The Great Depression was a dramatic, worldwide economic downturn beginning in some countries as early as 1928. Economics is the social science that studies the production distribution, and consumption of goods and services. A recession is a contraction phase of the Business cycle. The U ^[1] The beginning of the Great Depression in the United States is associated with the stock market crash on October 29, 1929, known as Black Tuesday and the end is associated with the onset of the war economy of World War II, beginning around 1939. The United States of America —commonly referred to as the A stock market crash is a sudden dramatic decline of Stock prices across a significant cross-section of a Stock market. Events 437 - Valentinian III, Western Roman Emperor, marries Licinia Eudoxia, daughter of his cousin Theodosius II Year 1929 ( MCMXXIX) was a Common year starting on Tuesday (link will display the full calendar of the Gregorian calendar. The Wall Street Crash of 1929, also known as the ’29 Crash, the Crash of 1929, the Great Crash of 1929, the Great Crash of October 1929 War economy is the term used to describe the contingencies undertaken by the modern State to mobilise its Economy for War production. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including

The depression had devastating effects in both the industrialized countries and those which exported raw materials. The term developed country, or advanced country, is used to categorize countries with developed Economies in which the tertiary and quaternary sectors A raw material is something that is acted upon or used by Organisms, or by human labour or Industry, for use as a Building material to create some product International trade declined sharply, as did personal incomes, tax revenues, prices, and profits. International trade is exchange of Capital, Goods, and Services across International borders or Territories. Income, refers to consumption opportunity gained by an entity within a specified time frame which is generally expressed in monetary terms Tax revenue is the Income that is gained by Governments because of Taxation of the people Price in Economics and Business is the result of an exchange and from that trade we assign a numerical Monetary value to a good, Cities all around the world were hit hard, especially those dependent on heavy industry. Throughout the the industrial world cities in the Great Depression were hit hard beginning in 1929 and lasting through most of the 1930s Heavy industry does not have a single fixed meaning as compared to Light industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent. Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture ^[2][3] Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most. Mining is the extraction of valuable Minerals or other geological materials from the earth usually (but not always from an Ore body Logging is the process in which Trees are cut down for Forest management and Timber. At the time, Herbert Hoover was President of the United States. Herbert Clark Hoover (August 10 1874 &ndash October 20 1964 was the thirty-first President of the United States (1929–1933 The President of the United States is the Head of state and Head of government of the United States and is the highest political official in United States by ^[4] Even shortly after the Wall Street Crash of 1929, optimism persisted. John D. Rockefeller said that "These are days when many are discouraged. John Davison Rockefeller ( July 8, 1839 &ndash May 23, 1937) was an American Industrialist and philanthropist In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again. ”^[5]

The Great Depression ended at different times in different countries; for subsequent history see Home front during World War II. The Home front is the name given to the activities of the civilians during a state of Total war. The majority of countries set up relief programs, and most underwent some sort of political upheaval, pushing them to the left or right. In some states, the desperate citizens turned toward nationalist demagogues - the most infamous being Adolf Hitler - setting the stage for World War II in 1939. Demagogy (also demagoguery) ( Ancient Greek δημαγωγία from dēmos "people" and agein "to lead" refers to a political Hi and welcome to Wikipedia! Please understand that this article is frequently vandalized and vandalism is reverted immediately World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, a mother of seven children, age 32, in Nipomo, California, March 1936. Dorothea Lange ( May 25 1895 &ndash October 11 1965) was an influential American documentary Photographer Florence Owens Thompson ( September 1, 1903 - September 16, 1983) born Florence Leona Christie, was the subject of Dorothea Lange California ( is a US state on the West Coast of the United States, along the Pacific Ocean. Florence Owens Thompson ( September 1, 1903 - September 16, 1983) born Florence Leona Christie, was the subject of Dorothea Lange Nipomo is a Census-designated place (CDP in San Luis Obispo County, California, United States.

The downward spiral

The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below the peak of September 1929. ^[6] Together government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the prior year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the northern summer of 1930.

In early 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas where commodity prices plunged, and in mining and logging areas where unemployment was high and there were few other jobs. The decline in the American economy was the motor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. The Economy of the United States is the largest national economy in the world Frantic attempts to shore up the economies of individual nations through protectionist policies, like the 1930 U. For the protectionist Australian political party from the 1880s to 1909 see Protectionist Party S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, helped to strangle global trade. The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act) was an act signed into law on June 17 1930, that raised U By late in 1930, a steady decline set in which reached bottom by March 1933.

Causes

Main article: Causes of the Great Depression

Recession cycles are thought to be a normal part of living in a world of inexact balances between supply and demand. The causes of the Great Depression are still a matter of active debate among Economists The specific economic events that took place during the Great Depression have Supply and demand is an Economic model describing effects on price and quantity in a Market. What turns a usually mild and short recession or "ordinary" business cycle into a great depression is a subject of debate and concern. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of governments to not exacerbate widespread bank failures and the resulting panics and reduction in the money supply. A free market is a Market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers Those who believe in a large role for governments in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that expounded the problem.

Current theories may be broadly classified into three main points of view. First, there is orthodox classical economics: monetarist, Austrian Economics and neoclassical economic theory, all which focus on the macroeconomic effects of money supply and the supply of gold which backed many currencies before the Great Depression, including production and consumption. Classical economics is widely regarded as the first modern school of economic thought. Monetarism is a school of economic thought concerning the determination of national income and monetary Economics. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates Neoclassical economics is a term variously used for approaches to Economics focusing on the determination of prices outputs and income distributions in markets Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time Mass production (also called flow production, repetitive flow production, series production, or serial production) is the production of In economics consumption is the primary motivating force in the wealth or utility maximizing paradigm

Chart 1: USA GDP annual pattern and long-term trend, 1920-40, in billions of constant dollars^[7].

