The Great Depression was a worldwide economic crisis that brought depression to the economy of many countries during the 1930s. Before the Great Depression, after the World War I, the world economy seems to prosper, but as a result of many economic stagnation, the depression started to set in. But the US Stock Market Crash of October 1929 was the most significant and sudden factor which marked the beginning of the Great Depression.
During the Great Depression, there were many serious economic problems from 1929 through the whole of 1930s. Gross Domestic Product (GDP) of many countries have faced downfall, and other problems set in like the reduction in personal income, closure of business sectors which brought high rate of unemployment, and the fall prices. But, the Great Depression have subsided with the start of the World War II in 1939.
After the World War I, the world economy have shown some signs of prosperity as all the nations have engaged in rebuilding their economies. However, with the onset of 1920s, the story changed. Because, most of the countries espeacially European powers have relied on collecting loans from the United States in rebuilding their economies. While in repaying back the loans, the debtor countries relied on the reparations they were collecting from Germany, Austria, Hungary, and their associates.
However, by 1925, Germany have failed to pay the reparations to the European Powers. In turn the German failure caused many problems to them in paying back the loans they borrowed from the United States.
From about 1926 to 1928, the United States and the European powers were in an economic stagnation. Commercial and business sectors like banks were increasingly collapsing and unemployment was becoming rampant. Therefore, all these and other economic reasons have put the world economy in danger and signalled the coming of economic depression.
As many Indicators of the collapse of the world economy appeared, the sudden and most significant factor happened in which the American New York Stock Market crashed in October 1929.
Before the sudden New York Stock Market crash, in the stock market system people usually borrowed money from banks and purchased stocks or shares in order to make profit. However, the stagnation of the world economy have relatively caused the low demand in buying stock. And on the other hand, the American banks asked the borrowers to pay back the money. Therefore, this pressure from the banks caused the falling of the stock prices as most of the investors sold their stocks at a very low prices, which eventually led to the crashed of the Stock Market.
After the the crashed, the Great Depression began in the United States, and by 1930 the depression spreads to Europe and other parts of the world which marked the beginning of worldwide economic hardships.
In the United States, the economy plummeted which caused the collapsed of many businesses and unemployment rate was always going high. The situation continued to worsened to the extent that thousands of work and services sectors were shutdown. For example, in 1930 to 1932, over 3000 businesses were closed, which forced many families to cut short their spendings and eventually became unable to pay for rents or buy food
But, in 1932, a new government was elected. Franklin Roosevelt as newly elected US President, he came up with new economic scheme called the ‘New Deal’ in order to tackle the situation. The New Deal comprised three goals as follows :
- To solve the basic problems of the Americans, like needs of food, and shelter.
- To provide laws and ways that would enable the start up and growing business and agriculture again
- And lastly, to provide laws that would solve the US current economic problems.
From 1932 to 1934, Roosevelt’s government have acted quickly and provided about 12 new laws and programs that would strengthen the economy. Other measures were continued to be taken in the United States until 1939, when World War II broke out.
In Europe, the economic condition was already deteriorated. It was a known fact that most of the European powers have relied on the American loans and investment for reviving their economies after the World War I. But, after the New York Stock Market crash, and the start of the Great Depression, the United States reduced its foreign investments and granting loans to a large extent, more especially to European countries.
In Europe, countries such as Great Britain, France, Germany, and the central European countries like Poland were hugely effected. In the 1930s, investors started withdrawing their money while closure or downturn of many business sectors have increasingly caused the level of Unemploymement to rise. Inflation was going high to the extent that many people were unable to afford their basic needs. For example, in Britain, about 3 million people became jobless.
OTHER PARTS OF THE WORLD
In the other parts of the the world outside United States and Europe, the Great Depression have devastated the economy of many countries. For, the developing countries of Latin America were affected by the economic problems that was happening in the United States and Europe. In countries such as Brazil, foreign investors and bankers from Europe and the US have quits, and their actions led to the closure of large number work and service sectors.
End of the Great Depression
Before the end of the Great Depression in the world, many countries took a lot of economic measures in order to solve the problems. Leaders like Franklin Delano Roosevelt of the United States have made a remarkable economic reforms and social relief programs in order clear the problems.
However, the sudden end of the Great Depression have come with the outbreak of the World War II, which brought about mobilization of resources that indirectly cleared the Depression in many aspects.
The Great Depression have been a serious economic problem that stunned the world. Many economic historians have argued and maintained that the Great Depression have been the most significant and harsh economic downturn in the 20th century that even affected humans psychologically.
In many countries, the harshness led to the change overthrown of many governments. For example, in Germany, the frustration of the Depression led to the rising of dictator like Adolf Hitler who promised to restore the proseperity of his nation in any way possible.