Great Depression

12 Key excerpts on "Great Depression"

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  The Long Depression

  Marxism and the Global Crisis of Capitalism

  • Michael Roberts(Author)
  • 2016(Publication Date)
  • Haymarket Books

    (Publisher)

  Chapter 3 The Great Depression of the Mid-Twentieth Century

  The Great Depression was (and in many ways remains) a great puzzle as there were millions of the world’s citizens who wanted to consume more housing, food and clothing; and producers by the hundreds of thousands who wanted to manufacture more housing, food and clothing and yet the two sides could not get together. Why? What was preventing these economically improving, mutually beneficial changes taking place? What was it that prevented people from working and producing more? At this moment, the answer remains largely unknown.

  —Randall E. Parker 1

  To understand the Great Depression is the Holy Grail of macroeconomics.

  —Ben Bernanke 2

  The Trigger for the Depression

  The long depression of 1873–97 was originally called the Great Depression. It was seen as a one-off event by even the most perceptive of analysts, 3

  although there were hints in the analyses of the Dutch long-wave theorists and the Russian economist Kondratiev that such a depression could reoccur. What we know today as the Great Depression, which started in 1929 and carried on until the beginning of World War II, showed that the long depression of the late nineteenth century was not a unique event in capitalist development and could be repeated. However, mainstream economics has been unable to explain what happened to world economies in the 1930s or why.

  4

  At around the beginning of 1928, the US Federal Reserve, worried about financial speculation and inflated stock prices, began raising interest rates. Industrial production turned downward in spring 1929, and overall growth turned negative in the summer. A recession had begun. In the two months leading up to the Wall Street crash, industrial production fell at an annualized rate of 20 percent. When the financial crash came, it was savage, and stunning drops in the stock market followed. By mid-November the market had declined by half.

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  A Great Deal of Ruin

  Financial Crises since 1929

  • James Gerber(Author)
  • 2019(Publication Date)
  • Cambridge University Press

    (Publisher)

  The Obama administra- tion’s passage of a large fiscal stimulus in 2009 was controversial, but most economists believe it lowered unemployment rates and that its benefits outweighed the costs (IGM Forum, 2014a). The Great Depression, like all depressions, was a complex, puzzling, and devastating event, but it is overly agnostic to call it a mystery. Contemporary scholars still debate some facets and we do not understand the precise cause or effect of every move in the economy at the time, but the general outlines are relatively well understood. There is a large amount of first rate scholarship on the Great Depression and several generations of economic historians have increased our understanding of the period. 1 Even with the progress made by the many scholars who have studied the Great Depression, there is still a fair amount of uncertainty, however. This, I would argue, is partly because the Great Depression is a dramatic historical event that is easily converted into a lesson for favored political ideologies. Interpretations of the Great Depression span a wide range of economic ideologies and political agendas. It has been simultaneously interpreted as an excuse for both large and small 1 Some of the highlights from economists include books and articles by Irving Fischer (1933), John Kenneth Galbraith (1955), Milton Friedman and Anna Schwartz (1963, Chapter 7), Charles Kindleberger (2013 [1973]), Peter Temin (1976,1989), Hyman Minsky (1975), Cristina Romer (1990, 1993), Ben Bernanke (1995, 2000b), Barry Eichengreen (1992, 2015), and Keynes’ magnum opus The General Theory of Employment, Interest, and Money (1936). 70 the Great Depression, 1929–1939 government, more and fewer economic regulations, and both more and less government intervention into labor and product markets.

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  The Climax of Capitalism

  The U.S. Economy in the Twentieth Century

  • Tom Kemp(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  A decade of crisis: 1929—1939

  By its unexpectedness, its scale and its duration, the Great Depression of the 1930s had a traumatic effect on all sections of American society. Coming as a sequel to several years of prosperity which had led business spokesmen and leading economists to forecast a new era of crisis-proof expansion, it proved to be the longest and deepest in history.

  For three and a half years following the Wall Street crash, the economy continued on a downward plunge, ruining millions of small businessmen and farmers, condemning one quarter of the labour force to unemployment and almost destroying the banking system. In what Americans proudly assumed was the richest country in the world, the living standards of many unemployed workers and poor soil farmers fell to 'third world' levels. The blow to the 'American dream' was so sudden and severe that the reaction of many was one of disbelief and passivity rather than of anger. There was no sharp turn to the left by a segmented working class, no mass middle-class support for a far-right saviour - though both tendencies were later to appear.