Second, there are structural theories, most importantly Keynesian, but also including those of institutional economics, that point to underconsumption and overinvestment (economic bubble), malfeasance by bankers and industrialists or incompetence by government officials. In Economics Keynesian economics (ˈkeɪnziən also Keynesianism and Keynesian Theory) is based on the ideas of twentieth-century British economist Institutional economics, known by some as Institutionalist political economy, focuses on understanding the role of human-made institutions in shaping economic behaviour In underconsumption theory recessions and stagnation arise due to inadequate consumer demand relative to the amount produced An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative The expressions misfeasance and nonfeasance, and occasionally malfeasance, are used in English law with reference to the discharge of public obligations Another theory revolves around the surplus of products and the fact that many Americans were not purchasing but saving. The only consensus viewpoint is that there was a large scale lack of confidence. Unfortunately, once panic and deflation set in, many people believed they could make more money by keeping clear of the markets as prices got lower and lower and a given amount of money bought ever more goods.

Third, there is the Marxist critique of political economy. Marxism is the political philosophy and practice derived from the work of Karl Marx and Friedrich Engels. This emphasizes contradictions within capital itself (which is viewed as a social relation involving the appropriation of surplus value) as giving rise to an inherently unbalanced dynamic of accumulation resulting in an overaccumulation of capital, culminating in periodic crises of devaluation of capital. The origin of crisis is thus located firmly in the sphere of production, though economic crisis can be aggravated by problems of disproportionality between spheres of production and the underconsumption of the masses.

There were multiple causes for the first downturn in 1929, including the structural weaknesses and specific events that turned it into a major depression and the way in which the downturn spread from country to country. In terms of the 1929 small downturn, historians emphasize structural factors like massive bank failures and the stock market crash, while economists (such as Peter Temin and Barry Eichengreen) point to Britain's decision to return to the Gold Standard at pre-World War I parities (US$4. Dr Peter Temin (born 1937 is a widely cited economist and economic historian currently Elisha Gray II Professor of Economics MIT and former head of the Economics Department Barry Eichengreen (born 1952 is an American Economist who holds the title of George C The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold 86:£1).

US industrial production (1928-39).

Debt

Debt is seen as one of the causes of the Great Depression. Debt is that which is owed usually referencing Assets owed but the term can cover other obligations (What follows relates to the USA). The United States of America —commonly referred to as the

Macroeconomists including Ben Bernanke, the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view of the Great Depression originated by Arthur Cecil Pigou and Irving Fisher: in the 1920s, American consumers and businesses relied on cheap credit, the former to purchase consumer goods such as automobiles and furniture and the latter for capital investment to increase production. Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole Ben Shalom Bernanke (born December 13, 1953) is the incumbent Chairman of the Board of Governors of the United States Federal Reserve. Arthur Cecil Pigou ( November 18, 1877 &ndash March 7, 1959) was an English Economist. Irving Fisher ( February 27 1867 Saugerties, New York &ndash April 29 1947, New York was an American economist This fueled strong short-term growth but created consumer and commercial debt. People and businesses who were deeply in debt when price deflation occurred or demand for their product decreased often risked default. Deflation is the opposite of Inflation. Therefore under the usual contemporary definition of inflation 'deflation' means a decrease in the general price level. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged. In the fields of Architecture and Civil engineering, construction is a process that consists of the Building or assembling of Infrastructure

Crowd at New York's American Union Bank during a bank run early in the Great Depression.

Massive layoffs occurred, resulting in unemployment rates of over 25%. (US) Banks which had financed this debt began to fail as debtors defaulted on debt and depositors became worried about their deposits and began massive withdrawals. A bank run (also known as a run on the bank) occurs when a large number of Bank customers withdraw their deposits because they believe the bank is or might Government guarantees and Federal Reserve banking regulations to prevent these types of panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.

The debt became heavier, because prices and incomes fell 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By 1933, depositors had lost $140 billion in deposits. ^[8]

Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. Investment or investing is a term with several closely-related meanings in Business management, Finance and Economics, related to saving In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. ^[8] Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated. A virtuous circle or a vicious circle is a complex of events that reinforces itself through a Feedback loop toward greater instability This kind of self-aggravating process may have turned a 1930 recession into a 1933 great depression.

Trade decline and the U. S. Smoot-Hawley Tariff Act

Main article: Smoot-Hawley Tariff

Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act) was an act signed into law on June 17 1930, that raised U Most historians and economists assign the American Smoot-Hawley Tariff Act (enacted June 17, 1930) part of the blame for worsening the depression by seriously reducing international trade and causing retaliatory tariffs (i. The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act) was an act signed into law on June 17 1930, that raised U Events 1462 - Vlad III the Impaler attempts to assassinate Mehmed II ( The Night Attack) forcing him to retreat Year 1930 ( MCMXXX) was a Common year starting on Wednesday (link will display 1930 calendar of the Gregorian calendar. e. , a tax increase) in other countries. Foreign trade was a small part of overall economic activity in the United States and was concentrated in a few businesses like farming; it was a much larger factor in many other countries. ^[9] The average ad valorem rate of duties on dutiable imports for 1921–1925 was 25. An ad valorem tax ( Latin: according to value) is a Tax based on the value of Real estate or Personal property. 9% but under the new tariff it jumped to 50% in 1931–1935.

