The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. The timing of the Great Depression varied across nations; in most countries it started in 1929 and lasted until the late-1930s. It was the longest, deepest, and most widespread depression of the 20th century. In the 21st century, the Great Depression is commonly used as an example of how intensely the world's economy can decline.
The Great Depression started in the United States after a major fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday). Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%. By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession. Some economies started to recover by the mid-1930s. However, in many countries the negative effects of the Great Depression lasted until the beginning of World War II.
The Great Depression had devastating effects in countries both rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%.
Cities around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming communities and rural areas suffered as crop prices fell by about 60%. Facing plummeting demand with few alternative sources of jobs, areas dependent on primary sector industries such as mining and logging suffered the most.
Economic historians usually attribute the start of the Great Depression to the sudden devastating collapse of U.S. stock market prices on October 29, 1929, known as Black Tuesday. However, some dispute this conclusion and see the stock crash as a symptom, rather than a cause, of the Great Depression.
Even after the Wall Street Crash of 1929 optimism persisted for some time. John D. Rockefeller said "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again." The stock market turned upward in early 1930, returning to early 1929 levels by April. This was still almost 30% below the peak of September 1929.
Together, government and business spent more in the first half of 1930 than in the corresponding period of the previous year. On the other hand, consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by 10%. In addition, beginning in the mid-1930s, a severe drought ravaged the agricultural heartland of the U.S.
By mid-1930, interest rates had dropped to low levels, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment were depressed. By May 1930, automobile sales had declined to below the levels of 1928. Prices in general began to decline, although wages held steady in 1930. Then a deflationary spiral started in 1931. Farmers faced a worse outlook; declining crop prices and a Great Plains drought crippled their economic outlook. At its peak, the Great Depression saw nearly 10% of all Great Plains farms change hands despite federal assistance.
The decline in the U.S. economy was the factor that pulled down most other countries at first; then, internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By 1933, the economic decline had pushed world trade to one-third of its level just four years earlier.
Change in economic indicators 1929–32
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The two classical competing theories of the Great Depression are the Keynesian (demand-driven) and the monetarist explanation. There are also various heterodox theories that downplay or reject the explanations of the Keynesians and monetarists. The consensus among demand-driven theories is that a large-scale loss of confidence led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets. Holding money became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand. Monetarists believe that the Great Depression started as an ordinary recession, but the shrinking of the money supply greatly exacerbated the economic situation, causing a recession to descend into the Great Depression.
Economists and economic historians are almost evenly split as to whether the traditional monetary explanation that monetary forces were the primary cause of the Great Depression is right, or the traditional Keynesian explanation that a fall in autonomous spending, particularly investment, is the primary explanation for the onset of the Great Depression. Today the controversy is of lesser importance since there is mainstream support for the debt deflation theory and the expectations hypothesis that building on the monetary explanation of Milton Friedman and Anna Schwartz add non-monetary explanations.
There is consensus that the Federal Reserve System should have cut short the process of monetary deflation and banking collapse. If they had done this, the economic downturn would have been far less severe and much shorter.
British economist John Maynard Keynes argued in The General Theory of Employment, Interest and Money that lower aggregate expenditures in the economy contributed to a massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment.
Keynes' basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing, as the private sector would not invest enough to keep production at the normal level and bring the economy out of recession. Keynesian economists called on governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes.
As the Depression wore on, Franklin D. Roosevelt tried public works, farm subsidies, and other devices to restart the U.S. economy, but never completely gave up trying to balance the budget. According to the Keynesians, this improved the economy, but Roosevelt never spent enough to bring the economy out of recession until the start of World War II.
Monetarists follow the explanation given by Milton Friedman and Anna J. Schwartz. They argued that the Great Depression was caused by the banking crisis that caused one-third of all banks to vanish, a reduction of bank shareholder wealth and more importantly monetary contraction of 35%, which they called "The Great Contraction." This caused a price drop of 33% (deflation). By not lowering interest rates, by not increasing the monetary base and by not injecting liquidity into the banking system to prevent it from crumbling, the Federal Reserve passively watched the transformation of a normal recession into the Great Depression. Friedman and Schwartz argued that the downward turn in the economy, starting with the stock market crash, would merely have been an ordinary recession if the Federal Reserve had taken aggressive action. This view was endorsed by Fed Governor Ben Bernanke in a speech honoring Friedman and Schwartz with this statement:
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again.
— Ben S. Bernanke
The Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. Friedman and Schwartz argued that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.
With significantly less money to go around, businesses could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.
One reason why the Federal Reserve did not act to limit the decline of the money supply was the gold standard. At that time, the amount of credit the Federal Reserve could issue was limited by the Federal Reserve Act, which required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. A "promise of gold" is not as good as "gold in the hand", particularly when they only had enough gold to cover 40% of the Federal Reserve Notes outstanding. During the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933, President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold.
From the point of view of today's mainstream schools of economic thought, government should strive to keep the interconnected macroeconomic aggregates money supply and/or aggregate demand on a stable growth path. When threatened by the forecast of a depression central banks should pour liquidity into the banking system and the government should cut taxes and accelerate spending in order to keep the nominal money stock and total nominal demand from collapsing. At the beginning of the Great Depression most economists believed in Say's law and the self-equilibrating powers of the market and failed to explain the severity of the Depression. Outright leave-it-alone liquidationism was a position mainly held by the Austrian School. The liquidationist position was that a depression is good medicine. The idea was the benefit of a depression was to liquidate failed investments and businesses that have been made obsolete by technological development in order to release factors of production (capital and labor) from unproductive uses so that these could be redeployed in other sectors of the technologically dynamic economy. They argued that even if self-adjustment of the economy took mass bankruptcies, then so be it. An increasingly common view among economic historians is that the adherence of some Federal Reserve policymakers to the liquidationist thesis led to disastrous consequences. Regarding the policies of President Hoover, economists like Barry Eichengreen and J. Bradford DeLong point out that President Hoover tried to keep the federal budget balanced until 1932, when he lost confidence in his Secretary of the Treasury Andrew Mellon and replaced him. Despite liquidationist expectations, a large proportion of the capital stock was not redeployed but vanished during the first years of the Great Depression. According to a study by Olivier Blanchard and Lawrence Summers, the recession caused a drop of net capital accumulation to pre-1924 levels by 1933. Milton Friedman called the leave-it-alone liquidationism "dangerous nonsense". He wrote:
I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You've just got to let it cure itself. You can't do anything about it. You will only make it worse. ... I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.
The monetary explanation has two weaknesses. First it is not able to explain why the demand for money was falling more rapidly than the supply during the initial downturn in 1930–31. Second it is not able to explain why in March 1933 a recovery took place although short term interest rates remained close to zero and the Money supply was still falling. These questions are addressed by modern explanations that build on the monetary explanation of Milton Friedman and Anna Schwartz but add non-monetary explanations.
Irving Fisher argued that the predominant factor leading to the Great Depression was a vicious circle of deflation and growing over-indebtedness. He outlined nine factors interacting with one another under conditions of debt and deflation to create the mechanics of boom to bust. The chain of events proceeded as follows:
During the Crash of 1929 preceding the Great Depression, margin requirements were only 10%. Brokerage firms, in other words, would lend $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back. Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits en masse, triggering multiple bank runs. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.
Outstanding debts became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 U.S. banks failed. (In all, 9,000 banks failed during the 1930s). By April 1933, around $7 billion in deposits had been frozen in failed banks or those left unlicensed after the March Bank Holiday. Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated.
The liquidation of debt could not keep up with the fall of prices which it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed. This self-aggravating process turned a 1930 recession into a 1933 great depression.
Fisher's debt-deflation theory initially lacked mainstream influence because of the counter-argument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors). Pure re-distributions should have no significant macroeconomic effects.
Building on both the monetary hypothesis of Milton Friedman and Anna Schwartz as well as the debt deflation hypothesis of Irving Fisher, Ben Bernanke developed an alternative way in which the financial crisis affected output. He builds on Fisher's argument that dramatic declines in the price level and nominal incomes lead to increasing real debt burdens which in turn leads to debtor insolvency and consequently leads to lowered aggregate demand, a further decline in the price level then results in a debt deflationary spiral. According to Bernanke, a small decline in the price level simply reallocates wealth from debtors to creditors without doing damage to the economy. But when the deflation is severe falling asset prices along with debtor bankruptcies lead to a decline in the nominal value of assets on bank balance sheets. Banks will react by tightening their credit conditions, that in turn leads to a credit crunch which does serious harm to the economy. A credit crunch lowers investment and consumption and results in declining aggregate demand which additionally contributes to the deflationary spiral.
