Great Depression

The Great Depression was a severe global economic downturn from 1929 to 1939. It was a time when many people around the world lost their jobs and money. Factories stopped making as many things, and many banks and businesses closed down. The problems began in the United States after a big drop in stock prices known as the Wall Street crash of 1929. Countries like the United Kingdom and Germany also suffered greatly, with many people out of work.

Before the Great Depression, the 1920s were a time of growth and change called the "Roaring Twenties". But many banks and businesses made risky investments, and when spending dropped, jobs became hard to find. By 1933, about a quarter of people in the U.S. were unemployed, and many farmers lost their land. President Franklin D. Roosevelt introduced programs called the New Deal to help create jobs and support people. In Germany, the economic problems helped a political group led by Adolf Hitler gain power.

The Great Depression affected every part of life. People had less money to spend, and the value of things like crops dropped sharply. The world’s total economy shrank, and international trade fell by more than half. The beginning of World War II in 1939 helped end the Depression by creating new jobs in factories and the military.

Overview

The Great Depression was a very hard time for the world’s economies, lasting from 1929 to 1939. It began in the United States when the stock market crashed in 1929, causing many people to lose money. Even though the market tried to recover, it kept falling, and many jobs were lost.

The problem soon spread to other countries because people and businesses stopped trading as much. Some places felt the effects more than others. For example, Germany had big problems, while the United Kingdom did not suffer as much. The drop in trade and changes in money made the situation worse for everyone. By 1933, world trade had fallen to just one-third of what it was four years earlier.

Dow Jones Industrial Average

Wall Street crash of 1929

severe drought

deflationary spiral

U.S. economy

gold standard

protectionist

Smoot–Hawley Tariff Act

Course

Origins

The Great Depression was a difficult time for the world, starting in 1929 in the United States. After World War I, the 1920s were a time of wealth, especially in the United States and Western Europe. In 1929, the stock market crashed, losing most of its value by 1932. This crash caused many banks to fail and led to widespread poverty and unemployment.

The Smoot–Hawley Act and the Breakdown of International Trade

To try to fix the economy, the United States passed a law called the Smoot–Hawley Tariff Act in 1930. This law put high taxes on goods from other countries, which hurt trade and made the Depression worse. Other countries also put up their own barriers, making it hard for everyone to trade with each other.

The gold standard and the spreading of global depression

The gold standard, where countries tied their money to gold, made the Depression spread around the world. Countries that left the gold standard earlier recovered faster. For example, the United Kingdom left in 1931 and recovered sooner than countries that stayed on the gold standard longer.

Turning point and recovery

By 1933, most countries began to recover, but it took until the start of World War II to fully end the Depression. The war helped create jobs and boost economies, bringing an end to the hard times of the Depression.

Causes

The Great Depression was a very difficult time for the world economy. It started in the United States in 1929 after a big drop in stock prices and lasted until the late 1930s. Many people lost their jobs, and businesses closed.

One reason the Depression happened was that countries were trying to go back to using gold to back their money. This made it hard for them to control their economies, and many people lost jobs as a result.

There were different ideas about why the Depression happened. Some economists thought that the government should have done more to help, like spending money on projects to give people jobs. Others thought that the banks should have done more to keep money flowing.

One big idea was that the government and banks should work together to keep the economy steady. This means making sure that people keep making money and that businesses can keep running.

Some people thought that the Depression happened because the economy was not fair. They believed that rich people had too much money, and poor people did not have enough to spend.

In the end, many economists learned that the government and banks need to work together to prevent big economic problems like the Great Depression.

Effects by country

Many countries set up relief programs and experienced political changes. In Europe and Latin America, some democratic governments were replaced by dictatorships or authoritarian rule. The Dominion of Newfoundland abandoned its autonomy within the British Empire, becoming the only region to voluntarily give up democracy.

Argentina

The drop in foreign trade badly affected Argentina. The British decision to stop importing Argentine beef led to a treaty that kept some trade but required Argentina to favor British exports. By 1935, Argentina’s economy had recovered to 1929 levels, and the Central Bank of Argentina was formed. However, Argentina stopped growing and became less developed in the following decades.

Australia

Australia was one of the hardest-hit developed countries because it relied on exports. Unemployment reached a record high of 29% in 1932, and unrest became common. After 1932, prices for wool and meat rose, leading to a gradual recovery.

Canada

Canada was harshly affected by the global downturn and the Dust Bowl. By 1932, industrial production had fallen to 58% of its 1929 level, and unemployment reached 27% in 1933.

Chile

Chile was labeled the country hardest hit by the Great Depression because most of its government income came from exports of copper and nitrates, which were in low demand. By 1932, Chile’s economy had shrunk to less than half of what it had been in 1929. In response, Chile focused on developing local industries to protect itself from future shocks.

China

China was largely unaffected because it used the silver standard. However, U.S. actions in 1934 created too much demand for China’s silver, so China switched to a different currency system in 1935. The government also worked to improve its economy in several ways.

European African colonies

The drop in prices and exports hurt African colonies. In some areas, employment dropped by as much as 70%, and many people returned to their villages. Colonial governments cut budgets, delaying projects like building roads and schools.

France

France was affected later than other countries, around 1931. Unemployment stayed below 5%, and production fell by at most 20% from 1929 levels. However, the depression caused unrest and helped lead to the formation of a new government in 1936.

