COMMITTEE - Global Summit on the Economic Crisis

COUNTRY - Greece
SCHOOL - Modern High School for Girls.
DELEGATES - Mohona Sengupta and Akshita Poddar
TOPIC AREA - Discussing the Global Trade Breakdown and mitigating the Effects of
the Economic Downturn.

Statement of the Problem

The Great Depression led to an increase in global unemployment , fiscal rates , tariffs
and a sharp decline in the global economy and trade leading to worldwide economic
recession and several negative impacts on the social , economic and political systems of
the world.

Causes

I. The stock market crash of 1929

During the 1920s the U.S. stock market underwent a historic expansion. As stock prices
rose to unprecedented levels, investing in the stock market came to be seen as an easy
way to make money. By the end of the decade hundreds of millions of shares were being
carried on margin. Once prices began their inevitable decline in October 1929, millions of
overextended shareholders fell into a panic and rushed to liquidate their holdings,
exacerbating the decline and engendering further panic. Between September and
November, stock prices fell 33 percent.

II. The gold standard

Whatever its effects on the money supply in the United States, the gold standard
unquestionably played a role in the spread of the Great Depression from the United States
to other countries. As the United States experienced declining output and deflation, it
tended to run a trade surplus with other countries because Americans were buying fewer
imported goods, while American exports were relatively cheap. Such imbalances gave
rise to significant foreign gold outflows to the United States, which in turn threatened to
devalue the currencies of the countries whose gold reserves had been depleted.
III. The speculative boom of the 1920s
As anyone who's read "The Great Gatsby" or seen "Chicago" knows, the period popularly
called the "Roaring Twenties" preceded the crash. GDP grew at an annual rate of 4.7%,
while the jobless rate averaged 3.7%. From 1920 to 1929, total wealth in the U.S. more
than doubled, and individual Americans started investing in the market in a big way. But
all was not as roaring as it seemed. Consumer debt increased, and companies
over-extended themselves too. Financial institutions became heavily involved in stock
market speculation. In some cases, they created securities "subsidiaries" with their own
brokers secretly selling their own stocks — what would be a clear conflict of interest
today. Weak regulations had opened the way for a period of wild speculation on stock
exchanges. Being "in the market" was the "in" thing, but many investors weren't
researching companies and buying based on the fundamentals — they were just gambling
that the stock would keep going up.
Even worse, many people bought shares on margin, generally needing just 10% of a
stock's price to make a purchase (not realizing they'd be on the hook for the whole
amount if the price fell). That, in, turn, inflated prices, with shares selling for more
money than justified by their companies' actual earnings.
Still, the stock market stubbornly kept on climbing. That is, until October 1929, when it
all came tumbling down.

IV. Oversupply and overproduction problems

Mass production powered the 1920s consumption boom. But it also led to overproduction
on the part of many businesses. Even before the crash, they started having to sell goods at
a loss.

A similar crisis was occurring in agriculture. During World War I, farmers had bought
more machinery to boost production — a costly move that put them in debt. But, in the
post-war economy, they ended up producing far more supply than consumers needed.
Land and crop values plummeted.

It all resulted in a drop in prices, both agricultural and industrial, which decimated profits
and hurt already over-extended enterprises.

V. Low demand, high unemployment

Losing money forced companies to cut production — and their workforce. Debt-ridden
consumers then stopped spending. That only worsened the situation, causing more
businesses to collapse or cut back and, of course, lay off more people. During its peak in
1933, the jobless rate reached 24.9% — 15 million Americans out of a population of
125.6 million — and it was still nearly 19% in 1939.

Foreign Policy

The resolution of the Greco - Turkish War and the Treaty of Lausanne led to a population
exchange between Greece and Turkey, which led to major ramifications on the
agriculture sector. The Tsifliks were abolished and Greek refugees from the Asia Minor
settled on these abandoned and partitioned estates. The refugees brought in a new
economic air into Greece. Prior to this many of them were successful entrepreneurs and
they started developing the land and economic affairs in Greece using these skills and
qualities.As a result this led to rapid growth of urban areas in Greece. These refugees
settled in urban centers such as Athens and Thessaloniki. Many Greek economists stated
that these refugees kept the Greek industry competitive during the 1920s, as the surplus
of labor kept the real wages low.
Budgetary problems caused the government to dichotomize the drachma.
Unable to secure any more loans from abroad to finance the war with Turkey, in 1922 the
Finance minister Petros Protopapadakis declared that each drachma would be cut into
half. Half of the value would be kept by the owner and the other would be surrendered to
the government in exchange for a 20 year 6.5 % loan. In 1928, the Greek Drachma was
tied to the gold standard, but pegged to the British pound.
In 1923, the military and diplomatic conditions of Greece were adversely
affected due to the Corfu incident, which in turn affected the economic sector. However,
after the coming back of the liberal leader, Eleftherios Venizelos, in 1928, a new
government was formed. This was the only cabinet of the Second Republic to run its full
four-year term, and the work it left behind was considerable. Alongside domestic
reforms, Venizelos restored Greece's frayed international relations, even initiating a
Greco-Turkish reconciliation with a visit to Ankara and the signing of a Friendship
Agreement in 1930.
Prior to the Great Depression, the Greek economy experienced years of growth,
a healthy commercial activity spree, and a stark increase in (less-leveraged) bank loans to
finance it.
Solutions

● Formation of job creation programs which would provide labour to all able
-bodied men in areas where unemployment rates were high. This could be in the
form of creation of housing , agricultural labour and construction as housing , food
insecurity were issues concerning the majority of the population.
● ​ Formation of a merit system through which people would be granted jobs
including government officials based on their qualifications and merit. The reform
system should ensure that no person of authority would be able to allow their
supporters to get any job without a set down standard.
● An act to be set in place that would ensure that total working hours in a week did
not exceed 42 hours with 6 hours per day with a minimum wage of 24 cents per
worker. Child labour of children under the age of 18 would be forbidden and if
carried out would be a punishable offence. Workers would also be given protection
against hazard to their lives due to working environments wherein the employer
would be liable to pay them for their injuries.
● The central banks should be ordered by the governments to increase their output
of money supply, both to adhere to the interests of the investors as well as to listen
to the plight of the banks

Conclusion

The Great Depression not only affected the countries on the global sphere at an economic
level, but also every individual who was involved in the economy. People at the lowest
levels lost their jobs and there was massive unemployment. Banks were being shut down
as people lost their faith in these institutions. Furthermore the governments barely took
steps to eradicate the problems at hand. If steps were taken , they were short sighted in
nature which would ultimately lead to fiscal and monetary policy problems as well as
arising of debts within the economic systems of the country. Our aim is to figure out what
solutions will be effective enough to work at different levels and different economies of
the world. These solutions not only need to be inclusive and efficient in nature but also
need to be devised keeping in mind that such problems are avoided in the future.