Since economic mainstream turned to the new neoclassical synthesis, expectations are a central element of macroeconomic models. According to Peter Temin, Barry Wigmore, Gauti B. Eggertsson and Christina Romer, the key to recovery and to ending the Great Depression was brought about by a successful management of public expectations. The thesis is based on the observation that after years of deflation and a very severe recession important economic indicators turned positive in March 1933 when Franklin D. Roosevelt took office. Consumer prices turned from deflation to a mild inflation, industrial production bottomed out in March 1933, and investment doubled in 1933 with a turnaround in March 1933. There were no monetary forces to explain that turn around. Money supply was still falling and short term interest rates remained close to zero. Before March 1933 people expected further deflation and a recession so that even interest rates at zero did not stimulate investment. But when Roosevelt announced major regime changes people began to expect inflation and an economic expansion. With these positive expectations, interest rates at zero began to stimulate investment just as they were expected to do. Roosevelt's fiscal and monetary policy regime change helped to make his policy objectives credible. The expectation of higher future income and higher future inflation stimulated demand and investments. The analysis suggests that the elimination of the policy dogmas of the gold standard, a balanced budget in times of crises and small government led endogenously to a large shift in expectation that accounts for about 70–80 percent of the recovery of output and prices from 1933 to 1937. If the regime change had not happened and the Hoover policy had continued, the economy would have continued its free fall in 1933, and output would have been 30% lower in 1937 than in 1933.
The recession of 1937–38, which slowed down economic recovery from the Great Depression, is explained by fears of the population that the moderate tightening of the monetary and fiscal policy in 1937 would be first steps to a restoration of the pre-March 1933 policy regime.
Two prominent theorists in the Austrian School on the Great Depression include Austrian economist Friedrich Hayek and American economist Murray Rothbard, who wrote America's Great Depression (1963). In their view, much like the monetarists, the Federal Reserve (of which was created in 1913) shoulders much of the blame; however unlike the Monetarists, they argue that the key cause of the Depression was the expansion of the money supply in the 1920s, of which led to an unsustainable credit-driven boom.
In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. Therefore, by the time the Federal Reserve tightened in 1928 it was far too late to prevent an economic contraction. In February 1929 Hayek published a paper predicting the Federal Reserve's actions would lead to a crisis starting in the stock and credit markets.
According to Rothbard, the government support for failed enterprises and efforts to keep wages above their market values actually prolonged the Depression. Unlike Rothbard, after 1970 Hayek believed that the Federal Reserve had further contributed to the problems of the Depression by permitting the money supply to shrink during the earliest years of the Depression. However, during the Depression (in 1932 and in 1934) Hayek had criticized both the Federal Reserve and the Bank of England for not taking a more contractionary stance.
Hans Sennholz, another prominent Austrian economist, argued that most boom and busts that plagued the American economy, such as those in 1819–20, 1839–43, 1857–60, 1873–78, 1893–97, and 1920–21, were generated by government creating a boom through easy money and credit, which was soon followed by the inevitable bust. The spectacular crash of 1929 followed five years of reckless credit expansion by the Federal Reserve System under the Coolidge Administration. The passing of the Sixteenth Amendment, the passage of The Federal Reserve Act, rising government deficits, the passage of the Hawley-Smoot Tariff Act, and the Revenue Act of 1932, exacerbated and prolonged the crisis.
Ludwig von Mises wrote in the 1930s: "Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not a real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth, i.e. the accumulation of savings made available for productive investment. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later, it must become apparent that this economic situation is built on sand."
Two economists of the 1920s, Waddill Catchings and William Trufant Foster, popularized a theory that influenced many policy makers, including Herbert Hoover, Henry A. Wallace, Paul Douglas, and Marriner Eccles. It held the economy produced more than it consumed, because the consumers did not have enough income. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.
According to this view, the root cause of the Great Depression was a global over-investment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. The proposed solution was for the government to pump money into the consumers' pockets. That is, it must redistribute purchasing power, maintaining the industrial base, and re-inflating prices and wages to force as much of the inflationary increase in purchasing power into consumer spending. The economy was overbuilt, and new factories were not needed. Foster and Catchings recommended federal and state governments to start large construction projects, a program followed by Hoover and Roosevelt.
It cannot be emphasized too strongly that the [productivity, output and employment] trends we are describing are long-time trends and were thoroughly evident prior to 1929. These trends are in nowise the result of the present depression, nor are they the result of the World War. On the contrary, the present depression is a collapse resulting from these long-term trends.
The first three decades of the 20th century saw economic output surge with electrification, mass production and motorized farm machinery, and because of the rapid growth in productivity there was a lot of excess production capacity and the work week was being reduced.
The dramatic rise in productivity of major industries in the U.S. and the effects of productivity on output, wages and the work week are discussed by Spurgeon Bell in his book Productivity, Wages, and National Income (1940).
The gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and a monetary contraction first hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates. Under the gold standard's price–specie flow mechanism, countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline (deflation).
Some economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the Gold Standard, it was suspending gold convertibility (or devaluing the currency in gold terms) that did the most to make recovery possible.
Every major currency left the gold standard during the Great Depression. The UK was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.
The UK, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the US, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–36.
According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, The UK and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies.
Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened the Great Depression. Most historians and economists partly blame the American Smoot–Hawley Tariff Act (enacted June 17, 1930) for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries. The average ad valorem rate of duties on dutiable imports for 1921–25 was 25.9% but under the new tariff it jumped to 50% during 1931–35. In dollar terms, American exports declined over the next four (4) years from about $5.2 billion in 1929 to $1.7 billion in 1933; so, not only did the physical volume of exports fall, but also the prices fell by about 1/3 as written. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber.
Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls". These restrictions formed a lot of tension between trade nations, causing a major deduction during the depression. Not all countries enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries condensed "trade and exchange restrictions only marginally":
The consensus view among economists and economic historians is that the passage of the Smoot-Hawley Tariff exacerbated the Great Depression, although there is disagreement as to how much. In the popular view, the Smoot-Hawley Tariff was a leading cause of the depression. However, many economists hold the opinion that the tariff act did not greatly worsen the depression.
The financial crisis escalated out of control in mid-1931, starting with the collapse of the Credit Anstalt in Vienna in May. This put heavy pressure on Germany, which was already in political turmoil. With the rise in violence of Nazi and communist movements, as well as investor nervousness at harsh government financial policies. Investors withdrew their short-term money from Germany, as confidence spiraled downward. The Reichsbank lost 150 million marks in the first week of June, 540 million in the second, and 150 million in two days, June 19–20. Collapse was at hand. U.S. President Herbert Hoover called for a moratorium on Payment of war reparations. This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down and the moratorium, was agreed to in July 1931. An International conference in London later in July produced no agreements but on August 19 a standstill agreement froze Germany's foreign liabilities for six months. Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures were more frequent in July, and spread to Romania and Hungary. The crisis continued to get worse in Germany, bringing political upheaval that finally led to the coming to power of Hitler's Nazi regime in January 1933.
The world financial crisis now began to overwhelm Britain; investors across the world started withdrawing their gold from London at the rate of £2.5 million per day. Credits of £25 millions each from the Bank of France and the Federal Reserve Bank of New York and an issue of £15 millions fiduciary note slowed, but did not reverse the British crisis. The financial crisis now caused a major political crisis in Britain in August 1931. With deficits mounting, the bankers demanded a balanced budget; the divided cabinet of Prime Minister Ramsay MacDonald's Labour government agreed; it proposed to raise taxes, cut spending and most controversially, to cut unemployment benefits 20%. The attack on welfare was totally unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition "National government." The Conservative and Liberals parties signed on, along with a small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the gold standard, and suffered relatively less than other major countries in the Great Depression. In the 1931 British election the Labour Party was virtually destroyed, leaving MacDonald as Prime Minister for a largely Conservative coalition.
In most countries of the world, recovery from the Great Depression began in 1933. In the US, recovery began in early 1933, but the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933.
There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and the 1937 recession that interrupted it). The common view among most economists is that Roosevelt's New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt's words and actions portended. It was the rollback of those same reflationary policies that led to the interruption of a recession beginning in late 1937. One contributing policy that reversed reflation was the Banking Act of 1935, which effectively raised reserve requirements, causing a monetary contraction that helped to thwart the recovery. GDP returned to its upward trend in 1938.
According to Christina Romer, the money supply growth caused by huge international gold inflows was a crucial source of the recovery of the United States economy, and that the economy showed little sign of self-correction. The gold inflows were partly due to devaluation of the U.S. dollar and partly due to deterioration of the political situation in Europe. In their book, A Monetary History of the United States, Milton Friedman and Anna J. Schwartz also attributed the recovery to monetary factors, and contended that it was much slowed by poor management of money by the Federal Reserve System. Former Chairman of the Federal Reserve Ben Bernanke agreed that monetary factors played important roles both in the worldwide economic decline and eventual recovery. Bernanke also saw a strong role for institutional factors, particularly the rebuilding and restructuring of the financial system, and pointed out that the Depression should be examined in an international perspective.
Women's primary role were as housewives; without a steady flow of family income, their work became much harder in dealing with food and clothing and medical care. Birthrates fell everywhere, as children were postponed until families could financially support them. The average birthrate for 14 major countries fell 12% from 19.3 births per thousand population in 1930, to 17.0 in 1935. In Canada, half of Roman Catholic women defied Church teachings and used contraception to postpone births.
Among the few women in the labor force, layoffs were less common in the white-collar jobs and they were typically found in light manufacturing work. However, there was a widespread demand to limit families to one paid job, so that wives might lose employment if their husband was employed. Across Britain, there was a tendency for married women to join the labor force, competing for part-time jobs especially.
