Life During the Great Depression

History of the World is commonly studied in phases, each unique in the turn of events and eventuality. However, commonly they are all characterized by time lines that are specify reign, ideology or the outcome of certain connected political events. The Great Depression of 1929-1930 is different. It was an era ushered into the economics of the world due to the consequences of a political upsurge - World War I. This phase in world history is marked as the largest economic depression ever witnessed in modern times.

The Great depression hit world economy, originating in the United States. In fact the day the US economy plunged due to a stock market crash beyond repair and scope for help is marked by historians as 'Black Tuesday'. On October 29, 1929, the US stock market witnessed a downturn that was not to heal in a hurry. Parallel world events include the attempts by the Central Powers Germany and Italy, to avenge the humiliation by the Treaty of Versailles and another mad race for stacking of armaments and establishing military supremacy. Diplomatic liaisons and commitments had a devastating effect on the economy of a number of countries. International trade suffered. It plunged along with personal income and prices of commodities. This in turn hit tax revenue and estimated profits. Heavy industries came to a stand still in fiscally weakened economic recession.

The construction industry literally shut down. Crop prices fell and unemployment was faced with few alternatives. The Great Depression affected different countries at different times. Worldwide, relief programs were set up. The ugliness of political upheaval forced desperate citizens, especially those of scorned Germany and Italy, to place their faith in demagogues like Adolf Hitler and Benitto Mussolini. This marked the preparatory ground for World War II in 1939.

The trigger factor was a total collapse in the stock market. Consumers cut back expenditures to deal with lost investments, but had to deal with drought that ravaged through the US in 1930. The financial set back was further exploited by the droughts and famines that challenged many other nations as well. Commodity prices hit rock bottom, but that was not as alarming as the scarcity witnessed. Unemployment was high and nations randomly experimented and adopted various protectionist policies. The depression spread from country to country in the form of failures in the banking sector, dangerously imbalanced supply and demand curves and failure of free markets. The resulting panic led to a downturn in the money markets.

The over-investment and underconsumption, fueled by administrative incompetence led to unbalanced accumulation of capital. The ripple down effect caused a cycle of devaluation, which in turn caused bad debt and deflation. Industrialists indulged in speculated liquidation and distress selling amidst fallen asset prices, profits and nominal interest rates. The panic was only further agitated by bank failures, poor capital investment and an aggravated fiscal arena. The reduction in international trade caused the implementation of tariffs that were retaliatory in nature. Recovery, by 1933, was largely due to the suspension of the convertibility of gold that had become a trend and emergency, restructuring of the financial systems to accommodate increased government spending. Subsequently, the setting of minimum wages and commodity prices, structural increase of purchasing power, lowered farm production and set business price codes helped quick recovery. The political consequences of the phase include the adoption of social democracy, and planned economies.