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The Great Depression

INDIVIDUAL SOCIETIES

Nazahat | 10A | 2 Sep 2019


Intro
Lasting from 1929-1939, the Great Depression was the worst economic turndown in
history. It was noted as the longest and most severe economic depression ever experienced
by the industrialized Western world. Starting in the United States after the stock market
crash on black Thursday, the Great Depression spread out to cause drastic declines in
output, severe unemployment, and acute deflation in almost every country of the world.

Causes
During the ‘roaring 20s’, the US economy expanded rapidly, and their wealth increased by
more than double. Reaching its peak in August 1929, the stock market underwent rapid
expansion. There were a few main causes of the Great depression:

1. The stock market crash of 1929.


2. Investors turned to the currency market - Speculators began trading in their
dollars for gold. This created a run on the dollar.
3. The feds raised interest rates again to preserve the dollar’s value.
4. The Fed did not increase the supply of money to combat deflation.
5. Bank failures - Throughout the 1930s, bank deposits were uninsured. As banks
failed people simply lost their savings.
6. Reduction in purchasing across the board - Fearing further economic woes,
individuals from all classes stopped purchasing items. This then led to a reduction
in the number of items produced, and thus a reduction in the workforce.
7. American economic policy in Europe - As businesses began failing, the
government charged a high tax for imports, leading to less trade between America
and foreign countries.
8. Drought conditions - While not a direct cause of the Great Depression, the
drought that occurred in the Mississippi Valley in 1930 was of such proportions
that many could not even pay their taxes or other debts and had to sell their farms
for no profit to themselves.

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Effects/Impacts- Europe
For many years, one economic malady after another befell several countries. Many were
left in awful conditions, with poor jobs and wages. Several people even lost all of their life
savings. As countries were still recovering from the effects of World War 1, the Great
Depression had quite an impact on Europe.

As it started to seem like the world was slowly heading towards disaster, tensions started
to increase. Events of 1931 began cascading, with one crisis leading to another. Austria's
largest bank collapsed. Concerns over the possible weak financial condition of other
European banks immediately led to European residents rushing to banks where they had
their money deposited. The rush further weakened banks and even affected banks not
previously in financial trouble. This led to failure of German banks by mid-June. As a
result, Germany announced it could no longer keep paying its debts resulting from World
War 1. This led to economic problems in other nations that were reliant on those
payments to fund their own government operations. By 1933, unemployment rates in
Europe were soaring. Of the available workforce in each country, unemployment rates
were 26.3 percent in Germany, 23.7 percent in Sweden, 14.1 percent in Britain, 20.4 percent
in Belgium, and 28.8 percent in Denmark. In 1931, German industrial production
decreased more than 40 percent; 29 percent in France; and 14 percent in Britain from 1929

A response to the Great Depression was fascism and militarism. This was found in
Germany and Italy from Europe. In Germany, Adolph Hitler and his Nazi Party promised
to restore the country's economy and to rebuild its military. In Italy, fascism arose even
before the Depression's onset under the leadership of Italian dictator Benito Mussolini.

In the Soviet Union, Joseph Stalin's grip on power solidified due to the Great Depression.
His First Five Year Plan called for rapid industrialization and "collectivization" of small
peasant farms under government control. To crush opposition to his program, Stalin
exiled millions of peasant to labor camps in Siberia and instituted a program of terror
called the Great Purge. Historians estimate that as many as 20 million Soviets died during
the 1930s as a result of famine and deliberate killings.

Great Britain and France’s response was welfare capitalism. Under welfare capitalism,
government assumed ultimate responsibility for promoting a reasonably fair distribution
of wealth and power and for providing security against the risks of bankruptcy,
unemployment, and destitution.

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Global perspective
The Great Depression was a global phenomenon which, unlike previous economic
downturns, affected people on a global scale. Due to several factors, the Great Depression
dragged on with no end in sight, and caused several political, social and economic
consequences. This phenomenon resulted in the complete collapse of World Trade.
International trade fell 30 percent, and "Beggar-thy-neighbor" trade policies were a major
reason why the Depression kept persisting. Towards the end of the Great Depression, an
estimated 30 million people were unemployed around the world.

European countries significantly reduced unemployment by 1936, unlike America, which


continued to be deeply affected by this economic collapse.

Australia was reliant on borrowing vast sums of money, along with trade, their economy
collapsed with an unemployment peak. It took them almost a decade to recover.

Conclude
The Great Depression lasted over 12 years and had many long lasting effects that were
caused by problems from this long-term crisis. It made a lot of changes, but also was what
caused World War 2. The Great Depression ended after WW2, and Franklin Roosevelt’s
‘New Deal’, which help provide aid to those in need of help. Luckily, nowadays there are
better safeguards, and developments in monetary policy help manage the economy, so
while there’s no saying about the future, it’s unlikely for such a catastrophe to happen
again.

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References
 “The Great Depression in Global Perspective.” Digital History,

http://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=3433.

 History.com Editors. “Great Depression History.” History.com, A&E Television

Networks, 29 Oct. 2009, https://www.history.com/topics/great-depression/great-

depression-history.

 “The Great Depression.” Khan Academy, Khan Academy,

https://www.khanacademy.org/humanities/us-history/rise-to-world-power/great-

depression/a/the-great-depression.

 Amadeo, Kimberly. “What Happened During the Great Depression?” The Balance,

The Balance, 5 Aug. 2019, https://www.thebalance.com/the-great-depression-of-

1929-3306033.

 Romer, Christina D., and Richard H. Pells. “Great Depression.” Encyclopædia

Britannica, Encyclopædia Britannica, Inc., 16 Aug. 2019,

https://www.britannica.com/event/Great-Depression.

 5 Causes of The Great Depression - Cland.k12.Ky.us. PDF file,

https://www.cland.k12.ky.us/userfiles/13/classes/441/5causesofthegreatdepression.p

df?id=8459.

 Amadeo, Kimberly. “How the Lows of the Great Depression Still Affects Us

Today.” The Balance, The Balance, 5 Aug. 2019,

https://www.thebalance.com/effects-of-the-great-depression-4049299.

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