  The explanation of the Great Depression poses many problems for economists and it is not surprising that no consensus should exist. Many were, and still are, reluctant to attribute it to some organic weakness of capitalism, looking rather to extraneous circumstances, mistakes in government policy or wrong decisions by the monetary authorities.

  The Greatest Depression

  Most accounts of the Depression begin with the Wall Street crash, so that the beginning of the Depression can be exactly dated to 24 October 1929. It is unlikely that the crash would have been followed by such devastating consequences had there not been about this time the coming together of various factors making for a slump. The crash, while particularly severe, was a financial panic of a classic type familiar in the financial history of European countries as well as the United States. Its form was a rush into liquidity by those holding shares, and later, other types of paper - bonds, securities, bills of exchange bringing prices crashing down. In the previous months share prices had been rising at an extraordinary rate, the result of excessive speculation in which large numbers of people, including many newcomers to stock-market transactions, had been participating. In such speculative manias, a time comes when confidence in the continued upward movement of stock-market prices begins to break. Some feel the urge to sell before the fall begins, or become overcommitted and have to sell to settle payments elsewhere. Once selling generates a fall there is a good chance that the movement will spread until it becomes an avalanche. Weaknesses and frauds are exposed, and it becomes virtually impossible to reverse the trend.

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  A History of Big Recessions in the Long Twentieth Century

  • Andrés Solimano(Author)
  • 2020(Publication Date)
  • Cambridge University Press

    (Publisher)

  61 4 The Great Depression of the 1930s 4.1 Introduction The precise causes of the Great Depression of the early 1930s, the worst slump of the twentieth century, remain somewhat of an unresolved mys- tery in economic analysis and history. It is apparent that while there is not a single cause of the Great Depression – or a single country responsible for the big international slump – we can make the following list of factors that did contribute to the Great Depression: (i) the stock market crash of 1929 in the United States; (ii) the decline in terms of trade and capital inflow for exporters of primary products in Latin America and Australia that started in 1928 or before; (iii) bankruptcies of banks in the early 1930s in America, Austria, and Germany; (iv) deflationary policies pursued by central banks in the context of the gold standard; (v) the timing of abandonment of the gold standard (the evidence shows that early-exit countries started their recovery sooner); (vi) the fall in domestic prices that increased the real value of debt held by consumers and firms with a negative effect on con- sumption and investment; and (vii) the lack of a decisive fiscal policy stance to face recessions and depressions by governments at that time. The Great Depression was an international slump rather than a con- traction affecting only a few isolated countries. However, the exact timing of the start and end of the Depression varied for the core, the European periphery, and primary exporters into Latin America, Asia, and Australia. It is important to recognize the international context that preceded the Great Depression. It is perhaps not a coincidence that the onset of the Great Depression occurred at the end of a particularly complex decade: the 1920s. The economic and political settlement fol- lowing World War I had serious consequences for Europe and the global economy. A central role in that settlement was played by the treaty of

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  Beyond the Global Capitalist Crisis

  The World Economy in Transition

  • Berch Berberoglu(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  1 Howard J. Sherman

  Every expansion in U.S. history has been followed by an economic contraction. If the contraction is relatively mild by historical standards, it is called a recession. If it is more severe, it is called a depression. When the contraction lasted ten years and official unemployment went up to 25 percent in the 1930s, it was called the Great Depression.

  “Absolutely sound” was President Calvin Coolidge’s assessment of the economy and the stock market merely a few months before Hoover swore in as President in January 1929. In the fall of 1929, Hoover’s secretary of the Treasury, Andrew Mellon, reassured one and all that “there is no cause to worry. The high tide of prosperity will continue.” Finally, in mid-October 1929, no less than Irving Fishing, the preeminent U.S. economist of his day, proclaimed that “stock prices have reached what looks like a permanently high plateau” (see Galbraith 1988: 15, 26, 41, and 70).