In rural and small-town areas, women expanded their operation of vegetable gardens to include as much food production as possible. In the United States, agricultural organizations sponsored programs to teach housewives how to optimize their gardens and to raise poultry for meat and eggs. In American cities, African American women quiltmakers enlarged their activities, promoted collaboration, and trained neophytes. Quilts were created for practical use from various inexpensive materials and increased social interaction for women and promoted camaraderie and personal fulfillment.
Oral history provides evidence for how housewives in a modern industrial city handled shortages of money and resources. Often they updated strategies their mothers used when they were growing up in poor families. Cheap foods were used, such as soups, beans and noodles. They purchased the cheapest cuts of meat—sometimes even horse meat—and recycled the Sunday roast into sandwiches and soups. They sewed and patched clothing, traded with their neighbors for outgrown items, and made do with colder homes. New furniture and appliances were postponed until better days. Many women also worked outside the home, or took boarders, did laundry for trade or cash, and did sewing for neighbors in exchange for something they could offer. Extended families used mutual aid—extra food, spare rooms, repair-work, cash loans—to help cousins and in-laws.
In Japan, official government policy was deflationary and the opposite of Keynesian spending. Consequently, the government launched a nationwide campaign to induce households to reduce their consumption, focusing attention on spending by housewives.
In Germany, the government tried to reshape private household consumption under the Four-Year Plan of 1936 to achieve German economic self-sufficiency. The Nazi women's organizations, other propaganda agencies and the authorities all attempted to shape such consumption as economic self-sufficiency was needed to prepare for and to sustain the coming war. The organizations, propaganda agencies and authorities employed slogans that called up traditional values of thrift and healthy living. However, these efforts were only partly successful in changing the behavior of housewives.
The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery. It did help in reducing unemployment.
The rearmament policies leading up to World War II helped stimulate the economies of Europe in 1937–39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 ended unemployment.
When the United States entered into the war in 1941, it finally eliminated the last effects from the Great Depression and brought the U.S. unemployment rate down below 10%. In the US, massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts.
The majority of countries set up relief programs and most underwent some sort of political upheaval, pushing them to the right. Many of the countries in Europe and Latin America that were democracies saw them overthrown by some form of dictatorship or authoritarian rule, most famously in Germany in 1933. The Dominion of Newfoundland gave up democracy voluntarily.
Australia's dependence on agricultural and industrial exports meant it was one of the hardest-hit developed countries. Falling export demand and commodity prices placed massive downward pressures on wages. Unemployment reached a record high of 29% in 1932, with incidents of civil unrest becoming common. After 1932, an increase in wool and meat prices led to a gradual recovery.
Harshly affected by both the global economic downturn and the Dust Bowl, Canadian industrial production had fallen to only 58% of the 1929 level by 1932, the second lowest level in the world after the United States, and well behind nations such as Britain, which fell to only 83% of the 1929 level. Total national income fell to 56% of the 1929 level, again worse than any nation apart from the United States. Unemployment reached 27% at the depth of the Depression in 1933.
The League of Nations labeled 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. Chile initially felt the impact of the Great Depression in 1930, when GDP dropped 14%, mining income declined 27%, and export earnings fell 28%. By 1932, GDP had shrunk to less than half of what it had been in 1929, exacting a terrible toll in unemployment and business failures.
Influenced profoundly by the Great Depression, many national leaders promoted the development of local industry in an effort to insulate the economy from future external shocks. After six years of government austerity measures, which succeeded in reestablishing Chile's creditworthiness, Chileans elected to office during the 1938–58 period a succession of center and left-of-center governments interested in promoting economic growth by means of government intervention.
Prompted in part by the devastating 1939 Chillán earthquake, the Popular Front government of Pedro Aguirre Cerda created the Production Development Corporation (Corporación de Fomento de la Producción, CORFO) to encourage with subsidies and direct investments an ambitious program of import substitution industrialization. Consequently, as in other Latin American countries, protectionism became an entrenched aspect of the Chilean economy.
China was largely unaffected by the Depression, mainly by having stuck to the Silver standard. However, the U.S. silver purchase act of 1934 created an intolerable demand on China's silver coins, and so in the end the silver standard was officially abandoned in 1935 in favor of the four Chinese national banks' "legal note" issues. China and the British colony of Hong Kong, which followed suit in this regard in September 1935, would be the last to abandon the silver standard. In addition, the Nationalist Government also acted energetically to modernize the legal and penal systems, stabilize prices, amortize debts, reform the banking and currency systems, build railroads and highways, improve public health facilities, legislate against traffic in narcotics and augment industrial and agricultural production. On November 3, 1935, the government instituted the fiat currency (fapi) reform, immediately stabilizing prices and also raising revenues for the government.
The sharp fall in commodity prices, and the steep decline in exports, hurt the economies of the European colonies in Africa and Asia. The agricultural sector was especially hard hit. For example, sisal had recently become a major export crop in Kenya and Tanganyika. During the depression it suffered severely from low prices and marketing problems that affected all colonial commodities in Africa. Sisal producers established centralized controls for the export of their fibre. There was widespread unemployment and hardship among peasants, labourers, colonial auxiliaries, and artisans. The budgets of colonial governments were cut, which forced the reduction in ongoing infrastructure projects, such as the building and upgrading of roads, ports and communications. The budget cuts delayed the schedule for creating systems of higher education.
The depression severely hurt the export-based Belgian Congo economy because of the drop in international demand for raw materials and for agricultural products. For example, the price of peanuts fell from 125 to 25 centimes. In some areas, as in the Katanga mining region, employment declined by 70%. In the country as a whole, the wage labour force decreased by 72.000 and many men returned to their villages. In Leopoldville, the population decreased by 33%, because of this labour migration.
Political protests were not common. However, there was a growing demand that the paternalistic claims be honored by colonial governments to respond vigorously. The theme was that economic reforms were more urgently needed than political reforms. French West Africa launched an extensive program of educational reform centered around "rural schools" designed to modernize agriculture and stem the flow of under-employed farm workers to cites where unemployment was high. Students were trained in traditional arts, crafts, and farming techniques and were then expected to return to their own villages and towns.
The depression was relatively mild: unemployment peaked under 5%, the fall in production was at most 20% below the 1929 output; there was no banking crisis.
However, the depression had drastic effects on the local economy, and partly explains the February 6, 1934 riots and even more the formation of the Popular Front, led by SFIO socialist leader Léon Blum, which won the elections in 1936. Ultra-nationalist groups also saw increased popularity, although democracy prevailed into World War II.
France's relatively high degree of self-sufficiency meant the damage was considerably less than in nations like Germany.
The Great Depression hit Germany hard. The impact of the Wall Street Crash forced American banks to end the new loans that had been funding the repayments under the Dawes Plan and the Young Plan. The financial crisis escalated out of control and mid-1931, starting with the collapse of the Credit Anstalt in Vienna in May. This put heavy pressure on Germany, which was already in political turmoil with the rise in violence of Nazi and communist movements, as well as with investor nervousness at harsh government financial policies. Investors withdrew their short-term money from Germany, as confidence spiraled downward. The Reichsbank lost 150 million marks in the first week of June, 540 million in the second, and 150 million in two days, June 19–20. Collapse was at hand. U.S. President Herbert Hoover called for a moratorium on Payment of war reparations. This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down and the moratorium, was agreed to in July 1931. An international conference in London later in July produced no agreements but on August 19 a standstill agreement froze Germany's foreign liabilities for six months. Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures became more frequent in July, and spread to Romania and Hungary.
In 1932, 90% of German reparation payments were cancelled. (In the 1950s, Germany repaid all its missed reparations debts.) Widespread unemployment reached 25% as every sector was hurt. The government did not increase government spending to deal with Germany's growing crisis, as they were afraid that a high-spending policy could lead to a return of the hyperinflation that had affected Germany in 1923. Germany's Weimar Republic was hit hard by the depression, as American loans to help rebuild the German economy now stopped. The unemployment rate reached nearly 30% in 1932, bolstering support for the Nazi (NSDAP) and Communist (KPD) parties, causing the collapse of the politically centrist Social Democratic Party. Hitler ran for the Presidency in 1932, and while he lost to the incumbent Hindenburg in the election, it marked a point during which both Nazi Party and the Communist parties rose in the years following the crash to altogether possess a Reichstag majority following the general election in July 1932.
Hitler followed an autarky economic policy, creating a network of client states and economic allies in central Europe and Latin America. By cutting wages and taking control of labor unions, plus public works spending, unemployment fell significantly by 1935. Large-scale military spending played a major role in the recovery.
The reverberations of the Great Depression hit Greece in 1932. The Bank of Greece tried to adopt deflationary policies to stave off the crises that were going on in other countries, but these largely failed. For a brief period the drachma was pegged to the U.S. dollar, but this was unsustainable given the country's large trade deficit and the only long-term effects of this were Greece's foreign exchange reserves being almost totally wiped out in 1932. Remittances from abroad declined sharply and the value of the drachma began to plummet from 77 drachmas to the dollar in March 1931 to 111 drachmas to the dollar in April, 1931. This was especially harmful to Greece as the country relied on imports from the UK, France and the Middle East for many necessities. Greece went off the gold standard in April, 1932 and declared a moratorium on all interest payments. The country also adopted protectionist policies such as import quotas, which a number of European countries did during the time period.