In dollar terms, American exports declined from about $5. 2 billion in 1929 to $1. 7 billion in 1933; but prices also fell, so the physical volume of exports only fell in half. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. According to this theory, the collapse of farm exports caused many American farmers to default on their loans leading to the bank runs on small rural banks that characterized the early years of the Great Depression. A bank run (also known as a run on the bank) occurs when a large number of Bank customers withdraw their deposits because they believe the bank is or might

U. S. Federal Reserve and money supply

Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was caused by monetary contraction, which was the consequence of poor policy making by the American Federal Reserve System and continuous crisis in the banking system. Monetarism is a school of economic thought concerning the determination of national income and monetary Economics. Milton Friedman (July 31 1912 November 16 2006 was an American Nobel Laureate Economist and Public intellectual. Ben Shalom Bernanke (born December 13, 1953) is the incumbent Chairman of the Board of Governors of the United States Federal Reserve. Contractionary monetary policy is Monetary policy that seeks to reduce the size of the Money supply. ^[10][11] By not acting, the Federal Reserve allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933. In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time Friedman argued^[12] the downward turn in the economy starting with the stock market crash would have been just another recession. The problem was that some large, public bank failures, particularly the Bank of the United States, produced panic and widespread runs on local banks, and that the Federal Reserve sat idly by while banks fell. The New York Bank of United States was a bank in the Bronx, New York City which was founded in 1913 He claimed if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did and the money supply would not have fallen to the extent and at the speed that it did. A government bond is a bond issued by a national government denominated in the country's own Currency. In Economics, the open market is the term used to refer to the environment in which bonds are bought and sold ^[13] With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch, which was owned and controlled by Wall Street bankers. ^[14]

The Federal Reserve, by design, is not controlled by the President or the U. S. Treasury; it is primarily controlled and owned by its member banks and the chairman of the Federal Reserve. The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States and one of the most ^[15]

One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time the amount of credit that the Federal Reserve could issue was limited due to laws which required partial gold backing of that credit. By the late 1920's the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. Since a "promise of gold" is not as good as "gold in the hand", during the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. Several years into the Great Depression the private ownership of gold was declared illegal and reduced the pressure on Federal Reserve gold.

Austrian School explanations

Another explanation comes from the Austrian School of economics. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates Austrian theorists who wrote about the Depression include Hayek and Murray Rothbard, who wrote "America's Great Depression" in 1963. Austria (Österreich ( officially the Republic of Austria (Republik Österreich Friedrich August von Hayek CH ( May 8, 1899 March 23, 1992) was an Austrian British Economist Murray Newton Rothbard (March 2 1926 – January 7 1995 was an American economist of the Austrian School who helped define modern Libertarianism America's Great Depression is a 1963 Treatise on the 1930s Great Depression and its root causes written by Austrian School economist and author In their view, the key cause of the Depression was the expansion of the money supply in the 1920s that lead to an unsustainable credit driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.

In fact, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929^[16] predicted the economic downturn, stating that "the boom will collapse within the next few months. "

Ludwig von Mises also expected this financial catastrophe, and is quoted as stating "A great crash is coming, and I don't want my name in any way connected with it,"^[17] when he turned down an important job at the Kreditanstalt Bank in early 1929.

One reason for the monetary inflation was to help Great Britain, which, in the 1920s, was struggling with its plans to return to the gold standard at pre-war (World War I) parity. See also Kingdom of Great Britain Great Britain (Breatainn Mhòr Prydain Fawr Breten Veur Graet Breetain is the larger of the two main islands World War I (abbreviated WWI; also known as the First World War, the Great War, and the War to End All Returning to the gold standard at this rate meant that the British economy was facing deflationary pressure. ^[18] According to Rothbard, the lack of price flexibility in Britain meant that unemployment shot up, and the American government was asked to help. The United States was receiving a net inflow of gold and inflated further in order to help Britain return to the gold standard. Montagu Norman, head of the Bank of England, had an especially good relationship with Benjamin Strong, the de facto head of the Federal Reserve. Benjamin Strong Jr (born 1872 Fishkill-on-Hudson New York state - October 1928 was an American Economist. Norman pressured the heads of the central banks of France and Germany to inflate as well, but unlike Strong, they refused. ^[18] Rothbard says American inflation was meant to allow Britain to inflate as well, because under the gold standard, Britain could not inflate on its own.

In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and in capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market’s adjustment and made the road to complete recovery more difficult. ^[19]

Furthermore, Rothbard criticizes Milton Friedman's assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve purchased $1. 1 billion of government securities from February to July 1932 which raised its total holding to $1. 8 billion. Total bank reserves only rose by $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor very much beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and, Rothbard argues, was the cause of the Federal Reserve's inability to inflate. ^[20]

Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas, 1938.

Business

Franklin D. Roosevelt, elected in 1932, primarily blamed the excesses of big business for causing an unstable bubble-like economy. Democrats believed the problem was that business had too much power, and the New Deal was intended as a remedy, by empowering labor unions and farmers and by raising taxes on corporate profits. The New Deal was the name that United States President Franklin D A trade union or labour union is an organization of workers who have banded together to achieve common goals in key areas such as wages hours and working conditions forming Regulation of the economy was a favorite remedy. Some New Deal regulation (the NRA and AAA) was declared unconstitutional by the U.S. Supreme Court. The Supreme Court of the United States is the highest judicial body in the United States and leads the federal judiciary. Most New Deal regulations were abolished or scaled back in the 1970s and 1980s in a bipartisan wave of deregulation. Deregulation, a term which gained widespread currency in the period 1970-2000 can be seen as a process by which governments remove reduce or simplify Restrictions on Business ^[21] However the Securities and Exchange Commission, Federal Reserve, and Social Security won widespread support. The US Securities and Exchange Commission (commonly known as the SEC) is an independent agency of the United States government which holds primary responsibility Social Security, in the United States currently refers to the federal Old-Age Survivors and Disability Insurance ( OASDI) program