  A few days later the stock market crashed, and the U.S economy sank into a depression that was to last a decade. By 1933, at least 25 percent of the labor force was unemployed and another 25 percent were on involuntary part-time work or were so discouraged that they gave up looking for jobs. The homeless, the hungry, and the desperate were never fully counted. The most famous pictures of the era showed long lines of people waiting for free bread or a bowl of soup. These breadlines, as they were called, would sometimes extend for blocks from the entrance of a soup kitchen.

  The term “depression” was commonly used before World War II to refer to any economic contraction. From 1948 to 2001, there were 10 minor contractions. Conservatives did not like the term “depression” because it reminded everyone of the horrors of the Great Depression which they would rather forget, while denying that the economy had any basic problem. So the conservatives invented the term “recession” to convey the idea that the problem was mild and temporary. Eventually the term “recession” was widely used.

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  The Origins and Evolution of Consumer Capitalism

  A Veblenian-Keynesian Perspective

  • John P. Watkins(Author)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  “Poverty in the Midst of Plenty”

  DOI: 10.4324/9780429443763-5

  The Great Depression accentuated the paradox of “poverty in the midst of plenty.” The depression resulted from the failure of the private sector to generate sufficient demand to absorb the increased output, impoverishing millions. The theory underlying classical economics precluded policies necessary to pull the economy out of depression. Classical economics advocated laissez-faire, free trade, and balanced budgets. It argued that government deficits displace private investment, reducing economic growth. In its view, the solution to depression lay in deflation.

  In The General Theory, Keynes attributed the depression to a collapse in effective demand, resulting from a collapse in investment. Some years later, he attributed the failure to recover from the depression to insufficient consumption. As Keynes noted, the problem lay in an increase in output combined with an institutional structure that discouraged consumer spending.

  But the main explanation of what has happened this year in Great Britain and for several years in the United States is, I am certain, the gigantic powers of production, far exceeding any previous experience, of a modern industrial economy. Coupled with institutional factors which tend to encourage accumulation and retard the growth of consumption when incomes increase, this means an unprecedented output has to be reached before a state of full employment can be approached.

  (1940, 157)

  The beginning of the depression is generally attributed to the stock-market crash. Occurring on October 29, 1929, the market fell 20%. Within three years, industrial output measured by the Federal Reserve’s index of manufacturing output fell 48%; gross national product fell 46% in current prices and 27% in real prices. Consumer prices fell by one-fourth; employment declined by 20% pushing the unemployment rate to 25%, leaving 13,000,000 people unemployed out of a labor force of 48,000,000. Durable goods declined by 80%. From the outset of the depression in 1929 to its depth in 1932, one-third of all banks failed, nine million people lost their savings. From the stock-market crash to its depth in July 1933, stock values plummeted 83%, wiping out $74 billion in value (see Faulkner 1960

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  America and Its Sources

  A Guided Journey through Key Documents, 1865-present

  • Erin L. Conlin, Stephan Schaffrath, Erin L. Conlin, Stephan Schaffrath(Authors)
  • 2019(Publication Date)
  • Milestone Documents

    (Publisher)

  If the Depression began for farmers in the 1920s, by October 29, 1929, the rest of the nation knew it had arrived as well. As with the agricultural crisis in the West, speculators played a role in the new crisis. Coupled with insufficient banking regulations, the stock market was a bubble waiting to burst by the end of the 1920s. The stock market crash did not cause the Great Depression, but it did contribute to the nation’s economic decline.

  The stock market was experiencing a bubble—stock prices skyrocketed, but the value listed on the New York Stock Exchange was not a real reflection of a company’s value. Speculators, hoping to make money quickly, used weak banking laws to borrow money to purchase stocks. The goal was to purchase stocks and then quickly sell them at a profit when their price rose. The stock market crash revealed significant problems in the American economy.

  A return to laissez faire economics in the 1920s meant there were few laws in place to regulate the economy. More and more of the nation’s wealth resided in the pockets of a few wealthy individuals and corporations. This meant that the rest of the public was much more susceptible to economic swings. Failure to adequately regulate banks resulted in average customer’s savings being loaned to speculators to purchase stocks. When the market tanked, individuals and banks alike lost their capital. Many banks were forced to close their doors, with investors unable to recover their lost money. Speculators were often to blame. As noted, agricultural overproduction kicked off the national crisis in rural America. However, the nation’s factories also had a hand in the larger economic collapse, in part via overproduction of consumer goods. These factors taken together set the stage for the Great Depression, the severe economic downturn that lasted through most of the 1930s. The Depression was not limited to the United States but in fact affected much of the rest of the world economy as well.

