Great Depression

The period was characterized by high rates of unemployment and poverty; drastic reductions in liquidity, industrial production, and trade; and widespread bank and business failures around the world.

The economic contagion began in 1929 in the United States, the largest economy in the world, with the devastating Wall Street stock market crash of October 1929 often considered the beginning of the Depression.

[7] The outbreak of World War II in 1939 ended the Depression, as it stimulated factory production, providing jobs for women as militaries absorbed large numbers of young, unemployed men.

This is supported by the contrast in how the crisis progressed in, e.g., Britain, Argentina and Brazil, all of which devalued their currencies early and returned to normal patterns of growth relatively rapidly and countries which stuck to the gold standard, such as France or Belgium.

[17] While the precise causes for the occurrence of the Great depression are disputed and can be traced to both global and national phenomena, its immediate origins are most conveniently examined in the context of the U.S. economy, from which the initial crisis spread to the rest of the world.

It exacerbated the Great Depression[27] by preventing economic recovery after domestic production recovered, hampering the volume of trade; still there is disagreement as to the precise extent of the Act's influence.

[53] John Maynard Keynes did not think that the New Deal under Roosevelt single-handedly ended the Great Depression: "It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on the scale necessary to make the grand experiments which would prove my case—except in war conditions.

[87][88] There is a consensus that the Federal Reserve System should have cut short the process of monetary deflation and banking collapse, by expanding the money supply and acting as lender of last resort.

[91] 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.

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 analysis suggests that the elimination of the policy dogmas of the gold standard, a balanced budget in times of crisis and small government led endogenously to a large shift in expectation that accounts for about 70–80% of the recovery of output and prices from 1933 to 1937.

[110] There is common consensus among economists today that the government and the central bank should work to keep the interconnected macroeconomic aggregates of gross domestic product and money supply on a stable growth path.

[112] Economists like Barry Eichengreen and J. Bradford DeLong note that President Herbert 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.

"[125] 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.

[147] French West Africa launched an extensive program of educational reform, in which "rural schools", designed to modernize agriculture, would stem the flow of under-employed farm workers to cities where unemployment was high.

[151] 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.

[160] 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".

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.

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.

[178] After Piłsudski's death, in 1936 the gold standard regime was relaxed, and launching the development of the Central Industrial Region kicked off the economy, to over 10% annual growth rate in the 1936–1938 period.

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.

Jennifer Burns wrote: As the Great Depression ground on and unemployment soared, intellectuals began unfavorably comparing their faltering capitalist economy to Russian Communism.

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.

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.

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.

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.[222][223][224][225] Nonfiction works from this time also capture important themes.

The 1933 memoir Prison Days and Nights by Victor Folke Nelson provides insight into criminal justice ramifications of the Great Depression, especially in regard to patterns of recidivism due to lack of economic opportunity.

[210] 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 then-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.

Unemployed people lined up outside a soup kitchen opened in Chicago by Al Capone during the Great Depression in February 1931
Crowd gathering at the intersection of Wall Street and Broad Street after the 1929 crash
Crowds outside the Bank of United States in New York after its failure in 1931
Willis C. Hawley (left) and Reed Smoot in April 1929, shortly before the Smoot–Hawley Tariff Act passed the House of Representatives
The Depression in international perspective [ 37 ]
The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period. Dotted red line = long-term trend 1920–1970. [ 47 ]
A female factory worker in 1942, Fort Worth, Texas . Women entered the workforce as men were drafted into the armed forces.
Money supply decreased considerably between Black Tuesday and the Bank Holiday in March 1933 , when there were massive bank runs across the United States.
CPI 1914–2022
Inflation
Deflation
M2 money supply increases Year/Year
U.S. industrial production, 1928–1939
The Great Depression in the U.S. from a monetary view. Real gross domestic product in 1996-Dollar (blue), price index (red), money supply M2 (green) and number of banks (grey). All data adjusted to 1929 = 100%.
Crowd at New York's American Union Bank during a bank run early in the Great Depression
Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas , 1938.
An impoverished American family living in a shanty, 1936
Unemployed men march in Toronto , Ontario, Canada.
Soup kitchen for the unemployed in Paris, 1932
Unemployed men in Hamburg, 1931
The devil operating a screw press against a workman, Nazi propaganda medal , obverse
The reverse of this medal supporting the German election Nazi campaigns of 1932
Adolf Hitler speaking in 1935
Unemployed outside a factory in Italy, October 1931
Benito Mussolini giving a speech at the Fiat Lingotto factory in Turin, 1932
A line of unemployed people in Amsterdam, 1933
Unemployed people in front of a workhouse in London, 1930
Unemployed men standing in line outside a depression soup kitchen in Chicago, 1931
Burning shacks on the Anacostia flats, Washington, D.C., put up by the Bonus Army (World War I veterans) after the marchers with their wives and children were driven out by the regular Army by order of President Hoover , 1932 [ 208 ]
Buried machinery in a barn lot; South Dakota , May 1936. The Dust Bowl on the Great Plains coincided with the Great Depression. [ 213 ]
CCC workers constructing drainage culvert, 1933. Over 3 million unemployed young men were taken out of the cities and placed into 2,600+ work camps managed by the CCC. [ 214 ]
The WPA employed 2–3 million at unskilled labor.
Black Friday, 9 May 1873, Vienna Stock Exchange. The Panic of 1873 and Long Depression followed.