Lack of government deficit spending

British economist John Maynard Keynes argued in General Theory of Employment Interest and Money that lower aggregate expenditures in the economy contributed to a massive decline in income and employment that was well below the average. John Maynard Keynes 1st Baron Keynes CB (ˈkeɪnz "cains" (5 June 1883 &ndash 21 April 1946 was a British Economist whose ideas The General Theory of Employment Interest and Money was written by the English economist John Maynard Keynes. In this situation, the economy might have reached a perfect balance, at a cost of high unemployment. Keynesian economists called for governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes. Government spending or government expenditure is classified by economists into three main types

Massive increases in deficit spending, new banking regulation, and boosting farm prices did start turning the U. Deficit spending is the amount by which a government private company or individual's spending exceeds income over a particular period of time also called simply "deficit" Bank regulations are a form of Government Regulation which subject Banks to certain requirements restrictions and guidelines S. economy around in 1933, but it was a slow and painful process. The U. S. had not returned to 1929's GNP for over a decade and still had an unemployment rate of about 15% in 1940—down from 25% in 1932. The unemployment problem was not solved until the post-World War II decontrolling of the command wartime economy in 1946. World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including The advent of World War II, when about 12 million men were forcibly drafted into the army and taken out of the labor market wasn't a true long-term "solution" to massive unemployment in the civilian marketplace, or to create real wealth for the masses with consumer goods. Conscription (also known as the draft, the call-up or national service) is a general term for involuntary labor demanded by some established authority Labour economics seeks to understand the functioning of the Market and dynamics for labour. Multiple war good production programs reduced unemployment technically to under 2% and brought in millions of new workers to the labor markets, although as noted before it was strictly to making war goods (armaments) which only benefitted the war-making sector of the economy. A weapon is a Tool used either in Hunting, or attack or defence in Combat for the purpose of subduing enemy personnel or to destroy enemy weapons

Inequality of wealth and income

Marriner S. Eccles who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Marriner Stoddard Eccles ( September 9, 1890 &ndash December 18, 1977) was a U The Chairman of the Board of Governors of the Federal Reserve System is the head of the central banking system of the United States and one of the most Knopf, 1951)^[22]:

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. [Emphasis in original. ] Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers' loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product -- in other words, had there been less savings by business and the higher-income groups and more income in the lower groups -- we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression.

Literature

The U. S. Depression has been the subject of much writing, as the country has sought to re-evaluate an era that dumped financial as well as emotional catastrophe on its people. Perhaps the most noteworthy and famous novel written on the subject is The Grapes of Wrath, published in 1939 and written by John Steinbeck, who was awarded both the Nobel Prize for literature and the Pulitzer Prize for the work. The Grapes of Wrath is a novel published in 1939 and written by John Steinbeck, who was awarded the Pulitzer Prize and the Nobel Prize for John Steinbeck III (February 27 1902—December 20 1968 was one of the best-known and most widely read American writers of the 20th century The Nobel Prize (Nobelpriset (Nobelprisen is a Swedish prize established in the 1895 will of Swedish chemist Alfred Nobel; it was first awarded in Peace, Literature The Pulitzer Prize, ˈpʊlɨtsɚ PULL-it-sər is an American award regarded as the highest national honor in Newspaper journalism, The novel focuses on a poor family of sharecroppers who are forced from their home as drought, economic hardship, and changes in the agricultural industry occur during the Great Depression. Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture Steinbeck's Of Mice and Men is another important novel about a journey during the Great Depression. Of Mice and Men is a Novella written by Nobel Prize -winning author John Steinbeck. The Great Depression is a novella written by Alon Bersharder about a sad, disgruntled temporary worker, making the title both a homage to the historical event and a pun. Additionally, Harper Lee's To Kill a Mockingbird was set during the Great Depression. To Kill a Mockingbird is a Pulitzer Prize -winning Novel by Harper Lee published in 1960.

Effects

Australia

Main article: Great Depression in Australia

Australia's extreme dependence on agricultural and industrial exports meant it was one of the hardest-hit countries in the Western world, amongst the likes of Canada and Germany. The Great Depression of the 1930s was an economic catastrophe that severely affected most nations of the world and Australia was not immune In Economics, an export is any good or Commodity, Transported from one country to another country in a Legitimate fashion The term Western world, the West or the Occident ( Latin: occidens -sunset -west as distinct from the Orient) can have multiple meanings Country to "Dominion of Canada" or "Canadian Federation" or anything else please read the Talk Page Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. Falling export demand and commodity prices placed massive downward pressures on wages. Further, unemployment reached a record high of almost 32% in 1932, with incidents of civil unrest becoming common. Unemployment occurs when a person is available to work and currently seeking work but the person is without work. Civil disorder, also known as civil unrest, is a broad term that is typically used by law enforcement to describe one or more forms of disturbance caused by a group of people After 1932, an increase in wool and meat prices led to a gradual recovery.

Canada

Unemployed men march in Toronto, Canada.

Main article: Great Depression in Canada

Harshly impacted by both the global economic downturn and the Dust Bowl, Canadian industrial production had fallen to only at 58% of the 1929 level by 1932, the second lowest level in the world after the United States, and well behind nations such as Britain, which only saw it fall to 83% of the 1929 level. Canada was hit hard by the Great Depression. Between 1929 and 1933 the gross national product dropped 40% (compared to 37% in the US The Dust Bowl, or the dirty thirties, was a period of severe Dust storms causing major ecological and agricultural damage to American and Total national income fell to 55% of the 1929 level, again worse than any nation other than the United States.

