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DEPRESSION
By
Professor & Lawyer
Puttu Guru Prasad
THE GREAT DEPRESSION
THE GREAT DEPRESSION
The Great Depression was a severe worldwide economic
depression in the decade preceding World War II . The
timing of the Great Depression varied across nations, but
in most countries it started in 1930 and lasted until the
late 1930s or middle 1940s. It was the longest, deepest,
and most widespread depression of the 20th century. In
the 21st century, the Great Depression is commonly used
as an example of how far the world's economy can
decline. The depression originated in the U.S., after the
fall in stock prices that began around September 4, 1929,
and became worldwide news with the stock market crash
of October 29, 1929.
THE COMING OF DEPRESSION
During the 1920s, many Americans enjoyed what seemed like an endless era of
prosperity. But in 1929, the stock market crashed.
Declining trade.
Production fell, unemployment rose, and the economy went into a period of dramatic
decline.
Years after the Great Depression began, periodic contraction was seen as part of the
business cycle.
Economic historians usually attribute the start of the Great Depression to the sudden
devastating collapse of US stock market prices on October 29, 1929, known as Black
Tuesday.
By mid-1930, interest rates had dropped to low levels, but expected deflation and the
continuing reluctance of people to borrow meant that consumer spending and
investment were depressed.
By May 1930, automobile sales had declined to below the levels of 1928. Prices in
general began to decline, although wages held steady in 1930; but then a deflationary
spiral started in 1931.
Conditions were worse in farming areas, where commodity prices plunged, and in
mining and logging areas, where unemployment was high and there were few other
jobs.
THE BEGINNING
The economic contraction that began
with the Great Crash triggered the
most severe economic downturn in
the nations historythe Great
Depression. In the beginning in mid-
1930, a severe drought ravaged the
agricultural heartland of the US.
The Great Depression lasted from
1929 until the United States entered
World War II in 1941. The stock
market crash of 1929 did not cause
the Great Depression. Rather, both
the Great Crash and the Depression
were the result of deep underlying
problems with the countrys
economy.
Together, government and business spent more in the
first half of 1930 than in the corresponding period of
the previous year. Consumers, many of whom had
suffered severe losses in the stock market the
previous year, cut back their expenditures
CAUSES OF GREAT DEPRESSION
Banks failure.
Unequal Decline of
distribution of international
wealth. trade.
Overproduction of
Decline of agricultural goods.
farming
industry.
Over
production of
industrial
goods.
BANKING INDUSTRY COLLAPSED
Families lose savings in crash; banks
have little cash left on reserve.
Banks lose money loaned to buy
on the margin (even people who
did not invest lost out!).
People default on mortgages due to
unemployment.
European nations could not repay
their debts.
America would not forgive the
loans.
Banks begin to fail.
INTERNATIONAL TRADE DECLINED
European demand for goods declines
Factories producing more
Personal income , tax, revenue, profits and prices dropped.
International trade plunged by more than 50%.
Interest rates dropped to low levels
Overproduction of
Agricultural Goods
American farmers had prospered during World War I
Use profits to buy machines to produce more
After World War I, demand drops surplus!
Huge supply + Low demand = Low prices
Overproduction of
Industrial Goods
o Technological advances change how
Americans live and work
o In the Roaring 1920s:
Consumer demand is very high
Machine produce quality products quickly
Unrestricted capitalism
o By 1929, supply greatly exceeds
demand!
FARMING INDUSTRY DECLINE
Farmers borrowed from bank to buy
machinery
Foreclosed on mortgages and other debts
Banks closed due to defaults and stock
market
Between 1929 and 1933 farmers income
50%
Farmers in dept.
One million families lose their farms by
1934
Many people too poor to buy goods to lift
economy
UNEQUAL DISTRIBUTION OF
WEALTH
Gap between the rich and poor widens in
the 1920s
By 1929 some Americans have more wealth
Wages increased
The income of rich increased
Wealth does not trickle down
Consumers in debt ; Cannot afford products
EFFECTS OF GREAT
DEPRESSION
The Great Depression had devastating effects in
countries rich and poor . Personal income , tax,
revenue, profits and prices dropped, while international
trade plunged by more than 50%. Unemployment in
the U.S. rose to 25%, and in some countries rose as high
as 33%. Cities all around the world were hit hard,
especially those dependent on heavy industry.
Construction was virtually halted in many Countries.
Farming and rural areas suffered as crop prices fell by
approximately 60%. Facing plummeting demand with
few alternate sources of jobs, areas dependent on
primary sector industries such as cash cropping, mining
and logging suffered the most. Some economies
RESULTS OF GREAT DEPRESSION
Gross
Rising price Gap National
Hardship,
Nations Farmers resulted in between Product
Banks homelessn
economy struggled declining rich and decreased,
failed. ess
crashed. a lot. of poor Unemploy
increased.
consumers. widened. ment
increased.
THE NATIONS SICK ECONOMY
As the 1920s advanced, serious problems
threatened the economy while
Important industries struggled, including :
Agriculture
Railroads
Textiles
Steel
Mining
Automobiles
Housing
Consumer goods
FARMERS STRUGGLE
No industry suffered as much
as agriculture
During World War I
European demand for
American crops soared
After the war demand
plummeted
Farmers increased production
sending prices further
downward
CONSUMER SPENDING
DOWN
By the late 1920s, American
consumers were buying less
Rising prices, stagnant wages
and overbuying on credit
were to blame
Most people did not have the
money to buy the flood of
goods factories produced
GAP BETWEEN RICH & POOR
The gap between rich
and poor widened
The wealthiest 1% saw
their income rise 75%
The rest of the
population saw an
increase of only 9%
More than 70% of
American families
earned less than $2500
per year
FINANCIAL COLLAPSE
After the crash, many
Americans panicked and
withdrew their money from
banks
Banks had invested in the
Stock Market and lost
money
In 1929- 600 banks fail
By 1933 11,000 of the
25,000 banks nationwide
had collapsed
GNP DROPS, UNEMPLOYMENT
SOARS
Between 1928-1932, the U.S.
Gross National Product (GNP)
the total output of a nations
goods & services fell nearly
50% from $104 billion to $59
billion
90,000 businesses went
bankrupt
Unemployment leaped from 3%
in 1929 to 25% in 1933
HARDSHIPS,
HOMELESSNESS INCREASED
The Great Depression
brought hardship,
homelessness, and
hunger to millions
Across the country,
people lost their jobs,
and their homes
Some built makeshifts
shacks out of scrap
material
WORLD WIDE EFFECTS
AUSTRALIA
EAST ASIA
FRANCE
GERMANY
LATIN AMERICA
INDIA
USA
AUSTRALIA
Australia's extreme dependence on
agricultural and industrial exports meant
it was one of the hardest-hit countries in
the Western world
Falling export demand and commodity
prices placed massive downward
pressures on wages
Further, unemployment reached a record
high of almost 32% in 1932
After 1932, an increase in wool and meat
prices led to a gradual recovery
East Asia
The Great Depression in East
Asia was of minor impact
The Japanese economy shrank
by 8% 192931
The invasion and subjugation
of Manchuria into a Japanese
puppet-state in September
1931, thus providing Japan
with raw materials and
energy, the Japanese economy
was able to recover by 1932
and continued to grow.
FRANCE
The Depression began to affect
France from about 1931