Great Depression

The Great Depression was a massive global economic recession (or "depression") that ran from 1929 to approximately 1939. It led to numerous bank failures, high unemployment, as well as dramatic drops in Gross Domestic Product (GDP), industrial production, stock market share prices and virtually every other measure of economic growth. It is generally considered to have bottomed out in 1933, but it was not until well after the end of World War II before such indicators as industrial production, share prices and global GDP surpassed their 1929 levels.

Responses

The Wall Street crash is widely considered to be the event which marked the start of the world-wide financial crisis. In the United States between 1929 and 1933, unemployment soared from approximately 3% to over 25%, while manufacturing output declined by one-third. Governments worldwide sought economic recovery by adopting restrictive autarkic policies such as high tariffs, import quotas and barter agreements and by experimenting with new plans for their internal economies.

Related Topics:
Wall Street crash - 1929 - 1933 - Unemployment - Autarkic

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Economic crises due to the depression created great problems throughout the United States and much of the world. Consumers reduced their purchases of luxury products and many businesses cut production. Big businesses, such as General Motors, saw their sales drop by 50% in the late 1920s and the early 1930s. This caused businesses to cut back on the numbers they employed, with thousands of workers losing their jobs.

Related Topics:
General Motors - 1920s - 1930s

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When farm prices fell, small farmers went bankrupt and in the USA many lost their land due to bank foreclosure. By June of 1932 the American economy had shed about 55% of the work force. On July 8,1932, the Dow Jones Industrial Average plunged to 41.22. The United States government responded by instituting the New Deal policy which was an attempt to restore prosperity by spending on welfare and public works.

Related Topics:
Foreclosure - 1932 - July 8 - Dow Jones Industrial Average - Plunged to 41.22 - New Deal

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After the stock market collapse, the New York based banks became concerned over the security of overseas loans and called in their loans to Germany and Austria. However, without the American money, Germany was unable to continue making World War One reparations payments to France and Britain. This chain reaction meant they in turn could not repay their war loans to America. Therefore, the depression had spread to Europe. All governments were forced to cease paying both reparations and war loan repayments.

Related Topics:
New York - Germany - Austria - World War One - France - Britain - Europe

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The United States government tried to protect domestic industries from foreign competition by imposing the highest import duty in American history. In retaliation, other countries raised their tariffs on imports of American goods. As a result, global industrial production declined by 36% between 1929 and 1932, while world trade dropped by 62%.

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Observers throughout the world saw in the massive program of economic planning and state ownership of the Soviet Union what appeared to be a depression-proof economic system and a solution to the crisis in capitalism.

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In Germany unemployment increased drastically fueling widespread disillusionment and anger. The institutions of the Weimar Republic, which had already been unable to maintain order in Germany, further deteriorated in the years from 1930 to 1932, while the Chancellor and finance expert Heinrich Brüning attempted to fix the economy by drastically cutting state spending. At the time the NSDAP, or Nazi party, gained much popularity, winning the two general elections in 1932. This eventually led to the appointment of Adolf Hitler as Chancellor on January 30, 1933 (See Weimar Republic for details). In Nazi Germany, economic recovery was pursued through rearmament, conscription, and public works programs. In Benito Mussolini's Italy, the economic controls of his corporate state were tightened.

Related Topics:
Germany - Weimar Republic - Chancellor - Heinrich Brüning - NSDAP - Adolf Hitler - January 30 - 1933 - Nazi - Benito Mussolini - Italy

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In the United Kingdom, the Labour government of Ramsay MacDonald, and later the Conservative-dominated coalition "National Government", responded to the depression by imposing tariffs on all imports from outside the British Empire (arguably worsening the global situation), by cutting public spending, and by abandoning the Gold Standard which reduced the cost of British exports (see Great Depression in the United Kingdom).

Related Topics:
United Kingdom - Labour - Ramsay MacDonald - Conservative - British Empire - Gold Standard - Great Depression in the United Kingdom

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In the Netherlands some projects were started to give people employment and boost the economy, such as the Amsterdamse Bos, a reforestation project near Amsterdam. In Heerlen fabric merchant Schunck commissioned a new building in 1934 for his business, the hypermodern Glaspaleis (Crystal Palace) the tallest building in the city at the time.

Related Topics:
Netherlands - Amsterdamse Bos - Amsterdam - Heerlen - Schunck - 1934 - Glaspaleis

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In the United States, President Herbert Hoover made efforts to control the situation. However he gravely underestimated the severity of the crisis, even announcing to U.S. Congress on December 3, 1929, that the worst effects of the recent stock market crash were behind them, and that the U.S. public had regained faith in the economy. Having realized his mistake, Hoover went before Congress again on December 2, 1930, to ask for a $150 million public works program to help generate jobs. However, one of the major problems was that with deflation, the currency that you kept in your pocket could buy more goods as prices went down. Another was that there had been no federal oversight of the stock market or other investment markets, and with the collapse many stock and investment schemes were found to be either insolvent or outright frauds. Unfortunately, many banks had invested in these schemes and this may have precipitated a collapse of the banking system in 1932; Milton Friedman's monetary theories suggest that the inexperience of the newly-created Federal Reserve in managing the money supply exacerbated the problem. With the banking system in shambles, and people holding on to whatever currency that they had, there was minimal cash available for any activities that would cause positive change.

Related Topics:
United States - Herbert Hoover - U.S. Congress - December 3 - 1929 - Stock market - Economy - December 2 - 1930 - 1932 - Milton Friedman - Federal Reserve

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The response of the Hoover administration helped little; instead of increasing the money supply, the Hoover administration did the exact opposite and raised interest rates, falsely believing that inflation was the real danger. Many in the Hoover administration believed that as wages fell, the cost of production would drop and, as a result, production would pick up again--the depression would be self-correcting. Nobody at that time foresaw the effects of a calamitous drop in the money supply. For this reason, they saw no need for the government to intervene in the economy, a policy which proved disastrous.

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Like their counterparts abroad, many Americans were disillusioned with their system of government, believing that Hoover's policies had driven the country to ruin. Shanty towns populated by unemployed people at the time were often dubbed Hoovervilles, highlighting the President's fading popularity. During this period, several alternative political movements saw a considerable increase in membership. In particular, a number of high-profile figures embraced the ideals of Communism. Radio speakers, such as Father Charles Coughlin, saw their listening audiences swell into the millions as they sought easy scapegoats for the country's woes.

Related Topics:
Shanty town - Hoovervilles - Communism - Charles Coughlin

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Upon accepting the Democratic nomination for president (July 2, 1932), Franklin D. Roosevelt promised "a new deal for the American people", a phrase that has endured as a label for his administration and its many domestic achievements. Upon being elected in 1932 he proposed the "New Deal", a platform of government programs based on Keynesian economics and intended to stimulate and revitalize the economy. The British and French governments also intervened in their economies to escape the worst effects of the depression.

Related Topics:
Democratic - July 2 - 1932 - Franklin D. Roosevelt - New Deal - Keynesian

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