East Asia

The Great Depression in East Asia was of minor impact. The Japanese economy shrank by 8% 1929-31. However, with the invasion and subjugation of Manchuria into a Japanese puppet-state in September 1931, thus providing Japan with raw materials and energy, the Japanese economy was able to recover by 1932 and continued to grow.

France

Main article: Great Depression in France

The Depression began to affect France from about 1931. The Great Depression affected France from about 1931 through the remainder of the decade France's relatively high degree of self-sufficiency meant the damage was considerably less than nations like Germany. However, hardship and unemployment were high enough to lead to rioting and the rise of the socialist Popular Front. Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the Means of production and distribution The Popular Front (French Front populaire) was an alliance of left-wing movements including the French Communist Party (PCF the Socialist

Germany

Main article: Great Depression in Central Europe

Germany's Weimar Republic was hit hard by the depression, as American loans to help rebuild the German economy now stopped. The effects of the Great Depression were profound throughout Europe, though the greatest impact was on Germany, Austria and Poland, where one The term Weimar Republic ( ˈvaɪmarɐ repuˈbliːk is used by historians to signify the democratic and Republican period of Germany from 1919 to 1933 Unemployment soared, especially in larger cities, and the political system veered toward extremism. A political system is a System of Politics and Government. It is usually compared to the Law system, Economic system, Cultural Extremism is a term used to describe the actions or ideologies of individuals or groups outside the perceived political center of a society or otherwise claimed to violate Repayment of the war reparations due by Germany were suspended in 1932 following the Lausanne Conference of 1932. The Lausanne Conference was a 1932 meeting of representatives from Great Britain, Germany, and France that resulted in an agreement to suspend World By that time Germany had repaid 1/8th of the reparations. Hitler's Nazi Party came to power in January 1933. Hi and welcome to Wikipedia! Please understand that this article is frequently vandalized and vandalism is reverted immediately The, officially National Socialist German Workers' Party, ( abbreviated NSDAP) was a Political party in Germany between 1919 and 1945 In 1934 the economy was still not balanced enough for Germany to work on its own.

Latin America

Main article: Great Depression in Latin America

Because of high levels of United States investment in Latin American economies, they were severely damaged by the Depression. The Great Depression which followed the US stock market crash of 1929 impacted heavily on the countries of Latin America. Within the region, Chile, Bolivia and Peru were particularly badly affected. Chile, officially the Republic of Chile ( Spanish:) is a country in South America occupying a long and narrow Coastal strip wedged between the The Republic of Bolivia (República de Bolivia) named after Simón Bolívar, is a Landlocked country in central South America. Peru (Perú Piruw Piruw officially the Republic of Peru ( reˈpuβlika del peˈɾu is a country in western South America. One result of the Depression in this area was the rise of fascist movements. Fascism is a totalitarian nationalist and corporatist ideology

Netherlands

Main article: Great Depression in the Netherlands

From roughly 1931 until 1937, the Netherlands suffered a deep and exceptionally long depression. The Great Depression was a period of severe Economic crisis in the 1930s which affected countries around the world including The Netherlands (Dutch De Grote Depressie This depression was partly caused by the after-effects of the Stock Market Crash of 1929 in the United States, and partly by internal factors in the Netherlands. The Wall Street Crash of 1929, also known as the ’29 Crash, the Crash of 1929, the Great Crash of 1929, the Great Crash of October 1929 Government policy, especially the very late dropping of the Gold Standard, played a role in prolonging the depression. The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold The Great Depression in the Netherlands led to some political instability and riots, and can be linked to the rise of the Dutch national-socialistic party NSB. The National Socialist Movement in the Netherlands (Nationaal-Socialistische Beweging in Nederland NSB was a Dutch Fascist and later national socialist The depression in the Netherlands lessened somewhat in force at the end of 1936, when the government finally dropped the Gold Standard, but real economic stability did not return until after World War II. The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including

South Africa

Main article: Great Depression in South Africa

Soviet Union

Main article: Economy of the Soviet Union#Economic development

Having removed itself from the capitalist world system both by choice and as a result of efforts of the capitalist powers to isolate it, the Great Depression had little effect on the Soviet Union. The Great Depression had a pronounced economic and political effect on South Africa, as it did to most nations at the time The economy of the Soviet Union was based on a system of State ownership, administrative planning Socialist competition and free labour This was a period of industrial expansion for the Soviet Union as it recovered from Revolution and Civil War, and the apparent immunity of the Soviet Union to the Great Depression seemed to validate the theory of Marxism and contributed to Socialist and Communist agitation in affected nations. Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the Means of production and distribution Communism is a Socioeconomic structure that promotes the establishment of an egalitarian, classless, stateless Society based This in turn increased fears of Communist revolution in the West, strengthening support for anti-Communists, both moderate and extreme. The term Western world, the West or the Occident ( Latin: occidens -sunset -west as distinct from the Orient) can have multiple meanings Anti-communism refers to opposition to Communism. Historically the word "communism" has been used to refer to several types of communal social organization and

United Kingdom

Main article: Great Depression in the United Kingdom

United States

Main article: Great Depression in the United States

Early response

Secretary of the Treasury Andrew Mellon advised President Hoover that shock treatment would be the best response: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. This article deals with the effects of the Great Depression of the 1930s - also known as the Great Slump - on the United Kingdom. The Great Depression in the United States began on "Black Tuesday" with the Wall Street crash of October 1929 and rapidly spread The United States Secretary of the Treasury is the head of the United States Department of the Treasury, concerned with finance and monetary matters, and until Andrew William Mellon ( March 24 1855 &mdash August 27 1937) was an American banker industrialist philanthropist art collector Herbert Clark Hoover (August 10 1874 &ndash October 20 1964 was the thirty-first President of the United States (1929–1933 In Economics, shock therapy refers to the sudden release of price and currency controls withdrawal of state subsidies and immediate trade liberalization within a country usually Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom . . . That will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people. "^[23] Hoover rejected this advice, not believing government should directly aid the people, but insisted instead on "voluntary cooperation" between business and government.