Protectionist policies coupled with a weak drachma, stifling imports, allowed Greek industry to expand during the Great Depression. In 1939, Greek Industrial output was 179% that of 1928. These industries were for the most part "built on sand" as one report of the Bank of Greece put it, as without massive protection they would not have been able to survive. Despite the global depression, Greece managed to suffer comparatively little, averaging an average growth rate of 3.5% from 1932 to 1939. The dictatorial regime of Ioannis Metaxas took over the Greek government in 1936, and economic growth was strong in the years leading up to the Second World War.
Icelandic post-World War I prosperity came to an end with the outbreak of the Great Depression. The Depression hit Iceland hard as the value of exports plummeted. The total value of Icelandic exports fell from 74 million kronur in 1929 to 48 million in 1932, and was not to rise again to the pre-1930 level until after 1939. Government interference in the economy increased: "Imports were regulated, trade with foreign currency was monopolized by state-owned banks, and loan capital was largely distributed by state-regulated funds". Due to the outbreak of the Spanish Civil War, which cut Iceland's exports of saltfish by half, the Depression lasted in Iceland until the outbreak of World War II (when prices for fish exports soared).
How much India was affected has been hotly debated. Historians have argued that the Great Depression slowed long-term industrial development. Apart from two sectors—jute and coal—the economy was little affected. However, there were major negative impacts on the jute industry, as world demand fell and prices plunged. Otherwise conditions were fairly stable. Local markets in agriculture and small-scale industry showed modest gains.
Frank Barry and Mary E. Daly have argued that:
The Great Depression hit Italy very hard. As industries came close to failure they were bought out by the banks in a largely illusionary bail-out—the assets used to fund the purchases were largely worthless. This led to a financial crisis peaking in 1932 and major government intervention. The Industrial Reconstruction Institute (IRI) was formed in January 1933 and took control of the bank-owned companies, suddenly giving Italy the largest state-owned industrial sector in Europe (excluding the USSR). IRI did rather well with its new responsibilities—restructuring, modernising and rationalising as much as it could. It was a significant factor in post-1945 development. But it took the Italian economy until 1935 to recover the manufacturing levels of 1930—a position that was only 60% better than that of 1913.
The Great Depression did not strongly affect Japan. The Japanese economy shrank by 8% during 1929–31. Japan's Finance Minister Takahashi Korekiyo was the first to implement what have come to be identified as Keynesian economic policies: first, by large fiscal stimulus involving deficit spending; and second, by devaluing the currency. Takahashi used the Bank of Japan to sterilize the deficit spending and minimize resulting inflationary pressures. Econometric studies have identified the fiscal stimulus as especially effective.
The devaluation of the currency had an immediate effect. Japanese textiles began to displace British textiles in export markets. The deficit spending proved to be most profound and went into the purchase of munitions for the armed forces. By 1933, Japan was already out of the depression. By 1934, Takahashi realized that the economy was in danger of overheating, and to avoid inflation, moved to reduce the deficit spending that went towards armaments and munitions.
This resulted in a strong and swift negative reaction from nationalists, especially those in the army, culminating in his assassination in the course of the February 26 Incident. This had a chilling effect on all civilian bureaucrats in the Japanese government. From 1934, the military's dominance of the government continued to grow. Instead of reducing deficit spending, the government introduced price controls and rationing schemes that reduced, but did not eliminate inflation, which remained a problem until the end of World War II.
The deficit spending had a transformative effect on Japan. Japan's industrial production doubled during the 1930s. Further, in 1929 the list of the largest firms in Japan was dominated by light industries, especially textile companies (many of Japan's automakers, such as Toyota, have their roots in the textile industry). By 1940 light industry had been displaced by heavy industry as the largest firms inside the Japanese economy.
Before the 1929 crisis, links between the world economy and Latin American economies had been established through American and British investment in Latin American exports to the world. As a result, Latin Americans export industries felt the depression quickly. World prices for commodities such as wheat, coffee and copper plunged. Exports from all of Latin America to the U.S. fell in value from $1.2 billion in 1929 to $335 million in 1933, rising to $660 million in 1940.
But on the other hand, the depression led the area governments to develop new local industries and expand consumption and production. Following the example of the New Deal, governments in the area approved regulations and created or improved welfare institutions that helped millions of new industrial workers to achieve a better standard of living.
From roughly 1931 to 1937, the Netherlands suffered a deep and exceptionally long depression. This depression was partly caused by the after-effects of the Stock Market Crash of 1929 in the US, and partly by internal factors in the Netherlands. Government policy, especially the very late dropping of the Gold Standard, played a role in prolonging the depression. The Great Depression in the Netherlands led to some political instability and riots, and can be linked to the rise of the Dutch national-socialist party NSB. The depression in the Netherlands eased off somewhat at the end of 1936, when the government finally dropped the Gold Standard, but real economic stability did not return until after World War II.
New Zealand was especially vulnerable to worldwide depression, as it relied almost entirely on agricultural exports to the United Kingdom for its economy. The drop in exports led to a lack of disposable income from the farmers, who were the mainstay of the local economy. Jobs disappeared and wages plummeted, leaving people desperate and charities unable to cope. Work relief schemes were the only government support available to the unemployed, the rate of which by the early 1930s was officially around 15%, but unofficially nearly twice that level (official figures excluded Māori and women). In 1932, riots occurred among the unemployed in three of the country's main cities (Auckland, Dunedin, and Wellington). Many were arrested or injured through the tough official handling of these riots by police and volunteer "special constables".
Already under the rule of a dictatorial junta, the Ditadura Nacional, Portugal suffered no turbulent political effects of the Depression, although António de Oliveira Salazar, already appointed Minister of Finance in 1928 greatly expanded his powers and in 1932 rose to Prime Minister of Portugal to found the Estado Novo, an authoritarian corporatist dictatorship. With the budget balanced in 1929, the effects of the depression were relaxed through harsh measures towards budget balance and autarky, causing social discontent but stability and, eventually, an impressive economic growth.
In the years immediately preceding the depression, negative developments in the island and world economies perpetuated an unsustainable cycle of subsistence for many Puerto Rican workers. The 1920s brought a dramatic drop in Puerto Rico's two primary exports, raw sugar and coffee, due to a devastating hurricane in 1928 and the plummeting demand from global markets in the latter half of the decade. 1930 unemployment on the island was roughly 36% and by 1933 Puerto Rico's per capita income dropped 30% (by comparison, unemployment in the United States in 1930 was approximately 8% reaching a height of 25% in 1933). To provide relief and economic reform, the United States government and Puerto Rican politicians such as Carlos Chardon and Luis Munoz Marin created and administered first the Puerto Rico Emergency Relief Administration (PRERA) 1933 and then in 1935, the Puerto Rico Reconstruction Administration (PRRA).
As world trade slumped, demand for South African agricultural and mineral exports fell drastically. The Carnegie Commission on Poor Whites had concluded in 1931 that nearly one third of Afrikaners lived as paupers. The social discomfort caused by the depression was a contributing factor in the 1933 split between the "gesuiwerde" (purified) and "smelter" (fusionist) factions within the National Party and the National Party's subsequent fusion with the South African Party. Unemployment programs were begun that focused primarily on the white population.
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. Its forced transformation from a rural to an industrial society succeeded in building up heavy industry, at the cost of millions of lives in rural Russia and Ukraine.
At the time of the Depression, the Soviet economy was growing steadily, fuelled by intensive investment in heavy industry. The apparent economic success of the Soviet Union at a time when the capitalist world was in crisis led many Western intellectuals to view the Soviet system favorably. Jennifer Burns wrote:
As the Great Depression ground on and unemployment soared, intellectuals began unfavorably comparing their faltering capitalist economy to Russian Communism. ... More than ten years after the Revolution, Communism was finally reaching full flower, according to New York Times reporter Walter Duranty, a Stalin fan who vigorously debunked accounts of the Ukraine famine, a man-made disaster that would leave millions dead."
Despite all of this, The Great Depression caused mass immigration to the Soviet Union, mostly from Finland and Germany. Soviet Russia was at first happy to help these immigrants settle, because they believed they were victims of capitalism who had come to help the Soviet cause. However, when the Soviet Union entered the war in 1941, most of these Germans and Finns were arrested and sent to Siberia, while their Russian-born children were placed in orphanages. Their fate is unknown.
Spain had a relatively isolated economy, with high protective tariffs and was not one of the main countries affected by the Depression. The banking system held up well, as did agriculture.
By far the most serious negative impact came after 1936 from the heavy destruction of infrastructure and manpower by the civil war, 1936–39. Many talented workers were forced into permanent exile. By staying neutral in the Second World War, and selling to both sides, the economy avoided further disasters.
By the 1930s, Sweden had what America's Life magazine called in 1938 the "world's highest standard of living". Sweden was also the first country worldwide to recover completely from the Great Depression. Taking place in the midst of a short-lived government and a less-than-a-decade old Swedish democracy, events such as those surrounding Ivar Kreuger (who eventually committed suicide) remain infamous in Swedish history. The Social Democrats under Per Albin Hansson formed their first long-lived government in 1932 based on strong interventionist and welfare state policies, monopolizing the office of Prime Minister until 1976 with the sole and short-lived exception of Axel Pehrsson-Bramstorp's "summer cabinet" in 1936. During forty years of hegemony, it was the most successful political party in the history of Western liberal democracy.
