Effects of the Great Depression

What was the Great Depression?

The 'Great Depression' was a period in History when business was weak and many people were out of work. The Great Depression began in October 29 1929, when the stock market in the United States crashed. It quickly turned into a worldwide economic slump owing to the special and close relationships that had been forged between the United States and European economies after World War I. It was the industrialized Western world’s longest and most severe depression ever experienced. It ended with the arrival of the War Economy of World War II beginning in 1939.

Effects of the Great Depression

The Depression became a worldwide business downturn of the 1930's that affected almost all countries. International commerce declined quickly. There was a sharp reduction in tax revenues, profits and personal incomes. It affected both countries that exported raw materials and industrialized countries. It led to a sharp decrease in world trade as each country tried to protect their own industries and products by raising tariffs on imports. Governments reduced their spending, which led to decreased consumer demand. Construction came to a standstill in many nations. Some nations changed their heads and their type of government. World Trade collapsed with trade in 1939 still below the 1929 level. In Germany, weak economic conditions led to the rise to power of Adolf Hitler. Germany suffered greatly because of the huge debt the country was burdened by following World War I. The Japanese invaded China and developed mines and industries in Manchuria. Japan thought this economic growth would relieve the depression. The Depression had profound political effects. In countries such as Germany and Japan, reaction to the Depression brought about the rise to power of militarist governments who adopted the aggressive foreign policies that led to the Second World War. In countries such as the United States and Britain, the government intervened which ultimately resulted in the creation of welfare systems. Thousands of investors lost large sums of money and several were wiped out, losing everything. Banks, stores, and factories were closed and left millions of people jobless, penniless, and homeless. Many people came to depend on the government or charities to provide them with food.

Franklin D. Roosevelt became the United States President in 1933. He promised a "New Deal" under which the government would intervene to reduce unemployment by work-creation schemes such as painting of the post offices and street cleaning. Both agriculture and industry were supported by policies to limit output and increase prices. The Great Depression ended as nations augmented their production of war materials at the beginning of World War II. This increased production provided jobs and put considerable amounts of money back into circulation. In Germany Hitler developed a massive work-creation scheme that had largely removed unemployment by 1936. Rearmament, paid for by government borrowing, started in a major way. In order to control inflation, consumption was restricted by rationing and trade controls. By 1939 the Germans’ Gross National Product was 51 per cent higher than in 1929 which was due mainly to the manufacture of machinery and armaments.