The New Deal

Main article: New Deal

Shortly after President Roosevelt was inaugurated in 1933, drought and erosion combined to cause the Dust Bowl, shifting hundreds of thousands of displaced persons off of their farms in the midwest. The New Deal was the name that United States President Franklin D The Dust Bowl, or the dirty thirties, was a period of severe Dust storms causing major ecological and agricultural damage to American and A displaced person (sometimes abbreviated DP) is a person who has been forced to leave his or her native place a phenomenon known as Forced migration. From his inauguration onward, Roosevelt argued a restructuring of the economy would be needed to prevent another or avoid prolonging the current depression. New Deal programs sought to stimulate demand and provide work and relief for the impoverished through increased government spending, by:

• Reforming the financial system, especially the banks and Wall Street. Supply and demand is an Economic model describing effects on price and quantity in a Market. Wall Street is a street in lower Manhattan, New York City, United States. The Securities Act of 1933 comprehensively regulated the securities industry. Congress enacted the Securities Act of 1933 (the "1933 Act" the "Truth in Securities Act" or the "Federal Securities Act", enacted 1933-05-27 This was followed by the Securities Exchange Act of 1934 which created the Securities and Exchange Commission. The Securities Exchange Act of 1934 is a law governing the secondary trading of securities ( Stocks bonds, and Debentures. The US Securities and Exchange Commission (commonly known as the SEC) is an independent agency of the United States government which holds primary responsibility (Though amended, the key provisions of both Acts are still in force as of 2008). Federal insurance of bank deposits was provided by the FDIC (still operating as of 2008), and the Glass-Steagal Act (which remained in effect for 50 years). A deposit account is a current account at a Banking institution that allows money to be deposited and withdrawn by the account holder with the transactions and resulting balance The Federal Deposit Insurance Corporation ( FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933 The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC in the United States and included banking reforms some of which The institution of the National Recovery Administration remains a controversial act to this day. National Recovery Administration (NRA created in the United States of America under the 1933 National Industrial Recovery Act, was one of the New Deal Although it only lasted until 1935, it made a number of sweeping changes to the American economy until it was declared unconstitutional by the Supreme Court. The Supreme Court of the United States is the highest judicial body in the United States and leads the federal judiciary.

• Instituting regulations which ended what was called "cut-throat competition," which kept forcing down prices for everyone (done by the NRA). National Recovery Administration (NRA created in the United States of America under the 1933 National Industrial Recovery Act, was one of the New Deal
• Setting minimum prices and wages and competitive conditions in all industries (done by the NRA). A minimum wage is the lowest hourly daily or monthly Wage that employers may legally pay to employees or workers
• Encouraging unions that would raise wages, to increase the purchasing power of the working class (done by the NRA). Purchasing power is the amount of value of a good/services compared to the amount paid with a Currency. Working class is a term used in academic Sociology and in ordinary conversation to describe depending on context and speaker those employed in specific fields or types
• Cutting farm production so as to raise prices and make it possible to earn a living in farming (done by the AAA and successor farm programs). The Agricultural Adjustment Act ( enacted May 12, 1933) restricted production during the New Deal by paying farmers to reduce crop area
• Forcing businesses to work with government to set price codes (done by the NRA).
• Creating the NRA board to set labor codes and standards (done by the NRA).

These reforms (together with relief and recovery measures) are called by historians the First New Deal. The New Deal was the name that United States President Franklin D It was centered around the use of an alphabet soup of agencies set up in 1933 and 1934, along with the use of previous agencies such as the Reconstruction Finance Corporation, to highly regulate and stimulate the economy but the two concepts were incompatible, as the economy continued to stagnate. An alphabet soup is a metaphor for an abundance of Abbreviations or Acronyms named for a common dish made from Alphabet pasta. The Reconstruction Finance Corporation ( RFC) was an independent agency of the United States government chartered during the administration of Herbert Hoover By 1935, the "Second New Deal" added Social Security, a national relief agency (the Works Progress Administration, WPA) and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. The New Deal was the name that United States President Franklin D Social Security, in the United States currently refers to the federal Old-Age Survivors and Disability Insurance ( OASDI) program An aid agency is an organisation dedicated to distributing Aid. The Works Progress Administration (renamed in 1939 the Work Projects Administration; WPA) was the largest New Deal agency employing millions of people The National Labor Relations Board (or NLRB) is an Independent agency of the United States Government charged with conducting Unemployment fell by two-thirds in Roosevelt's first term (from 25% to 14. 3%, 1933 to 1937), but faster than the economic upturn came 1938's "recession within a depression" and unemployment zoomed to 19% and only until the draft to fight World War II, and then post-war 1946's vast decontrol of the (wartime) command economy that included a sharp reduction of taxes and regulations finally allowed consumer goods to be created, and unemployment finally fell to normal levels. Conscription (also known as the draft, the call-up or national service) is a general term for involuntary labor demanded by some established authority World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including