The World Depression broke at a time when the United Kingdom had still not fully recovered from the effects of the First World War more than a decade earlier. The country was driven off the gold standard in 1931.
The world financial crisis began to overwhelm Britain in 1931; investors across the world started withdrawing their gold from London at the rate of £2.5 million per day. Credits of £25 millions each from the Bank of France and the Federal Reserve Bank of New York and an issue of £15 millions fiduciary note slowed, but did not reverse the British crisis. The financial crisis now caused a major political crisis in Britain in August 1931. With deficits mounting, the bankers demanded a balanced budget; the divided cabinet of Prime Minister Ramsay MacDonald's Labour government agreed; it proposed to raise taxes, cut spending and most controversially, to cut unemployment benefits by 20%. The attack on welfare was totally unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition "National Government". The Conservative and Liberals parties signed on, along with a small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the gold standard, and suffered relatively less than other major countries in the Great Depression. In the 1931 British election, the Labour Party was virtually destroyed, leaving MacDonald as Prime Minister for a largely Conservative coalition.
The effects on the northern industrial areas of Britain were immediate and devastating, as demand for traditional industrial products collapsed. By the end of 1930 unemployment had more than doubled from 1 million to 2.5 million (20% of the insured workforce), and exports had fallen in value by 50%. In 1933, 30% of Glaswegians were unemployed due to the severe decline in heavy industry. In some towns and cities in the north east, unemployment reached as high as 70% as shipbuilding fell by 90%. The National Hunger March of September–October 1932 was the largest of a series of hunger marches in Britain in the 1920s and 1930s. About 200,000 unemployed men were sent to the work camps, which continued in operation until 1939.
In the less industrial Midlands and Southern England, the effects were short-lived and the later 1930s were a prosperous time. Growth in modern manufacture of electrical goods and a boom in the motor car industry was helped by a growing southern population and an expanding middle class. Agriculture also saw a boom during this period.
Hoover's first measures to combat the depression were based on voluntarism by businesses not to reduce their workforce or cut wages. But businesses had little choice and wages were reduced, workers were laid off, and investments postponed.
In June 1930 Congress approved the Smoot–Hawley Tariff Act which raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. Other nations increased tariffs on American-made goods in retaliation, reducing international trade, and worsening the Depression.
In 1931, Hoover urged bankers to set up the National Credit Corporation so that big banks could help failing banks survive. But bankers were reluctant to invest in failing banks, and the National Credit Corporation did almost nothing to address the problem.
By 1932, unemployment had reached 23.6%, peaking in early 1933 at 25%. Drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans, and more than 5,000 banks had failed. Hundreds of thousands of Americans found themselves homeless, and began congregating in shanty towns – dubbed "Hoovervilles" – that began to appear across the country. In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The final attempt of the Hoover Administration to stimulate the economy was the passage of the Emergency Relief and Construction Act (ERA) which included funds for public works programs such as dams and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The Reconstruction Finance Corporation was a Federal agency with the authority to lend up to $2 billion to rescue banks and restore confidence in financial institutions. But $2 billion was not enough to save all the banks, and bank runs and bank failures continued. Quarter by quarter the economy went downhill, as prices, profits and employment fell, leading to the political realignment in 1932 that brought to power Franklin Delano Roosevelt. It is important to note, however, that after volunteerism failed, Hoover developed ideas that laid the framework for parts of the New Deal.
Shortly after President Franklin Delano Roosevelt was inaugurated in 1933, drought and erosion combined to cause the Dust Bowl, shifting hundreds of thousands of displaced persons off their farms in the Midwest. From his inauguration onward, Roosevelt argued that restructuring of the economy would be needed to prevent another depression or avoid prolonging the current one. New Deal programs sought to stimulate demand and provide work and relief for the impoverished through increased government spending and the institution of financial reforms.
During a "bank holiday" that lasted five days, the Emergency Banking Act was signed into law. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. The Securities Act of 1933 comprehensively regulated the securities industry. This was followed by the Securities Exchange Act of 1934 which created the Securities and Exchange Commission. Although amended, key provisions of both Acts are still in force. Federal insurance of bank deposits was provided by the FDIC, and the Glass–Steagall Act.
The Agricultural Adjustment Act provided incentives to cut farm production in order to raise farming prices. The National Recovery Administration (NRA) made a number of sweeping changes to the American economy. It forced businesses to work with government to set price codes through the NRA to fight deflationary "cut-throat competition" by the setting of minimum prices and wages, labor standards, and competitive conditions in all industries. It encouraged unions that would raise wages, to increase the purchasing power of the working class. The NRA was deemed unconstitutional by the Supreme Court of the United States in 1935.
These reforms, together with several other relief and recovery measures, are called the First New Deal. Economic stimulus was attempted through a new alphabet soup of agencies set up in 1933 and 1934 and previously extant agencies such as the Reconstruction Finance Corporation. By 1935, the "Second New Deal" added Social Security (which was later considerably extended through the Fair Deal), a jobs program for the unemployed (the Works Progress Administration, WPA) and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. In 1929, federal expenditures constituted only 3% of the GDP. The national debt as a proportion of GNP rose under Hoover from 20% to 40%. Roosevelt kept it at 40% until the war began, when it soared to 128%.
By 1936, the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high at 11%, although this was considerably lower than the 25% unemployment rate seen in 1933. In the spring of 1937, American industrial production exceeded that of 1929 and remained level until June 1937. In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget. The American economy then took a sharp downturn, lasting for 13 months through most of 1938. Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.
Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production. By May 1938 retail sales began to increase, employment improved, and industrial production turned up after June 1938. After the recovery from the Recession of 1937–38, conservatives were able to form a bipartisan conservative coalition to stop further expansion of the New Deal and, when unemployment dropped to 2% in the early 1940s, they abolished WPA, CCC and the PWA relief programs. Social Security remained in place.
Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state. The Great Depression was a main factor in the implementation of social democracy and planned economies in European countries after World War II (see Marshall Plan). Keynesianism generally remained the most influential economic school in the United States and in parts of Europe until the periods between the 1970s and the 1980s, when Milton Friedman and other neoliberal economists formulated and propagated the newly created theories of neoliberalism and incorporated them into the Chicago School of Economics as an alternative approach to the study of economics. Neoliberalism went on to challenge the dominance of the Keynesian school of Economics in the mainstream academia and policy-making in the United States, having reached its peak in popularity in the election of the presidency of Ronald Reagan in the United States, and Margaret Thatcher in the United Kingdom.
The Great Depression has been the subject of much writing, as authors have sought to evaluate an era that caused both financial and emotional trauma. Perhaps the most noteworthy and famous novel written on the subject is The Grapes of Wrath, published in 1939 and written by John Steinbeck, who was awarded both the Nobel Prize for literature and the Pulitzer Prize for the work. The novel focuses on a poor family of sharecroppers who are forced from their home as drought, economic hardship, and changes in the agricultural industry occur during the Great Depression. Steinbeck's Of Mice and Men is another important novella about a journey during the Great Depression. Additionally, Harper Lee's To Kill a Mockingbird is set during the Great Depression. Margaret Atwood's Booker prize-winning The Blind Assassin is likewise set in the Great Depression, centering on a privileged socialite's love affair with a Marxist revolutionary. The era spurred the resurgence of social realism, practiced by many who started their writing careers on relief programs, especially the Federal Writers' Project in the U.S.
A number of works for younger audiences are also set during the Great Depression, among them the Kit Kittredge series of American Girl books written by Valerie Tripp and illustrated by Walter Rane, released to tie in with the dolls and playsets sold by the company. The stories, which take place during the early to mid 1930s in Cincinnati, focuses on the changes brought by the Depression to the titular character's family and how the Kittredges dealt with it. A theatrical adaptation of the series entitled Kit Kittredge: An American Girl was later released in 2008 to positive reviews. Similarly, Christmas After All, part of the Dear America series of books for older girls, take place in 1930s Indianapolis; while Kit Kittredge is told in a third-person viewpoint, Christmas After All is in the form of a fictional journal as told by the protagonist Minnie Swift as she recounts her experiences during the era, especially when her family takes in an orphan cousin from Texas.
The term "The Great Depression" is most frequently attributed to British economist Lionel Robbins, whose 1934 book The Great Depression is credited with formalizing the phrase, though Hoover is widely credited with popularizing the term, informally referring to the downturn as a depression, with such uses as "Economic depression cannot be cured by legislative action or executive pronouncement" (December 1930, Message to Congress), and "I need not recount to you that the world is passing through a great depression" (1931).
The term "depression" to refer to an economic downturn dates to the 19th century, when it was used by varied Americans and British politicians and economists. Indeed, the first major American economic crisis, the Panic of 1819, was described by then-president James Monroe as "a depression", and the most recent economic crisis, the Depression of 1920–21, had been referred to as a "depression" by then-president Calvin Coolidge.
Financial crises were traditionally referred to as "panics", most recently the major Panic of 1907, and the minor Panic of 1910–11, though the 1929 crisis was called "The Crash", and the term "panic" has since fallen out of use. At the time of the Great Depression, the term "The Great Depression" was already used to refer to the period 1873–96 (in the United Kingdom), or more narrowly 1873–79 (in the United States), which has retroactively been renamed the Long Depression.
