The Great Depression was a severe worldwide economic depression that began in the United States in the 1930s. The global gross domestic product (GDP) decreased by an estimated 15% between 1929 and 1932. During the Great Recession, global GDP decreased by less than 1% from 2008 to 2009.
Causes of the Great Depression
There is no single explanation for the Great Depression, but a number of factors contributed to the crisis, including:
- Stock market crash of 1929: The stock market crash of 1929 was a major trigger of the Great Depression. The crash wiped out millions of dollars in wealth and caused widespread panic and loss of confidence in the financial system.
- Bank failures: The stock market crash led to a wave of bank failures, which further eroded public confidence and made it difficult for businesses to obtain credit.
- High unemployment: The Great Depression caused widespread unemployment, reaching nearly 25% at its peak in the United States. The high unemployment rate reduced consumer demand and made it difficult for businesses to stay afloat.
- Deflation: The Great Depression was also characterized by deflation, or a general decline in prices. Deflation made it more difficult for businesses to repay their debts and further reduced consumer demand.
- International trade: The Great Depression also led to a decline in international trade, as countries imposed tariffs and other restrictions on trade in an attempt to protect their own economies. The decline in international trade further reduced economic activity and exacerbated the Great Depression.