A Student's Guide to the Great Depression

What was the Great Depression?

The Great Depression was a spectacular, worldwide economic decline. During the Great Depression there was a sharp decline in government tax revenues, prices, profits, income and international trade. Unemployment grew and political upheaval developed in many countries. For example, the politics of Adolf Hitler, Joseph Stalin and Benito Mussolini took the stage during the 1930s.

Great Depression - When Did it Occur?

The beginning of the Great Depression is usually associated with the stock market crash on October 29, 1929, known as Black Tuesday.
However, it began in some countries as early as 1928. Similarly, while the end of the Great Depression is associated with the entry of the United States into World War Two, in 1941 it actually ended at different times in different countries. The economy in the United States was actually expanding as early as June 1938.

Great Depression - Where Did it Occur?

The Great Depression effected many countries throughout the world. Both industrialized countries and those which exported raw materials were hurt.

Great Depression in the United States

Many see the Great Depression as starting in the United States. The worst point in the United States was 1933 when more than 15 million Americans—one-quarter of the labor force were unemployed. Additionally, economic production declined by almost 50%.

Great Depression in Canada

Canada was also hit very hard by the Depression. By the latter part of the Depression about 30% of the labor force was unemployed.
The unemployment rate stayed below 12% until the beginning of World War Two.

Great Depression in Australia

Australia was also hit hard. Wages fell and by 1931 unemployment was at almost 32%.

Great Depression in France

While France did not suffer as much as other countries because it did not rely as much on trade unemployment was high and led to civil unrest.

Great Depression in Germany

After World War One Germany received loans from American to rebuild the economy.
However, during the depression these loans stopped. This caused unemployment to climb and the political system to turn to extremism.

Great Depression in South America

All of South America was hurt by the Depression because the United States was heavily invested in their economies. Specifically, Chile, Bolivia and Peru were very badly hurt.

Great Depression in the Netherlands

The Netherlands were hurt by the depression from about 1931 to 1937. This was because of the Stock Market Crash of 1929 in the United States as well as other internal factors.

Great Depression in the United Kingdom

The effects of the Great Depression on the United Kingdom varied depending on the area. In the in industrial areas the effect was large because the demand for their products collapsed. The effects on the industrial areas and the coal mining areas of Britain were immediate and devastating, as demand for their products collapsed. Unemployment rose to 2.5 million by the end of 1930. However, once Britain withdrew from the gold standard the economy began to slowly recover from 1933 onwards.

Next Page: Why Did the Great Depression Occur?

Economists still cannot agree on what caused the Great Depression. Most however have agreed that it was a combination of events and decisions that came into play that caused the Great Depression.

Stock Market Crash of 1929

The Wall Street Crash of 1929, is cited as the case of the Great Depression. However, while it does share some of the blame the crash ruined people’s fortunes and destroyed confidence in the economy. However, most believe that the crash alone would not have caused the Depression.

World War One

After World War One (1914-1918) many countries struggled to pay their war debts and reparations as Europe began to rebuild. This caused economic problems in many countries, as Europe struggled to pay war debts and reparations.

Production versus Consumption

This is another well known cause of the depression. The basis of this is that worldwide there was too much investment in industry capacity and not enough investment in wages and earnings. Thus, factories produced more than people could afford to buy.

Banking

There were a large number of bank failures during the depression. Additionally banks that did not fail did suffer. The banking system was not prepared to absorb the shock of a major recession. Furthermore, many academics believe that the government failed to take the appropriate actions to restore stability to the banking system and to calm people's fears about the possibility of bank failures.

Postwar Deflationary Pressures

The huge cost of World War One caused many European countries to abandon the gold standard. This resulted in inflation. Following the war most of these countries returned to the gold standard to try and counter the inflation. However, this resulted in deflation which lowered prices but increased the real value of debt.

International Debt

After World War One most of the European countries owned a lot of money to American banks. These loans were so high the countries could not pay them. The American government refused to lower or forgive the debts so the countries began to borrow more money to pay off their debts. However, as the American economy began to slow down the European countries began to find it difficult to borrow money. However, at the same time the United States had high tariffs so that the Europeans could not make money selling their products in the United States markets. The countries began to default on their loans. After the 1929 stock market crash banks tried to stay afloat. One of the ways they did this was to recall their loans. As money flowed out of Europe and back to the United States the economies of Europe began to fall apart.

International Trade

In 1930 the United States raised tariffs by up to 50% on imported goods to increase demand for domestic goods. However, instead of increasing demand for domestically produced goods it created unemployment abroad as the factories shut down. This not only caused other counties to raise tariffs themselves. This combined with a lack of demand for U.S goods because of unemployment abroad resulted in increasing unemployment in the US. "The World in Depression 1929-1939" Charles Kinderberger shows that by March 1933 international trade plummeted to 33% of its 1929 level.

Additional Sources of Information on the Great Depression

Shambhala.org
Government of Canada
UIUC.edu
Canadian Encyclopedia
PBS