Other economic downturns have been called a "great depression", but none had been as widespread, or lasted for so long. Various nations have experienced brief or extended periods of economic downturns, which were referred to as "depressions", but none have had such a widespread global impact.
The collapse of the Soviet Union, and the breakdown of economic ties which followed, led to a severe economic crisis and catastrophic fall in the standards of living in the 1990s in post-Soviet states and the former Eastern Bloc, which was even worse than the Great Depression. Even before Russia's financial crisis of 1998, Russia's GDP was half of what it had been in the early 1990s, and some populations are still poorer as of 2009 than they were in 1989, including Moldova, Central Asia, and the Caucasus.
The causes of the Great Recession seem similar to the Great Depression, but significant differences exist. The previous chairman of the Federal Reserve, Ben Bernanke, had extensively studied the Great Depression as part of his doctoral work at MIT, and implemented policies to manipulate the money supply and interest rates in ways that were not done in the 1930s. Generally speaking, the recovery of the world's financial systems tended to be quicker during the Great Depression of the 1930s as opposed to the late-2000s recession.
If we contrast the 1930s with the Crash of 2008 where gold went through the roof, it is clear that the U.S. dollar on the gold standard was a completely different animal in comparison to the fiat free-floating U.S. dollar currency we have today. Both currencies in 1929 and 2008 were the U.S. dollar, but in an analogous way it is as if one was a Saber-toothed tiger and the other is a Bengal tiger; they are two completely different animals. Where we have experienced inflation since the Crash of 2008, the situation was much different in the 1930s when deflation set in. Unlike the deflation of the early 1930s, the U.S. economy currently appears to be in a "liquidity trap," or a situation where monetary policy is unable to stimulate an economy back to health.
In terms of the stock market, nearly three years after the 1929 crash, the DJIA dropped 8.4% on August 12, 1932. Where we have experienced great volatility with large intraday swings in the past two months, in 2011, we have not experienced any record-shattering daily percentage drops to the tune of the 1930s. Where many of us may have that '30s feeling, in light of the DJIA, the CPI, and the national unemployment rate, we are simply not living in the '30s. Some individuals may feel as if we are living in a depression, but for many others the current global financial crisis simply does not feel like a depression akin to the 1930s.
1928 and 1929 were the times in the 20th century that the wealth gap reached such skewed extremes; half the unemployed had been out of work for over six months, something that was not repeated until the late-2000s recession. 2007 and 2008 eventually saw the world reach new levels of wealth gap inequality that rivalled the years of 1928 and 1929.
monetary development were crucial to the recovery implies that self-correction played little role in the growth of real output
fiscal policy was of little consequence even as late as 1942, suggests an interesting twist on the usual view that World War II caused, or at least accelerated, the recovery from the Great Depression.
The 1930s (pronounced "nineteen-thirties", commonly abbreviated as the "Thirties") was a decade of the Gregorian calendar that began on January 1, 1930, and ended on December 31, 1939.
After the Wall Street Crash of 1929, the largest stock market crash in American history, most of the decade was consumed by an economic downfall called the Great Depression that had a traumatic effect worldwide, leading to widespread unemployment and poverty, especially in the United States, an economic superpower, and Germany, who had to deal with the reparations regarding World War I. The Dust Bowl (which gives the nickname the Dirty Thirties) in the United States further emphasised the scarcity of wealth. Herbert Hoover worsened the situation with his failed attempt to balance the budget by raising taxes. Franklin D. Roosevelt was elected, as a response, in 1933, and introduced the New Deal. The founding of the Civilian Conservation Corps (CCC) and the funding of numerous projects (e.g. the Hoover Dam) helped restore prosperity in the US.
Meanwhile, authoritarian regimes emerged in several countries in Europe and South America, in particular the Third Reich in Germany. Germany elected Adolf Hitler, who imposed the Nuremberg Laws, a series of laws which discriminated against Jews and other ethnic minorities. Weaker states such as Ethiopia, China, and Poland were invaded by expansionist world powers, the last of these attacks leading to the outbreak of the World War II on September 1, 1939, despite calls from the League of Nations for worldwide peace. World War II helped end the Great Depression when governments spent money for the war effort. The 1930s also saw a proliferation of new technologies, especially in the fields of intercontinental aviation, radio, and film.1998–2002 Argentine great depression
The 1998–2002 Argentine Great Depression was an economic depression in Argentina, which began in the third quarter of 1998 and lasted until the second quarter of 2002. It almost immediately followed the 1974–1990 Great Depression after a brief period of rapid economic growth.The depression, which began after the Russian and Brazilian financial crises, caused widespread unemployment, riots, the fall of the government, a default on the country's foreign debt, the rise of alternative currencies and the end of the peso's fixed exchange rate to the US dollar. The economy shrank by 28 percent from 1998 to 2002. In terms of income, over 50 percent of Argentines were poor and 25 percent, indigent; seven out of ten Argentine children were poor at the depth of the crisis in 2002.By the first half of 2003, however, GDP growth had returned, surprising economists and the business media, and the economy grew by an average of 9% for five years.Argentina's GDP exceeded pre-crisis levels by 2005, and Argentine debt restructuring that year were resumed payments on most of its defaulted bonds; a second debt restructuring in 2010 brought the percentage of bonds out of default to 93%, though holdout lawsuits led by vulture funds remained ongoing. Bondholders who participated in the restructuring have been paid punctually and have seen the value of their bonds rise. Argentina repaid its International Monetary Fund loans in full in 2006, but had a long dispute with the 7% of bond-holders left. In April 2016 Argentina came out of the default when the new government decided to repay the country's debt, paying the full amount to the vulture/hedge funds.Causes of the Great Depression
The causes of the Great Depression in the early 20th century have been extensively discussed by economists and remain a matter of active debate. They are part of the larger debate about economic crises. The specific economic events that took place during the Great Depression are well established. There was an initial stock market crash that triggered a "panic sell-off" of assets. This was followed by a deflation in asset and commodity prices, dramatic drops in demand and credit, and disruption of trade, ultimately resulting in widespread unemployment (over 13 million people were unemployed by 1932) and impoverishment. However, economists and historians have not reached a consensus on the causal relationships between various events and government economic policies in causing or ameliorating the Depression.
Current mainstream theories may be broadly classified into two main points of view. The first are the demand-driven theories, from Keynesian and institutional economists who argue that the depression was caused by a widespread loss of confidence that led to underconsumption. The demand-driven theories argue that the financial crisis following the 1929 crash led to a sudden and persistent reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets. Holding money therefore became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand.
Second, there are the monetarists, who believe that the Great Depression started as an ordinary recession, but that significant policy mistakes by monetary authorities (especially the Federal Reserve) caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Related to this explanation are those who point to debt deflation causing those who borrow to owe ever more in real terms.
There are also several various heterodox theories that reject the explanations of the Keynesians and monetarists. Some new classical macroeconomists have argued that various labor market policies imposed at the start caused the length and severity of the Great Depression. The Austrian school of economics focuses on the macroeconomic effects of money supply and how central banking decisions can lead to malinvestment. Marxist economists view the Great Depression, with all other economic crises, as a symptom of the cyclical nature of capitalism and the instability that is inherent in the capitalist model.Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe economic downturn than a recession, which is a slowdown in economic activity over the course of a normal business cycle.
A depression is an unusual and extreme form of recession. Depressions are characterized by their length, by abnormally large increases in unemployment, falls in the availability of credit (often due to some form of banking or financial crisis), shrinking output as buyers dry up and suppliers cut back on production and investment, large number of bankruptcies including sovereign debt defaults, significantly reduced amounts of trade and commerce (especially international trade), as well as highly volatile relative currency value fluctuations (often due to currency devaluations). Price deflation, financial crises and bank failures are also common elements of a depression that do not normally occur during a recession.Dust Bowl
The Dust Bowl was a period of severe dust storms that greatly damaged the ecology and agriculture of the American and Canadian prairies during the 1930s; severe drought and a failure to apply dryland farming methods to prevent the aeolian processes (wind erosion) caused the phenomenon. The drought came in three waves, 1934, 1936, and 1939–1940, but some regions of the high plains experienced drought conditions for as many as eight years. With insufficient understanding of the ecology of the plains, farmers had conducted extensive deep plowing of the virgin topsoil of the Great Plains during the previous decade; this had displaced the native, deep-rooted grasses that normally trapped soil and moisture even during periods of drought and high winds. The rapid mechanization of farm equipment, especially small gasoline tractors, and widespread use of the combine harvester contributed to farmers' decisions to convert arid grassland (much of which received no more than 10 inches (~250 mm) of precipitation per year) to cultivated cropland.During the drought of the 1930s, the unanchored soil turned to dust, which the prevailing winds blew away in huge clouds that sometimes blackened the sky. These choking billows of dust – named "black blizzards" or "black rollers" – traveled cross country, reaching as far as the East Coast and striking such cities as New York City and Washington, D.C. On the plains, they often reduced visibility to 3 feet (1 m) or less. Associated Press reporter Robert E. Geiger happened to be in Boise City, Oklahoma, to witness the "Black Sunday" black blizzards of April 14, 1935; Edward Stanley, Kansas City news editor of the Associated Press coined the term "Dust Bowl" while rewriting Geiger's news story. While the term "the Dust Bowl" was originally a reference to the geographical area affected by the dust, today it usually refers to the event itself (the term "Dirty Thirties" is also sometimes used).
