The Great Depression was a global economic slowdown that took place in the 1930s. It started in the United States. According to sources, the period of the Great Depression was not the same for every country. In the majority of the nations of the world, it began in 1929 and continued till the late 1930s. The Great Depression is labelled as an instance of how severely the world economy can slump. It was the most extensive, severe, and pervasive depression that the 20th century ever experienced.
The Great Depression Facts
The Great Depression in the United States first took place in the United States, following a huge slump in stock prices that started around September 4, 1929. Soon, it turned into a piece of global news when the stock market crash of October 29, 1929, took place. People still remember this dramatic day as “Black Tuesday”. As a result of this October 29 stock market crash, Wall Street was panic-stricken and eliminated millions of investors. For the following many years, customer expenditure and investment sunk to new lows, resulting in a sharp drop in industrial production and job creation since companies facing losses started retrenching their staffs. Almost 50% of the banks operating in America shut down during the US great depression. Many people lost their properties and turned homeless.
Between 1929 and 1932, the global gross domestic product (GDP) diminished by approximately 15%. In contrast, from 2008 to 2009, the global GDP sunk by lower than 1% at the time of the Great Recession. A few economies began to show signs of revival in the middle of the 1930s. Nonetheless, in several nations, the adverse impact of the Great Depression remained until the offset of the Second World War.
Causes of the Great Depression
Historians and economists have no unanimity among them about the precise reasons behind the Great Depression. Primarily, the following reasons are considered as the cause of the great depression and several academics accord on them:
- The 1929 stock market crash.
- The gold standard.
- Panic among bankers and cash crunch.
- Reduced international lending and export/import duties.
- Inadequate demand from the private sector and inadequate fiscal outlay.
According to the debt-deflation theory of Irving Fisher, renowned US economist and statistician, inadequate expenditure, decrease in money supply, and debt on margin resulted in diminishing prices and additional insolvencies.
Effects of the Great Depression
There were overwhelming effects of the Great Depression on both impoverished and affluent nations. Tax revenue, individual earnings, prices, and profits plunged. At the same time, there was a substantial slump in global business activities by approximately 50%. Joblessness in the United States escalated to 23%. In some other countries, it went up as high as 33%.
Cities particularly dependent on heavy industries across the world were badly affected. In several nations, the construction industry came to a standstill. Agricultural communities and countryside areas were the worst victims as crop prices dropped by around 60%. Experiencing falling demand and limited options for alternative employment, regions relying on primary sectors of the economy like logging and mining underwent significant hardship.