The great depression or also known as the Crisis of 29, occurred before between the First and Second World War. After the First World War, all the countries involved tried to recover as soon as possible. In Europe there were many difficulties, while in the United States a new era of prosperity for capitalism occurred, during much of the 1920s.
US government policy was based on the belief that if private businesses were encouraged, prosperity would reach all strata of the population . Consequently, he created the most favorable conditions for the development of the industry, in general. The laws from 1922 to 1930 overprotected North American manufacturers from foreign competition, creating a monopoly in the domestic market. At the same time, they radically reduced or completely abolished taxes, in order to get the wealthy to invest in new industrial enterprises .
Throughout the 1920s private business was substantially stimulated. Large loans were granted for construction; juicy transportation contracts were approved; and other indirect subsidies were given . Thus, for example, the Merchant Navy, which had been partly owned by the government between 1917 and 1920, had become the property of private entrepreneurs.
Industry and finance followed a growing rate of prosperity . The specter of war was largely overcome. Now it was produced in series, through a new organization of work; it was sold in large quantities, encouraged by aggressive commercial advertising. Riches accumulated rapidly in few hands, while the majority remained marginalized from these benefits.
1. Causes of the Great Depression.
This apparent industrial prosperity, suddenly, collapsed resoundingly, in 1929, beginning an acute crisis like never before suffered. The causes of this crisis could be summarized in the following:
a. The industrial overproduction, favored, in addition, by the great innovations of the technique , broke the balance between supply and demand. At first, the greatest production was consumed by the working masses, who saw their wages increase, thus growing rapidly the market. Wages did not rise as quickly as prices, reducing the number of people who could buy the products. The result was the closure of many industries and the decrease in wages.
b. At the same time, agriculture suffered a notable setback . The period between 1900 and 1920, had been a period of prosperity and the prices of products were increasing. Demand gave a big boost to production. But the end of the war caused the closure of the foreign market and the State did not stimulate it properly.
2. The Great Depression:Crisis of 29
The lack of planning and the economic imbalance that took on alarming characteristics in 1929, became evident in the so-called “Black Friday” , October 24, 1929, on the New York Stock Exchange , in which more than 12 million shares nobody wanted to buy, as a consequence, the prices collapsed. The intervention of the most powerful banks failed to stop the decline and on Tuesday the 29th the greatest disaster that the New York stock market has ever known took place Thus, 33 million heavily discounted shares are being offered. Discontent and panic spread. The crisis lasted from September 1929 to January 1933; in which period the shares and public debt securities fell 5 or 6 times their nominal value. In the life of the American nation, except for the long-forgotten depression of the 1870s, nothing comparable had occurred.
What followed was the rise in the cost of living, the decline in production, the elimination of numerous financial firms, the failure of 5,096 banks, the reduction of credit, the unemployment of 13 million in 1933, the strikes and hunger . There was a need to put aside the doctrine of economic liberalism and for the State to lead the solution to the crisis.
3. New economic policy
Herbert Hoover, who was unlucky enough to reach the White House eight months before the stock market crash, futilely fought for industrial revival, but was held back by a traditional concept of the proper role of the federal government, unable to take action. radicals. In 1932, the American people elected Democrat Franklin Delano Roosevelt with 22,800,000 votes against Hoover's 15,700,000, thus replacing the Republicans , who had ruled uninterruptedly for nearly 80 years. Roosevelt ruled for 4 terms.
The new president proclaimed the so-called “New Deal” policy , putting into action complex reforms, which he did nothing but introduce in the United States, some types of reforms that were familiar to the English, Germans and Scandinavians, for more than a generation. The New Policy abandoned the policy of laissez faire and was innovative in the speed with which it carried out what had been the work of generations elsewhere .
The New Policy allowed, with astonishing speed, the banks to open their doors again and a policy of moderate monetary inflation was adopted, in order to induce a rise in the prices of ordinary consumer items, so that debtors had some relief . New government offices made it possible for industrialists and farmers to easily enjoy generous credit. He intervened in agricultural production, stimulating works of great encouragement to give activity to the Tennessee Valley, which became a complete laboratory for social and economic experimentation. He spent millions of dollars on helping the unemployed, on public works, and on conserving the nation's resources. It organized the economically active population. In short, as a result of these and other reforms, confidence was reborn and a new impulse was presented with the feverish rearmament of 1938, which was the prelude to the Second World War.
4. Impact of the Great Depression on Europe
The great depression or economic crisis of 1929, which originated in the United States, had repercussions throughout the world, to a greater or lesser extent, except in the Soviet Union. It was felt in 1930, 1931 and 1932.
It particularly shocked England, France and Germany.
4.1 Effects of the Great Depression in England.
At the end of the First World War, which deprived him of world leadership, he had contracted a foreign debt and his industrial structure was outdated . The export trade had been reduced to 50 percent. Most of its industries were in difficulty. Only the electrical and chemical industries received a considerable boom. The government, by trying to maintain monetary stability, led to unemployment, unemployment and the great depression or crisis of 1929.
The solution was faced by suppressing the currency convertibility into gold, the official reduction of discounts, the reduction of remunerations, the increase of taxes, the performance of public works , state intervention in the import and price of agricultural products and imports were levied with higher taxes. With all these measures, however, the trade did not reach the level of what was registered before in 1913.
4.2 The Economic Crisis in France.
At the end of the war, France, having suffered heavy industrial losses, was given back Alsace and Lorraine , where he implanted textile and metallurgical factories, and exploited deposits of potash and iron, achieving, in the following eight years, his industrial reconstruction. Trade in 1925, reached the third place among the exporting countries of the world. Alongside these positive aspects, there are also unfavorable balances, such as the drop in agricultural production and the devaluation of the franc by 80 percent , because the Germans did not comply with the war reparations they had contracted, the arms policy, and the payment of pensions to ex-combatants and compensation to the heirs of the victims of the war.
The great depression or crisis of 1929 loomed over this painful situation, causing economic, social and political unrest from which it was slow to recover. In 1936 the Popular Front was formed, headed by the socialist leader León Blum . The new government tried to alleviate the economy by resorting to the following measures:devaluation of the franc, increased wages and salaries, establishment of the 8-hour workday and nationalization of the railways. Despite these measures, recovery was slow due to the backwardness of its industrial equipment. The causes of this slow recovery were the backwardness of its industrial equipment, low productivity and lack of rationalization of the production process . Only on the eve of the Second World War was industrial activity revived by the fever of armaments.
4.3 The Economic Crisis in Germany.
At the end of the war, Germany had two major problems:the drop in iron and coal production and the dismal state of its public finances , which made it impossible to pay compensation to the victorious countries. The series of actions it undertook to address these difficulties did not yield satisfactory results.
The great depression or crisis of 1929 catastrophically shook the economy of Germany, a circumstance that, in 1933, served for the Nazi Party to capture power with the support of the upper bourgeoisie and the landed aristocracy .
The new government organized the economy vertically and applied two four-year plans. Its objective was to solve unemployment, for which it undertook great public works; started the rearmament; undertook the manufacture of synthetic products; prices were frozen and new markets were sought. The result was the considerable increase in its industrial production; but the living conditions of the people did not improve. However, Germany had a powerful war machine.