In 1929, federal expenditures constituted only 3% of the GDP. Between 1933 and 1939, they tripled, funded primarily by a growth in the national debt. The debt as proportion of GNP rose under Hoover from 20% to 40%. Roosevelt kept it at 40% until the war began, when it soared to 128%. After the Recession of 1937, conservatives were able to form a bipartisan conservative coalition to stop further expansion of the New Deal and, by 1943, had abolished all of the relief programs. The Recession of 1937 was a sharp economic downturn in the United States in 1937-38 The Conservative coalition, in the United States of America, was an unofficial Congressional coalition in American politics bringing together the conservative

Recession of 1937

Main article: Recession of 1937

In 1937, the American economy took an unexpected nosedive, lasting through most of 1938. The Recession of 1937 was a sharp economic downturn in the United States in 1937-38 Production declined sharply, as did profits and employment. Unemployment jumped from 14. 3% in 1937 to 19. 0% in 1938. The Roosevelt administration reacted by launching a rhetorical campaign against monopoly power, which was cast as the cause of the depression, and appointing Thurman Arnold to act; Arnold's effectiveness ended once World War II began and corporate energies had to be directed to winning the war. In Economics, a monopoly (from Greek monos, alone or single + polein, to sell exists when a specific individual or enterprise has sufficient Thurman Wesley Arnold ( June 2, 1891 – November 7, 1969) was an iconoclastic Washington D World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including

The administration's other response to the 1937 deepening of the Great Depression had more tangible results. Ignoring the pleas of the Treasury Department, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. The United States Department of the Treasury is a Cabinet department and the Treasury of the United States government. Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued the New Deal had been very hostile to business expansion in 1935–37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive antitrust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth. Tax policy is the government's approach to Taxation, both from the practical and normative side of the question

On the other hand, according to economist Robert Higgs, when looking only at the supply of consumer goods, significant GDP growth resumed only in 1946 (Higgs does not estimate the value to consumers of collective, intangible goods like victory in war). Robert Higgs (born 1 February 1944) is an American economist of the Austrian School. Economic growth is the increase in the amount of the goods and services produced by an economy over time To Keynesians, the war economy showed just how large the fiscal stimulus required to end the downturn of the Depression was, and it led, at the time, to fears that as soon as America demobilized, it would return to Depression conditions and industrial output would fall to its pre-war levels. War economy is the term used to describe the contingencies undertaken by the modern State to mobilise its Economy for War production. That incorrect Keynesian prediction that a new depression would start after the war failed to take into account massive savings and pent-up consumer demand along with the decontrolling of the restrictive wartime regulations in most consumer industries and cutting the high-tax rates starting in 1946.

Keynesian models

In the early 1930s, before John Maynard Keynes wrote The General Theory, he was advocating public works programs and deficits as a way to get the British economy out of the Depression. John Maynard Keynes 1st Baron Keynes CB (ˈkeɪnz "cains" (5 June 1883 &ndash 21 April 1946 was a British Economist whose ideas The General Theory of Employment Interest and Money was written by the English economist John Maynard Keynes. Public works are the construction or engineering projects carried out by the State on behalf of the Community. Although Keynes never mentions fiscal policy in The General Theory, and instead advocates the need to socialize investments, Keynes ushered in more of a theoretical revolution than a policy one. His basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing because the private sector will not invest enough to increase production and reverse the recession.

As the Depression wore on, Roosevelt tried public works, farm subsidies, and other devices to restart the economy, but never completely gave up trying to balance the budget. An agricultural subsidy is a governmental Subsidy paid to Farmers and Agribusinesses to supplement their income manage the supply of agricultural According to the Keynesians, he had to spend much more money; they were unable to say how much more. With fiscal policy, however, government could provide the needed Keynesian spending by decreasing taxes, increasing government spending, increasing individuals' incomes. Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes As incomes increased, they would spend more. As they spent more, the multiplier effect would take over and expand the effect on the initial spending. In economics the multiplier effect refers to the idea that an initial spending rise can lead to an even greater increase in National income. The Keynesians did not estimate what the size of the multiplier was. Keynesian economists assumed poor people would spend new incomes; in reality they saved much of the new money; that is, they paid back debts owed to landlords, grocers and family. Nouveau riche ( French for "new rich" or new money, refers to a person who has acquired considerable Wealth within his or her Keynesian ideas of the consumption function have been challenged, most notably in the 1950s by Milton Friedman and Franco Modigliani. In Economics, the consumption function is a single mathematical function used to express consumer spending Milton Friedman (July 31 1912 November 16 2006 was an American Nobel Laureate Economist and Public intellectual. Franco Modigliani ( Rome, June 18, 1918 – September 25, 2003) was an Italian-American Economist at the

Neoclassical approach

Recent work from a neoclassical perspective focuses on the decline in productivity that caused the initial decline in output and a prolonged recovery due to policies that affected the labor market. This work, collected by Kehoe and Prescott,^[24] decomposes the economic decline into a decline in the labor force, capital stock, and the productivity with which these inputs are used. This study suggests that theories of the Great Depression have to explain an initial severe decline but rapid recovery in productivity, relatively little change in the capital stock, and a prolonged depression in the labor force. This analysis rejects theories that focus on the role of savings and posit a decline in the capital stock.