The drought and erosion of the Dust Bowl affected 100,000,000 acres (400,000 km2) that centered on the panhandles of Texas and Oklahoma and touched adjacent sections of New Mexico, Colorado, and Kansas.The Dust Bowl forced tens of thousands of poverty-stricken families to abandon their farms, unable to pay mortgages or grow crops, and losses reached $25 million per day by 1936 (equivalent to $450,000,000 in 2018). Many of these families, who were often known as "Okies" because so many of them came from Oklahoma, migrated to California and other states to find that the Great Depression had rendered economic conditions there little better than those they had left.
The Dust Bowl has been the subject of many cultural works, notably the novel The Grapes of Wrath (1939) by John Steinbeck, the folk music of Woody Guthrie, and photographs depicting the conditions of migrants by Dorothea Lange.Great Depression in Australia
Australia suffered badly during the period of the Great Depression of the 1930s. The Depression began with the Wall Street Crash of 1929 and rapidly spread worldwide. As in other nations, Australia suffered years of high unemployment, poverty, low profits, deflation, plunging incomes, and lost opportunities for economic growth and personal advancement.
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. Unemployment reached a record high of around 30% in 1932, and gross domestic product declined by 10% between 1929 and 1931.There were also incidents of civil unrest, particularly in Australia's largest city, Sydney. Though Australian Communist and far right movements were active in the Depression, they remained largely on the periphery of Australian politics, failing to achieve the power shifts obtained in Europe, and the democratic political system of the young Australian Federation survived the strain of the period.
The James Scullin Labor Government had just assumed power with the commencement of the Scullin Ministry on 22 October following the 1929 federal election, however just a couple of days later, "Black Thursday" would mark the start of the Wall Street Crash of 1929 and the subsequent global onset of the Great Depression. From the outset the government was buffeted by the effects of the global economic crisis. With the government unable to implement the deflationary Premiers' Plan, Labor had split by 1931 over how to deal with the crisis, with Treasurer Ted Theodore failing to implement his Keynesian inflationary plans, and New South Wales Premier Jack Lang losing office over his plans to boost the budget through a temporary cessation of interest repayments on debts to Britain and that interest on all government borrowings be reduced by 3% to free up money for injection into the economy. Labor defector Joseph Lyons helped to form the United Australia Party through the ending of the Nationalist Party of Australia and succeeded Scullin as Prime Minister of Australia from the 1931 federal election until his death in 1939.
Thus Australia, unlike the United States, did not embark on a significant Keynesian program of spending to recover from the Depression. Nevertheless, the Australian recovery began around 1932. Australians took consolation from sporting achievements through the Depression, with cricketer Don Bradman and race horse Phar Lap achieving long-lasting fame.Great Depression in Canada
The worldwide Great Depression of the early 1930s was a social and economic shock that left millions of Canadians unemployed, hungry and often homeless. Few countries were affected as severely as Canada during what became known as the "Dirty Thirties," due to Canada's heavy dependence on raw material and farm exports, combined with a crippling Prairies drought known as the Dust Bowl. Widespread losses of jobs and savings ultimately transformed the country by triggering the birth of social welfare, a variety of populist political movements, and a more activist role for government in the economy.Great Depression in South Africa
The Great Depression had a pronounced economic and political effect on South Africa, as it did on most nations at the time. As world trade slumped, demand for South African agricultural and mineral exports fell drastically. It is believed that the social discomfort caused by the depression was a contributing factor in the 1933 split between the "gesuiwerde" (purified) and "smelter" (fusionist) factions within the National Party and the National Party's subsequent fusion with the South African Party.
The sudden lack of demand destroyed prices on commodities that were profitable to many Afrikaner farmers. For example, the price of wool fell 75% between 1925 and 1933. A large portion of the agricultural industry were unable to repay mortgages on their over-capitalized farms. Thus, the National Party found itself losing favour with one of its largest constituencies—conservative, rural Boers.
South Africa was saved from a complete collapse by the gold mining industry—one of the largest and most advanced at the time—as the price of gold rose rapidly as investors sought a haven from the dead securities market. Growing gold exports compensated somewhat for the loss of other trade revenue. However, like the situation with the Boers, the National party lost support as the weak economy forced the gold corporations to replace white labourers with lower-paid blacks.
The National Party-led government staved off bankruptcy by raising taxes on imports, petrol and postage, amongst other things. This "unfair" taxation led to further dislike of the ruling government.
The coalition government between Jan Smuts and J.B.M. Hertzog was successful in 1933 partly because Smuts presented the public with a mock budget showing how South Africa's economic malaise could be lifted by floating the South African pound and removing it from the Gold standard, thus making exports more attractive, and creating a scenario in which undue taxation could be removed.Great Depression in the United Kingdom
The Great Depression in the United Kingdom, also known as the Great Slump, was a period of national economic downturn in the 1930s, which had its origins in the global Great Depression. It was Britain's largest and most profound economic depression of the 20th century. The Great Depression originated in the United States in late 1929 and quickly spread to the world. Britain had never experienced the boom that had characterized the U.S., Germany, Canada and Australia in the 1920s, so its effect appeared less severe. Britain's world trade fell by half (1929–33), the output of heavy industry fell by a third, employment profits plunged in nearly all sectors. At the depth in summer 1932, registered unemployed numbered 3.5 million, and many more had only part-time employment.
Particularly hardest hit by economic problems were the industrial and mining areas in the north of England, Scotland, Northern Ireland and Wales. Unemployment reached 70% in some areas at the start of the 1930s (with more than 3 million out of work nationally) and many families depended entirely on payments from local government known as the dole. Politically the Conservative Party dominated the era and the Labour Party was seriously hurt.Great Depression in the United States
The Great Depression began in August 1929, when the United States economy first went into an economic recession. Everyone in the Great Depression struggled financially due to the collapse of the banking system. Although the country spent two months with declining GDP, it was not until the Wall Street Crash in October 1929 that the effects of a declining economy were felt, and a major worldwide economic downturn ensued. 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. Altogether, there was a general loss of confidence in the economic future.The usual explanations include numerous factors, especially high consumer debt, ill-regulated markets that permitted overoptimistic loans by banks and investors, and the lack of high-growth new industries. These all interacted to create a downward economic spiral of reduced spending, falling confidence and lowered production.
Industries that suffered the most included construction, shipping, mining, logging and agriculture (compounded by dust-bowl conditions in the heartland). Also hard hit was the manufacturing of durable goods like automobiles and appliances, whose purchase could be postponed. The economy hit bottom in the winter of 1932–33; then came four years of growth until the recession of 1937–38 brought back high levels of unemployment.
The Depression caused major political changes in America. Three years into the depression, President Herbert Hoover, widely shamed for not doing enough to combat the crisis, lost the election of 1932 to Franklin Delano Roosevelt by an embarrassingly wide margin. Roosevelt's economic recovery plan, the New Deal, instituted unprecedented programs for relief, recovery and reform, and brought about a major realignment of American politics.
The Depression also resulted in an increase of emigration for the first time in American history. Some immigrants went back to their native countries, and some native U.S. citizens went to Canada, Australia and South Africa. There were mass migrations of people from badly hit areas in the Great Plains (the Okies) and the South to places such as California and the cities of the North (the Great Migration). Racial tensions also increased during this time. By the 1940s immigration had returned to normal, and emigration declined. A well-known example of an emigrant was Frank McCourt, who went to Ireland, as recounted in his book Angela's Ashes.
The memory of the Depression also shaped modern theories of economics and resulted in many changes in how the government dealt with economic downturns, such as the use of stimulus packages, Keynesian economics, and Social Security. It also shaped modern American literature, resulting in famous novels such as John Steinbeck's The Grapes of Wrath and Of Mice and Men.
Examining the causes of the Great Depression raises multiple issues: what factors set off the first downturn in 1929; what structural weaknesses and specific events turned it into a major depression; how the downturn spread from country to country; and why the economic recovery was so prolonged.Many banks began to fail in October 1930 when farmers defaulted on loans. There was no federal deposit insurance during that time as bank failures were considered a normal part of economic life. Worried depositors started to withdraw savings, so the money multiplier worked in reverse. Banks were forced to liquidate assets (such as calling in loans rather than creating new loans). This caused the money supply to shrink and the economy to contract (the Great Contraction), resulting in a significant decline in aggregate investment. The decreased money supply further aggravated price deflation, putting more pressure on already struggling businesses.
The U.S. Government's commitment to the gold standard prevented it from engaging in expansionary monetary policy. High interest rates needed to be maintained in order to attract international investors who bought foreign assets with gold. However, the high interest also inhibited domestic business borrowing.
