act was first introduced to Congress in 1929 and became official law in
1930 after the stock market crash.This act was meant to help protect America's farmers from
overseas competition by putting in a protectionist policy, but it backfired tremendously. The
tariffs were warned against before being signed into law, immediately unpopular, and were
quickly retaliated against. Other countries increased their tariffs as well, and trade between
nations plummeted for several years.
The fallout from the Smoot-Hawley Tariff Act hurt not just the U.S. but the world economy and
may have made the depression worse.
Impact of Great Depression on Industrial Production and Employement of various Economies:
USA :
The stock market crash marked the beginning of a decade of high unemployment, poverty, low
profits, deflation, plunging farm incomes, and lost opportunities for economic growth as well as
for personal advancement. Industries that suffered the most included construction, shipping,
mining, logging and agriculture. Also hard hit was the manufacturing of durable goods like
automobiles and appliances, whose purchase could be postponed. Between the peak and the
trough of the downturn, industrial production in the United States declined 47 percent and
unemployment rate exceeded more than 20 percent
Decline in industrial production in various countries
Country Decline
United States 46.8%
United Kingdom 16.2%
Germany 41.8%
France 31.3%
Italy 33.0%
Japan 8.5%
Canada 42.4%
Belgium 30.6%
The Netherlands 37.4%
Sweden 10.3%
Denmark 16.5%
Poland 46.6%
Czechoslovakia 40.4%
Argentina 17.0%
Brazil 7.0%
Germany:
In 1930, the United States, by then the largest purchaser of German industrial exports, put up
tariff barriers to protect its own companies. German industrialists lost access to US markets and
found credit almost impossible to obtain.
Many industrial companies and factories either closed or shrank dramatically. By 1932, German
industrial production was at 58 per cent of its 1928 levels. The effect of this decline was
spiralling unemployment.
The effects on German society were devastating. By the end of 1929, around 1.5 million
Germans were out of work. Within a year, this figure had more than doubled. By early 1933,
unemployment in Germany had reached six million, more than one-third of its working
population.
While there were few shortages of food, millions found themselves without the means to
obtain it. Children suffered worst, thousands dying from malnutrition and hunger-related
diseases. Millions of industrial workers – who during the ‘Golden Age of Weimar‘ had become
the best-paid blue-collar workers in Europe – spent a year or more in idleness.
The Great Depression affected all classes in Germany, not just the factory workers.
Unemployment climbed markedly among white-collar workers and professional classes. A
Chicago news correspondent in Berlin reported that “60 per cent of each new university
graduating class was out of work.
Australia:
The Australian economy and foreign policy largely rested upon its place as a primary producer
within the British Empire, and Australia's important export industries, particularly primary
products such as wool and wheat, suffered significantly from the collapse in international
demand. Many hundreds of thousands of Australians suddenly faced the humiliation of poverty
and unemployment. This was still the era of traditional social family structure, where the man
was expected to be the sole bread winner. Soup kitchens and charity groups made brave
attempts to feed the many starving and destitute. The suicide rates increased dramatically and
it became clear that Australia had limits to the resources for dealing with the crisis.
Chile:
The League of Nations labelled Chile the country hardest hit by the Great Depression because
80% of government revenue came from exports of copper and nitrates, which were in low
demand. The economic crisis rose the levels of unemployment and caused a migration of
unemployed workers from the north to Santiago.
Canada:
The Great Depression devastated many economies. But one country arguably suffered more
than any other: Canada. Canada was, and still is, a country dependent on trade. In 1930, U.S.
president Herbert Hoover signed into law the Smoot-Hawley Tariff Act, which raised duties on
many imports to historically high levels. It was particularly harmful to Canada, America’s largest
trading partner, where export prices plummeted. Canadian automakers saw their exports
collapse to 13,000 vehicles in 1931 from 102,000 in 1929. Manufacturing, in general, declined
more than 50 per cent.
As the great depression raged on, the rate of unemployment went higher to unprecedented
levels. As industries lost their key market in the slump and consequently their revenues, they
laid off a high number of workers. Consequently, there was no hope that the existing industrial
workers could continue as industries halted their production due to low prices that could not
even meet production costs. By 1930,30% of the labour force was out of work, and one fifth of
the population became dependent on government assistance
Soviet Union:
The Soviet Union was the world's sole communist state with very little international trade. Its
economy was not tied to the rest of the world and was only slightly affected by the Great
Depression. The Soviet economy arguably actually benefited from the Great Depression. The
USSR hired specialized labour particularly from the USA to help fuel their industrialization.
Farmers, engineers and industrialists were brought in to help develop the relatively backward
and agrarian economy into one that was Urbanized and Industrialized
France:
The crisis affected France a bit later than other countries, hitting around 1931. The impact the
Great Depression had on France seemed to be less than the one it had on other industrialized
nations, such as Britain, Germany and the United States itself. French official unemployment
figures were around 500,000.Larger numbers of unemployed partially were prevented by the
reduction in working hours, part of the struggle of the labour movement to establish better
living conditions. The productivity of France's industry declined, as did prices for many
products, and wages/salaries. A fact contributing to relatively low unemployment figures was
the large sector of the population still engaged in agriculture.