Gold standard

Great Britain departed from the gold standard in September 1931, allowing the pound sterling to float internationally. See also Kingdom of Great Britain Great Britain (Breatainn Mhòr Prydain Fawr Breten Veur Graet Breetain is the larger of the two main islands The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold The Pound Sterling ( symbol £; ISO code: GBP) subdivided into 100 pence (singular penny) is the Currency The value of the pound then dropped significantly and British exports became cheaper. In April 1933, Roosevelt issued Executive Order 6102 prohibiting citizens of the U. Executive Order 6102 is an Executive Order signed on April 5, 1933 by U S. from owning other-than-token amounts of gold and from using gold as money. Throughout history various Metals some of which are considered precious today appear to have been used as a form of currency Citizens were forced to sell all gold holdings (apart from jewelry and "coins of special collector value") to the federal government at a price of $20. 67 per ounce. In January 1934, Roosevelt raised the official price of gold to $35 per ounce, thereby devaluing the U.S. dollar by 41%. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been

Private gold reserves held outside the country (for instance in Swiss banks) were largely undetected and thus unaffected. Rich people who knew or suspected the move was coming or simply did not trust FDR's government therefore made large profits.

Rearmament and recovery

The massive rearmament policies to counter the threat from Nazi Germany helped stimulate the economies in Europe in 1937-39. Nazi Germany and the Third Reich are the common English names for Germany under the regime of Adolf Hitler and the National Socialist German Workers By 1937, unemployment in Britain had fallen to 1. 5 million. The mobilization of manpower following the outbreak of war in 1939 finally ended unemployment.

In the United States, the massive war spending doubled the GNP, masking the effects of the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts. Government debt (also known as public debt or national debt) is Money (or credit) owed by any level of government either Central government Most people worked overtime and gave up leisure activities to make money after so many hard years. Overtime is the amount of time someone works beyond normal working hours. People accepted rationing and price controls for the first time as a way of expressing their support for the war effort. Rationing is the controlled distribution of resources and scarce goods or services Incomes policies in Economics are Wage and Price controls, most commonly instituted as a response to Inflation. In Politics and Military planning, a war effort refers to a coordinated Mobilization of society's resources&mdashboth industrial and Cost-plus pricing in munitions contracts guaranteed businesses a profit no matter how many mediocre workers they employed or how inefficient the techniques they used. Cost-plus pricing is a Pricing method used by companies It is used primarily because it is easy to calculate and requires little information The demand was for a vast quantity of war supplies as soon as possible, regardless of cost. Businesses hired every person in sight, even driving sound trucks up and down city streets begging people to apply for jobs. New workers were needed to replace the 11 million working-age men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state. Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the Means of production and distribution However, spending on the New Deal was far smaller than on the war effort.

Political consequences

The crisis had many political consequences, among which was the abandonment of classic economic liberal approaches, which Roosevelt replaced in the United States with Keynesian policies. Economic liberalism is the Economic component of Classical liberalism. It was a main factor in the implementation of social democracy and planned economies in European countries after the war. Social democracy is a Political ideology of the left and centre-left A planned economy or directed economy is an Economic system in which the Government or Workers' councils manages the Economy. The Marshall Plan (from its enactment officially the European Recovery Program, ERP) was the primary plan of the United States for rebuilding and creating a stronger Although Austrian economists had challenged Keynesianism since the 1920s, it was not until 1974, when the Nobel Prize in Economic Sciences was awarded to Friedrich Hayek notably for being "one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929" [1], and the beginning of monetarism, that the Keynesian approach was politically questioned, leading the way to neoliberalism. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates The Nobel Memorial Prize in Economic Sciences, officially named The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Sveriges riksbanks pris i ekonomisk Friedrich August von Hayek CH ( May 8, 1899 March 23, 1992) was an Austrian British Economist Monetarism is a school of economic thought concerning the determination of national income and monetary Economics. Originally coined by its critics and opponents " neoliberalism " is a label referring to the recent reemergence of Economic liberalism or Classical liberalism

Other Great Depressions

The Great Depression was not unique in magnitude or duration. Several Latin American countries faced similar events in the 1980s. Finnish economists refer to the Finnish economic decline around the breakup of the Soviet Union (1989-1994) as a great depression. Finland has a highly industrialized free-market economy with a Per capita output equal to that of other western economies such as France, Germany, Sweden Kehoe and Prescott define a great depression to be a period of diminished economic output with at least one year where output is 20% below the trend. By this definition Argentina, Brazil, Chile, and Mexico experienced great depressions in the 1980s, and Argentina experienced another in 1998-2002. Argentina benefits from rich Natural resources, a highly literate population an export-oriented Agricultural sector and a diversified industrial base The economic history of Brazil covers various economic events and traces the changes in the Brazilian economy over the course of the History of Brazil. Chile has a dynamic market-oriented economy characterized by a high level of foreign trade Pre-Spanish age Spanish age Economic history of Spain Independence The Mexican War of Independence (1810-21 left a legacy of This definition also includes the economic performance of New Zealand from 1974-1992 and Switzerland from 1973-present, although this designation for Switzerland has been controversial. The Economy of New Zealand is a Market economy which is greatly dependent on international trade mainly with Australia, the United States, History As an effect of the industrial revolution which began in England at the beginning of the 19th century ^[25][26]

See also

Notes

References

Further reading

External links

• Great Depressions of the Twentieth Century, edited by T. J. Kehoe and E. C. Prescott
• Theories of the Great Depression, R. L. Norman, Jr.
• America in the 1930s. Very large multi-mediated project on America in the Great Depression
• Recession? Depression? What's the difference? (About.com)
• An Overview of the Great Depression from EH. NET by Randall Parker.
• Great Myths of the Great Depression by Lawrence Reed
• Franklin D. Roosevelt Library & Museum for copyright-free photos of the period
• Economic Depressions: Their Cause and Cure by Murray Rothbard (1969)
• The Impact of the Great Depression in NI, on the Second World War online resource for NI
• Great Depression in the Deep South