The Great Depression (1929–1939) — the most devastating economic crisis of the 20th century:
📉 Overview
- Origin: United States (Wall Street Crash of October 1929).
- Duration: Roughly 10 years (1929–1939), with global effects lasting until WWII.
- Spread: Quickly spread worldwide due to trade links, banking systems, and the gold standard.
⚠️ Causes
- Stock Market Crash (1929): Over-speculation and margin trading caused the Dow Jones to lose nearly 90% of its value between 1929–1932.
- Bank Failures: Thousands of banks collapsed, wiping out savings and reducing lending.
- Overproduction & Falling Demand: Factories and farms produced more than consumers could buy, leading to layoffs.
- Global Trade Collapse: Protectionist policies like the Smoot–Hawley Tariff (1930) worsened global trade.
- Monetary Policy Mistakes: The Federal Reserve tightened credit instead of easing it, deepening deflation.
📊 Impact
- United States:
- Unemployment peaked at 25% (1933).
- GDP fell by about 30%.
- Deflation: Prices dropped nearly 10% per year in the early 1930s.
- Widespread homelessness (“Hoovervilles”), breadlines, bank runs.
- Global:
- Industrial production in major economies fell by >35%.
- Global trade contracted by 65% between 1929–1934.
- Europe: Germany faced hyper-unemployment, fueling extremism and Hitler’s rise.
- Colonial economies (Asia, Africa, Latin America) suffered from collapsing export demand (rubber, coffee, sugar).
🛠️ Responses
- United States (FDR’s New Deal):
- Banking reforms (FDIC insurance).
- Public works programs (WPA, CCC) for job creation.
- Social Security Act (1935) established welfare safety nets.
- Abandoning the gold standard (1933) allowed monetary expansion.
- International:
- Many countries devalued currencies to boost exports.
- Protectionism spread, fragmenting global trade.
🌍 Legacy
- Considered the worst economic crisis in modern history.
- Reshaped economic thought — Keynesian economics (government spending to boost demand) gained prominence.
- Led to financial regulation (Glass–Steagall Act) and central banks taking a more active role.
- Politically, it destabilized democracies, strengthened fascism in Europe, and contributed to the outbreak of World War II.
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