The U.S. interest rates were also affected by France's decision to raise their interest rates to attract gold to their vaults. In theory, the U.S. would have two potential responses to that: Allow the exchange rate to adjust, or increase their own interest rates to maintain the gold standard. At the time, the U.S. was pegged to the gold standard. Therefore, Americans converted their dollars into francs to buy more French assets, the demand for the U.S. dollar fell, and the exchange rate increased. One of the only things the U.S. could do to get back into equilibrium was increase interest rates.Nobel laureate economist Milton Friedman and his fellow monetarist Anna Schwartz argued that the Federal Reserve could have stemmed the severity of the Depression, but failed to exercise its role of managing the monetary system and ameliorating banking panics, resulting in a Great Contraction of the economy from 1929 until the New Deal began in 1933. This view was endorsed by Fed Governor Ben Bernanke who made this statement in a speech honoring Friedman and Schwartz:
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again.
— Ben S. BernankeGreatest Generation
The Greatest Generation, also known as the G.I. Generation and the World War II generation, is the demographic cohort following the Lost Generation. Demographers and researchers typically use the early 1900s as starting birth years and ending birth years in the mid to late 1920s. The generation was shaped by the Great Depression and were the primary participants in World War II.Long Depression
The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through the spring of 1879, or 1896, depending on the metrics used. It was the most severe in Europe and the United States, which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War. The episode was labeled the "Great Depression" at the time, and it held that designation until the Great Depression of the 1930s. Though a period of general deflation and a general contraction, it did not have the severe economic retrogression of the Great Depression.It was most notable in Western Europe and North America, at least in part because reliable data from the period is most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost some of its large industrial lead over the economies of Continental Europe. While it was occurring, the view was prominent that the economy of the United Kingdom had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as the Great Depression of 1873–1896.In the United States, economists typically refer to the Long Depression as the Depression of 1873–1879, kicked off by the Panic of 1873, and followed by the Panic of 1893, book-ending the entire period of the wider Long Depression. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction. In the United States, from 1873 to 1879, 18,000 businesses went bankrupt, including 89 railroads. Ten states and hundreds of banks went bankrupt. Unemployment peaked in 1878, long after the initial financial panic of 1873 had ended. Different sources peg the peak U.S. unemployment rate anywhere from 8.25% to 14%.New Deal
The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1936. It responded to needs for relief, reform, and recovery from the Great Depression. Major federal programs included the Civilian Conservation Corps (CCC), the Civil Works Administration (CWA), the Farm Security Administration (FSA), the National Industrial Recovery Act of 1933 (NIRA) and the Social Security Administration (SSA). They provided support for farmers, the unemployed, youth and the elderly. The New Deal included new constraints and safeguards on the banking industry and efforts to re-inflate the economy after prices had fallen sharply. New Deal programs included both laws passed by Congress as well as presidential executive orders during the first term of the presidency of Franklin D. Roosevelt.
The programs focused on what historians refer to as the "3 Rs": relief for the unemployed and poor, recovery of the economy back to normal levels and reform of the financial system to prevent a repeat depression. The New Deal produced a political realignment, making the Democratic Party the majority (as well as the party that held the White House for seven out of the nine presidential terms from 1933 to 1969) with its base in liberal ideas, the South, traditional Democrats, big city machines and the newly empowered labor unions and ethnic minorities. The Republicans were split, with conservatives opposing the entire New Deal as hostile to business and economic growth and liberals in support. The realignment crystallized into the New Deal coalition that dominated presidential elections into the 1960s while the opposing conservative coalition largely controlled Congress in domestic affairs from 1937 to 1964.Of Mice and Men
Of Mice and Men is a novella written by author John Steinbeck. Published in 1937, it tells the story of George Milton and Lennie Small, two displaced migrant ranch workers, who move from place to place in California in search of new job opportunities during the Great Depression in the United States.
Steinbeck based the novella on his own experiences working alongside migrant farm workers as a teenager in the 1910s (before the arrival of the Okies that he would vividly describe in The Grapes of Wrath). The title is taken from Robert Burns' poem "To a Mouse", which reads: "The best laid schemes o' mice an' men / Gang aft agley". (The best laid schemes of mice and men / Often go awry.)
While it is a book taught in many schools, Of Mice and Men has been a frequent target of censors for vulgarity and what some consider offensive and racist language; consequently, it appears on the American Library Association's list of the Most Challenged Books of 21st Century.Recession of 1937–38
The recession of 1937–1938 was an economic downturn that occurred during the Great Depression in the United States.
By the spring of 1937, production, profits, and wages had regained their early 1929 levels. Unemployment remained high, but it was slightly lower than the 25% rate seen in 1933. The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 percent, and production of durable goods fell even faster.
Unemployment jumped from 14.3% in May 1937 to 19.0% in June 1938. Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.
Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. In most sectors, hourly earnings continued to rise throughout the recession, partly compensating for the reduction in the number of hours worked. As unemployment rose, consumer expenditures declined, leading to further cutbacks in production.The Grapes of Wrath
The Grapes of Wrath is an American realist novel written by John Steinbeck and published in 1939. The book won the National Book Award
and Pulitzer Prize for fiction, and it was cited prominently when Steinbeck was awarded the Nobel Prize in 1962.Set during the Great Depression, the novel focuses on the Joads, a poor family of tenant farmers driven from their Oklahoma home by drought, economic hardship, agricultural industry changes, and bank foreclosures forcing tenant farmers out of work. Due to their nearly hopeless situation, and in part because they are trapped in the Dust Bowl, the Joads set out for California. Along with thousands of other "Okies", they seek jobs, land, dignity, and a future.
The Grapes of Wrath is frequently read in American high school and college literature classes due to its historical context and enduring legacy. A celebrated Hollywood film version, starring Henry Fonda and directed by John Ford, was released in 1940.The Green Mile (film)
The Green Mile is a 1999 American fantasy crime drama film written and directed by Frank Darabont and adapted from Stephen King’s 1996 novel of the same name.
The film stars Tom Hanks as Paul Edgecomb and Michael Clarke Duncan as John Coffey, with supporting roles by David Morse, Bonnie Hunt, and James Cromwell. The film also features Dabbs Greer in his final film, as the older Paul Edgecomb. The film, told in a flashback format, tells the story of Paul's life as a death row corrections officer during the U.S. Great Depression, and the supernatural events he witnessed.
The film received positive reviews from critics, and was nominated for four Academy Awards: Best Picture, Best Supporting Actor for Michael Clarke Duncan, Best Sound, and Best Screenplay Based on Material Previously Produced or Published.Wall Street Crash of 1929
The Wall Street Crash of 1929, also known as the Stock Market Crash of 1929 or the Great Crash, is a major stock market crash that occurred in late October 1929. It started on October 24 ("Black Thursday") and continued until October 29, 1929 ("Black Tuesday"), when share prices on the New York Stock Exchange collapsed.
It was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its after effects. The crash, which followed the London Stock Exchange's crash of September, signaled the beginning of the 12-year Great Depression that affected all Western industrialized countries.Weimar Republic
The Weimar Republic (German: Weimarer Republik [ˈvaɪmaʁɐ ʁepuˈbliːk] (listen)) is an unofficial historical designation for the German state from 1918 to 1933. The name derives from the city of Weimar, where its constitutional assembly first took place. The official name of the republic remained Deutsches Reich unchanged from 1871, because of the German tradition of substates. Although commonly translated as "German Empire", the word Reich here better translates as "realm", in that the term does not have monarchical connotations in itself. The Reich was changed from a constitutional monarchy into a republic. In English, the country was usually known simply as Germany.
Germany became a de facto republic on 9 November 1918 when Kaiser Wilhelm II abdicated the German and Prussian thrones with no agreement made on a succession by his son Crown Prince Wilhelm, and became a de jure republic in February 1919 when the position of President of Germany was created. A national assembly was convened in Weimar, where a new constitution for Germany was written and adopted on 11 August 1919. In its fourteen years, the Weimar Republic faced numerous problems, including hyperinflation, political extremism (with paramilitaries—both left- and right-wing) as well as contentious relationships with the victors of the First World War. Resentment in Germany towards the Treaty of Versailles was strong especially on the political right where there was great anger towards those who had signed the Treaty and submitted to fulfill the terms of it. The Weimar Republic fulfilled most of the requirements of the Treaty of Versailles although it never completely met its disarmament requirements and eventually paid only a small portion of the war reparations (by twice restructuring its debt through the Dawes Plan and the Young Plan). Under the Locarno Treaties, Germany accepted the western borders of the country by abandoning irredentist claims on France and Belgium, but continued to dispute the eastern borders and sought to persuade German-speaking Austria to join Germany as one of Germany's states.
From 1930 onwards President Hindenburg used emergency powers to back Chancellors Heinrich Brüning, Franz von Papen and General Kurt von Schleicher. The Great Depression, exacerbated by Brüning's policy of deflation, led to a surge in unemployment. In 1933, Hindenburg appointed Adolf Hitler as Chancellor with the Nazi Party being part of a coalition government. The Nazis held two out of the remaining ten cabinet seats. Von Papen as Vice Chancellor was intended to be the "éminence grise" who would keep Hitler under control, using his close personal connection to Hindenburg. Within months, the Reichstag Fire Decree and the Enabling Act of 1933 had brought about a state of emergency: it wiped out constitutional governance and civil liberties. Hitler's seizure of power (Machtergreifung) was permissive of government by decree without legislative participation. These events brought the republic to an end – as democracy collapsed, the founding of a single-party state began the dictatorship of the Nazi era.
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