Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%. By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.[3] Some economies started to recover by the mid-1930s. However, in many countries, the negative effects of the Great Depression lasted until the beginning of World War II.[4] Devastating effects were seen in both rich and poor countries with falling personal income, prices, tax revenues, and profits. International trade fell by more than 50%, unemployment in the U.S. rose to 23% and in some countries rose as high as 33%.[5]
1930 s jobs
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After the Wall Street Crash of 1929, where the Dow Jones Industrial Average dropped from 381 to 198 over the course of two months, optimism persisted for some time. The stock market rose in early 1930, with the Dow returning to 294 (pre-depression levels) in April 1930, before steadily declining for years, to a low of 41 in 1932.[11]
At the beginning, governments and businesses spent more in the first half of 1930 than in the corresponding period of the previous year. On the other hand, consumers, many of whom suffered severe losses in the stock market the previous year, cut expenditures by 10%. In addition, beginning in the mid-1930s, a severe drought ravaged the agricultural heartland of the U.S.[12]
Interest rates dropped to low levels by mid-1930, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment remained low.[13] By May 1930, automobile sales declined to below the levels of 1928. Prices, in general, began to decline, although wages held steady in 1930. Then a deflationary spiral started in 1931. Farmers faced a worse outlook; declining crop prices and a Great Plains drought crippled their economic outlook. At its peak, the Great Depression saw nearly 10% of all Great Plains farms change hands despite federal assistance.[14]
Because the Great Depression began in the United States and then spread around the world, the origins of the Great Depression are examined in the context of the United States economy. In the aftermath of World War I, the Roaring Twenties had brought considerable wealth to the United States and Western Europe.[18] The year 1929 dawned with considerable economic progress in the American economy. A small stock crash occurred on March 25, 1929, but the crash was stabilized. Despite signs of economic trouble, the market continued to improve through September. Stock prices began to slump in September, and were volatile at the end of September.[19] A large sell-off of stocks began in mid-October. Finally, on October 24, Black Thursday, the American stock market crashed 11% at the opening bell. Actions to stabilize the market failed, and on October 28, Black Monday, the market crashed another 12%. The panic peaked the next day on Black Tuesday, when the market saw another 11% drop.[20][21] Thousands of investors were ruined, and billions of dollars had been lost; many stocks could not be sold at any price.[21] The market recovered 12% on Wednesday, but the damage had been done. Though the market recovered from November 14, until April 17, 1930, the market entered a prolonged slump. From April 17, 1930, until July 8, 1932, the market lost 89% of its value.[22]
Despite the crash, the worst of the crisis did not reverberate around the world until after 1929. The crisis hit panic levels again in December 1930, with a bank run on the Bank of United States (privately run, no relation to the government). Unable to pay out to all of its creditors, the bank failed.[23][24] Among the 608 American banks that closed in November and December 1930, the Bank of United States accounted for a third of the total $550 million deposits lost and, with its closure, bank failures reached a critical mass.[25]
Women's primary role was as housewives; without a steady flow of family income, their work became much harder in dealing with food and clothing and medical care. Birthrates fell everywhere, as children were postponed until families could financially support them. The average birthrate for 14 major countries fell 12% from 19.3 births per thousand population in 1930, to 17.0 in 1935.[57] In Canada, half of Roman Catholic women defied Church teachings and used contraception to postpone births.[58]
Among the few women in the labor force, layoffs were less common in the white-collar jobs and they were typically found in light manufacturing work. However, there was a widespread demand to limit families to one paid job, so that wives might lose employment if their husband was employed.[59][60][61] Across Britain, there was a tendency for married women to join the labor force, competing for part-time jobs especially.[62][63]
In France, very slow population growth, especially in comparison to Germany continued to be a serious issue in the 1930s. Support for increasing welfare programs during the depression included a focus on women in the family. The Conseil Supérieur de la Natalité campaigned for provisions enacted in the Code de la Famille (1939) that increased state assistance to families with children and required employers to protect the jobs of fathers, even if they were immigrants.[64]
The liquidation of debt could not keep up with the fall of prices that it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed.[94] This self-aggravating process turned a 1930 recession into a 1933 great depression.
I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You've just got to let it cure itself. You can't do anything about it. You will only make it worse. ... I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.[107]
Ludwig von Mises wrote in the 1930s: "Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth, i.e. the accumulation of savings made available for productive investment. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later, it must become apparent that this economic situation is built on sand."[116][117]
The League of Nations labeled Chile the country hardest hit by the Great Depression because 80% of government revenue came from exports of copper and nitrates, which were in low demand. Chile initially felt the impact of the Great Depression in 1930, when GDP dropped 14%, mining income declined 27%, and export earnings fell 28%. By 1932, GDP had shrunk to less than half of what it had been in 1929, exacting a terrible toll in unemployment and business failures.
The German political landscape was dramatically altered, leading to Adolf Hitler's rise to power. The Nazi Party rose from being peripheral to winning 18.3% of the vote in the September 1930 election and the Communist Party also made gains, while moderate forces like the Social Democratic Party, the Democratic Party and the People's Party lost seats. The next two years were marked by increased street violence between Nazis and Communists, while governments under President Paul von Hindenburg increasingly relied on rule by decree, bypassing the Reichstag.[144] Hitler ran for the Presidency in 1932, and while he lost to the incumbent Hindenburg in the election, it marked a point during which both Nazi Party and the Communist parties rose in the years following the crash to altogether possess a Reichstag majority following the general election in July 1932.[143][145] Although the Nazis lost seats in November 1932 election, they remained the largest party, and Hitler was appointed as Chancellor the following January. The government formation deal was designed to give Hitler's conservative coalition partners many checks on his power, but over the next few months, the Nazis manoeuvred to consolidate a single-party dictatorship.[146]
Icelandic post-World War I prosperity came to an end with the outbreak of the Great Depression. The Depression hit Iceland hard as the value of exports plummeted. The total value of Icelandic exports fell from 74 million kronur in 1929 to 48 million in 1932, and was not to rise again to the pre-1930 level until after 1939.[150] 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".[150] Due to the outbreak of the Spanish Civil War, which cut Iceland's exports of saltfish by half, the Depression lasted in Iceland until the outbreak of World War II (when prices for fish exports soared).[150]
The deficit spending had a transformative effect on Japan. Japan's industrial production doubled during the 1930s. Further, in 1929 the list of the largest firms in Japan was dominated by light industries, especially textile companies (many of Japan's automakers, such as Toyota, have their roots in the textile industry). By 1940 light industry had been displaced by heavy industry as the largest firms inside the Japanese economy.[162]
New Zealand was especially vulnerable to worldwide depression, as it relied almost entirely on agricultural exports to the United Kingdom for its economy. The drop in exports led to a lack of disposable income from the farmers, who were the mainstay of the local economy. Jobs disappeared and wages plummeted, leaving people desperate and charities unable to cope. Work relief schemes were the only government support available to the unemployed, the rate of which by the early 1930s was officially around 15%, but unofficially nearly twice that level (official figures excluded Māori and women). In 1932, riots occurred among the unemployed in three of the country's main cities (Auckland, Dunedin, and Wellington). Many were arrested or injured through the tough official handling of these riots by police and volunteer "special constables".[166] 2ff7e9595c
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