What was the Great Depression?
By the 1920's the terrible impacts that World War I left started to disappear as countries longed to return to normalcy. However, this didn't last, and after the crash of 1929 the United States fell under the Great Depression. Women and men lost their jobs, lost their homes, fell under poverty, lost money because of the drop in stock prices, and faced lots of pain and despair. Productivity rates went down, the population went down, and overproduction led to job cuts and unemployment. Because of the global interdependence of countries around the world, and the trade routes that linked several different countries, nations all around the world were affected by the depression in the United States.
The Great Depression
- Some amount of normality had returned to prewar levels by the mid-1920's in an economic sense
- Productivity returned to it's normal levels, businesses repaired the damages that the war had caused to industrial plants, equipment, and transportation facilities
- This sense of normality was not real because many problems remained in the economy
- For example, the economic recovery of Europe was tied to the war debts of the Allies, reparations that were payed by Germany and Austria, and the U.S. funds that were supplied to Europe, so the European government was unstable
- By the summer of 1928, the U.S. withdrew their investments from Europe, which placed a huge economic strain on the country causing them to fall back into their depression
- Improvements in the Industrial process lowered the need for raw materials, so people in those industries experienced a drop in prices
- Technological advances in the production of tires for automobiles reduced the need for rubber, which was an important component of exports in the Dutch East Indies, Ceylon and Malaysia
- Also, the increasing use of oil reduced the need for coal, the use of synthetics brought down the cotton industry, and the adoption of artificial nitrogen hurt the nitrate industries in Chile
- One of the biggest weaknesses of the economy was the depressed state of agriculture, and the decline of agricultural production in Europe opened the opportunities for farmers in the United States, Canada, Argentina, and Australia
- After the end of the war, European production surged and contributed to the excess goods produced worldwide, which led to a collapse in prices
- The prices became extremely low, and many farmers went into poverty due to their extremely low salary
- The overproduction of goods reduced the need for workers and caused people to lay off workers and caused a loss of jobs for many people
The Crash of 1929
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The Spread of Economic Contraction Worldwide
- By 1932 the level of production was half of what it was in 1929, national income had dropped by roughly half, forty percent of U.S. banks were out of business, and most peoples deposits had disappeared
- Much of the world depended on U.S. exports and imperial markets, so when the U.S. economy contracted it caused a global effect
- With the main exception being the Soviet Union since their economy was completely independent, many countries suffered economic problems and deficits through the 1930's
- Nations that relied om manufactured goods to pay for imported food and fuel, such as Germany in Japan in particular, experienced it the most, since they could no longer import food or fuel which was necessary for their population to survive
- The depression also spread to primary producing economies such as Latin America, Africa, and Asia that relied on the exports of raw materials and a few primary products and greatly altered and crippled their economies
Industrial Economies
- Most U.S. investors began cashing in their loans and liquidating items in hopes of gaining some money, however banks became more strict and refused to cash in short term loans as they were closer to their due dates
- Banking houses in Germany and Austria collapsed since they depended majorly on U.S. loans
- The German economy in general experienced a major collapse that resulted in 35% of unemployment of their workers, and a 50% decrease in agricultural production
- The European economy also suffered since they were closely tied to the German economy and stalled for several years
- Germany was at an advantage, since none of the Great War was fought on German land, their resources remained untouched and unharmed, which was not the same for France or Russia, but they still could not escape the depression and its effects
- Foreign trade decreased sharply, which caused losses in manufacturing, employment, and per capita income for Europe since they depended on trade with the U.S. for certain goods
- Japan felt the effects of the depression almost immediately after it occurred, since they were largely dependent on the U.S. and their economy plummeted which unemployment rates skyrocketed when companies had to cut back on production
Primary Producing Economies
- Through the use of trade connections globally, the economic crisis was spread throughout the world
- Latin America mainly exported raw materials, which made them susceptible to the effects of the depression
- The prices of sugar from the Caribbean, coffee from Brazil and Columbia, wheat and beef from Argentina, tin from Bolivia, nitrates from Chile and other products decreased significantly, leaving much of Latin America unemployed
- In Africa, the situation was different, since they were under colonial rule they had to give up most of their natural resources to their masters
- The Africans who produced these materials suffered from the Great Depression, as did their European masters that took the goods from them, however select areas in Africa were untied to the global economy and therefore were unaffected
- The global depression affected some agricultural economies only to a small extent, such as China's agrarian economy, since it was not integrated with the economy, however their trade of Silk and Tea decreased significantly
- China's economy became directed by its domestic markets, which had no reliance on foreign trade
- The Philippines was another area that did not suffer as much as the rest of the world, because they benefited from a protected market of the United States
Economic Nationalism
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Despair and Government Action
- By 1933, unemployment rates across the world had reached 30 million people
- Men and women lost their jobs because of economic trends
- Unemployment affected women less in the beginning because factory workers preferred to have women as employees because they could be paid two-thirds of a mans wage
- However the government eventually made policies reducing the employment of females
- The British royal commission stated that industrial employment cannot be considered for married woman, and they decided that a woman's place is in the home and that it would also increase the low birthrates
Personal Suffering
- Many people were in anguish over the loss of their jobs, savings, homes, their dignity and hope, which often led to declining rates of marriage, childbirth, divorce and in general the Great Depression caused a lot of suffering
- These problems magnified the divisions between social classes even further
- Workers and farmers despised wealthier classes, as they were able to live a somewhat luxurious life even though the depression and were protected from the worst impact
- Young children that were completing their education soon realized that there were no available jobs for them to take on
- John Steinbeck, a U.S. writer, captured the terrible pain, heartlessness and political anger that arose during the depression
- In The Grapes of Wrath, Steinbeck wrote about a family who migrated to California to escape the Dust Bowl, and he explained their lives, hardships and commented on the U.S. government policy of planned scarcity, which stated that crops were destroyed to raise prices
- Steinbeck accurately portrayed the rising political anguish and despair that people endured in this time period