According to an article Great Depression, written by Pells and Romer (2019), The great depression took place in 1929, spread worldwide, and ended in 1939. The 10 year worldwide economic downturn was the longest and most severe depression experienced by the industrialized Western world. The great depression’s timing and severity was different across countries. In the US and Europe, it was longer and severe than in Japan and in Latin America.
There were four factors that had caused the depression. In 1929, the stock market crashed. It had crushed confidence towards the American economy. Due to this, it had reduced the act of spending and investment. Furthermore, in 1930s, banking panics had caused many banks to fail. It lessened the pool of money available for loans. By 1933, 20% of banks had failed. Additionally, to counteract trade imbalances with the US, the gold standard required foreign central banks to raise interest rates which discouraged spending and investments in those countries. Lastly, steep tariffs were applied on many industrial and agricultural goods. This act was introduced as the Smoot-Hawley Tariff Act (1930). It had caused retaliatory measures leading to the decline of output and reduced global trade.
Even though this depression had started in the United States, it still caused in many countries around the world a steep decrease in output, mass unemployment, intense deflation, increase in poverty, and homelessness. In the US, the impact had affected massive human suffering, decrease in output, and changes in economic policy. There was an expansion of labour unions and welfare state, government became more controlled of the country’s economy, and development of macroeconomics policies. Additionally, it brought effects to the social and cultural part too. Since the civil war, the Great Depression was the severest event that the Americans had faced.
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In the process of recovery, it mainly urged by the abandonment of the gold standard and currency deflation. This had caused some countries to encourage spending, lending, and investment. The New Deal was made, fiscal expansion, where there was an increase in government spending to provide jobs and other social welfare programs. Also, the government increase military spending to help reduced unemployment.
In the United States, recovery had stopped short. This was because another recession took place again in May 1937 and ended in June 1938. They experience a very severe contraction before the country completely recovered. This is why the United Stated continue to be depressed for the entire decade.
The recovery varied between other countries. But in the US, the recovery had begun in spring, 1933, where real GDP grew at an average rate of 9% per year in between 1933 to 1937. In 1937-38, the US experienced another severe downturn. After that, its economy grew more rapidly. Finally, the country’s output returned to it long-run trend in 1942.
In most countries, the Great Depression was over and they started to recover by 1933. However, in other countries, they did not experience full recovery until late 1930s or early 1940s. In the United States, it was said to have fully recovered in 1939.
In the culture and society part, economic disorder, the rise of totalitarianism, and the presence of war was among the traumas of the great depression. The event was remembered in many different ways and varied across countries. Bank panics destroyed the economic system, the drought struck the Great Plains, and the windstorms that exposed the topsoil left the area into a Dust Bowl, destroying crops and livestock. For this reason, 2.5 million people migrated to California, thinking that there was chance of sunshine and a better life. But it was nothing more than a scarce and poorly paid jobs for migrant farm labourers.
For Americans, the Great Depression will always remind them of the poorest conditions where there were apple sellers on the streets, closed factories, rural poverty and Hoovervilles (named after President Herbert Hoover). Hoovervilles are shanty town built by the homeless. Often children grew up quickly to take the adult responsibilities. Also, women in the workplace had increased in order to help their own families. Such tunes as “Brother, Can You Spare a Dime?” was most popular during that time.
References
- https://www.britannica.com/event/Great-Depression
- https://www.investopedia.com/insights/history-of-us-bankruptcy/
- http://encyclopedia.kids.net.au/page/gr/Great_Depression_(economics)
- http://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article=1309&context=constructing
- http://www.tamu.edu/faculty/ccbn/dewitt/adp/depression.htm
- https://economicdisaster.wordpress.com/
- https://www.thebalance.com/the-great-depression-of-1929-causes-how-it-ended-3305689