Germany

The Great Depression hit Germany hard. Unemployment reached nearly 30% in 1932. The political situation changed dramatically, leading to the rise of a new leader. The government tried different ways to improve the economy, including public works and military spending.

Greece

Greece felt the effects of the Great Depression in 1932. The country struggled with its currency and trade, but managed to grow at an average rate of 3.5% from 1932 to 1939.

Iceland

Iceland was hard hit, with exports dropping from 74 million kronur in 1929 to 48 million in 1932. The government increased its control over the economy, and the depression lasted until World War II began.

India

India’s economy was debated by historians. While the jute and coal industries suffered, other parts of the economy remained fairly stable.

Ireland

Ireland, with its focus on farming and trade with the UK, fared better than many other countries in the early years of the depression.

Italy

Italy was hit very hard. Banks took over failing industries, leading to a financial crisis in 1932. The government created a large state-owned industrial sector to help recover, but it took until 1935 to reach 1930’s manufacturing levels.

Japan

Japan was not strongly affected. The government used policies to boost the economy, and by 1933, Japan was out of the depression. The economy grew, especially in heavy industry, during the 1930s.

Latin America

High levels of U.S. investment meant Latin American economies were severely damaged. Countries like Chile, Bolivia, and Peru were especially affected. However, the depression also led governments to develop new local industries.

Netherlands

The Netherlands suffered a deep and long depression from 1931 to 1937, partly due to the after-effects of the U.S. stock market crash and internal factors. The depression led to political instability and riots.

New Zealand

New Zealand, dependent on agricultural exports to the UK, faced severe economic hardship. Unemployment rose, and riots occurred among the unemployed in major cities.

Poland

Poland was affected longer and stronger than other countries due to government policies and its recent independence. Industrial production fell significantly, and unemployment rose sharply.

Portugal

Portugal, already under a dictatorial junta, saw its leader expand his powers and establish an authoritarian government. The depression led to harsh economic measures but eventual growth.

Puerto Rico

Puerto Rico faced severe economic problems before the depression, and conditions worsened. Unemployment and income dropped significantly. Relief programs were created by the U.S. government and local leaders.

Romania

Romania was also affected by the Great Depression.

South Africa

As world trade dropped, demand for South Africa’s exports fell. This led to social unrest and political changes. Unemployment programs focused mainly on the white population.

Soviet Union

The Soviet Union, though a socialist state, still relied on international trade. The drop in global prices hurt its exports, but the economy continued to grow due to investment in heavy industry.

Spain

Spain was not one of the main countries affected by the Depression due to its isolated economy. However, the civil war from 1936 to 1939 caused heavy destruction and loss of talent.

Sweden

Sweden was the first country to fully recover from the Great Depression. Strong government policies and a focus on welfare helped the economy recover by the 1930s.

Thailand

In Thailand, the Great Depression contributed to the end of the absolute monarchy in 1932.

Turkey

Turkey’s economy was affected as trade deficits increased and the currency lost value. The government shifted to more state-controlled economic policies.

United Kingdom

The UK was driven off the gold standard in 1931. The financial crisis led to political changes, including the formation of a new government. The industrial areas suffered greatly, with unemployment reaching high levels, while the south and Midlands saw prosperity in modern industries.

United States

The U.S. faced severe economic problems, with unemployment reaching 25% in 1933. President Hoover’s measures were not enough, and the economy continued to decline. President Roosevelt’s New Deal programs aimed to provide relief, recovery, and reform through increased government spending and financial reforms. By 1936, economic indicators had improved, but unemployment remained high. A recession in 1937–38 followed cuts in spending, but recovery began in 1938.

Literature

The Great Depression inspired many writers to explore its effects on people’s lives. One famous book from this time is The Grapes of Wrath by John Steinbeck. It tells the story of a poor family who lose their home because of hard times and must travel to find work. Steinbeck also wrote Of Mice and Men, another story set during the Depression.

Other books from this period include To Kill a Mockingbird by Harper Lee and The Blind Assassin by Margaret Atwood, both of which happen during the Great Depression. For younger readers, the Kit Kittredge series by Valerie Tripp shows how one family in Cincinnati coped with the challenges of the time. These stories help us understand what life was like during this difficult period.

Naming

Further information: Economic depression

The name "The Great Depression" is often credited to a British economist named Lionel Robbins, who wrote a book called The Great Depression in 1934. However, many people believe that President Hoover helped make the term popular by talking about the economic troubles as a "depression."

The word "depression" has been used to describe economic problems since the 1800s. For example, President James Monroe called an economic crisis in 1819 a "depression," and President Calvin Coolidge used the same word for the economic trouble from 1920 to 1921.

Before this, big money problems were called "panics," like the Panic of 1907. But after the big crash in 1929, the word "panic" was used less often.

Other "great depressions"

When the collapse of the Soviet Union happened, it caused big economic problems in many countries. The situation became very tough for people living in those areas during the 1990s, and it was even harder than during the Great Depression. Before Russia's own financial trouble in 1998, the country's economy was only half of what it had been a few years earlier.

Comparison with the Great Recession

Main article: Comparisons between the Great Recession and the Great Depression

The worldwide economic decline after 2008 has often been compared to the problems of the 1930s. In the late 1920s, the gap between the very rich and everyone else grew very large, and many people were out of work for a long time. Similar big gaps happened again around 2007 and 2008.