  Throughout history, the American economy has had periods of growth followed by periods of recession and depression. That is part of a normal economic cycle. What made the depression of the 1930s so “great,” however, was the scope and scale of the disaster. Roughly a quarter of the nation was unemployed during the 1930s. (In a healthy economy, unemployment rates are typically about 4 to 5 percent.) Millions of Americans became migrants—people with no permanent home—because they had lost their land or jobs working in agriculture. No one knew how to end the Depression, because to date, the nation had never suffered such a severe one. Franklin Delano Roosevelt, elected president in 1932, promised to lead the country in a new direction.

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  Property and Prophets: The Evolution of Economic Institutions and Ideologies

  The Evolution of Economic Institutions and Ideologies

  • E. K. Hunt(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  CHAPTER 12 Keynesian Economics and the Great Depression

  Although the period from the Civil War to 1900 was one of rapid economic expansion in the United States, these accomplishments were dwarfed by the growth that occurred between 1900 and 1929. Table 12.1 presents the percentage increase in manufacturing production in several key industries between 1899 and 1927. It has been estimated that U.S. wealth (the market values of all economic assets) reached $86 billion by 1900; in 1929, it stood at $361 billion (data in Huberman 1964, p. 254).

  This spectacular growth gave the United States a huge edge over all other countries in manufacturing output. The American prosperity of the 1920s was based on high and rising levels of output, though there were recessions in 1923 and 1927. The gross national product, the value of all goods and services produced, increased by 62 percent from 1914 to 1929. Only 3.2 percent of the labor force was unemployed in 1929, and labor productivity rose during that decade at least as fast as wages. Between 1921 and 1929, total automobile registrations increased from less than 11 million to more than 26 million; consumers spent tens of millions of dollars on radios, refrigerators, and other electric appliances that had not been available before. American manufacturing seemed to most people a permanent cornucopia destined to create affluence for all.

  This leadership in manufacturing was associated with financial leadership in the world economy. The American economic empire began to rival that of England. By 1930, American businessmen owned large investments around the world. Table 12.2 gives the value of these investments in 1930 in millions of dollars.

  The Great Depression

  This era of rapid growth and economic abundance came to a halt on October 24, 1929. On that “Black Thursday,” the New York stock market saw security values begin a downward fall that was to destroy all faith in business. Their confidence undermined, businessmen cut back production and investment. This decreased national income and employment, which, in turn, worsened business confidence even more. Before the process came to an end, thousands of corporations had gone bankrupt, millions were unemployed, and one of the worst national catastrophes in history was under way.

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  The Age of Global Economic Crises

  (1929-2022)

  • Juan Manuel Matés-Barco, María Vázquez-Fariñas, Juan Manuel Matés-Barco, María Vázquez-Fariñas(Authors)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  Historia y Política, no. 26 (2011a): 47–79.
• Comín, Francisco.
  Historia económica mundial: De los orígenes a la actualidad
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• Crafts, Nicholas, and Peter Fearon.
  The Great Depression of the 1930s: Lesson for Today
  . Oxford: Oxford University Press, 2013. DOI 10.1093/acprof:oso/9780199663187.001.0001
• Eichengreen, Barry.
  Golden Fetters: The Gold Standard and the Great Depression
  . New York: Oxford University Press, 1992.
• Eichengreen, Barry, and Kris Mitchener.
  The Great Depression as a Credit Boom Gone Wrong
  . BIS Working Paper No. 137. Basle: BIS, 2003. DOI 10.2139/ssrn.959644
• Faulkner, Harold U.
  American Economic History
  . New York: Harper & Brothers Publishers, 1954.
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  The European Economy Between the Wars
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  Historia del pensamiento económico
  , ed. Luis Perdices de Blas, 163–200. Madrid: Síntesis, 2003.
• Fishback, Price. Monetary and Fiscal Policy During the Great Depression.
  Oxford Review of Economic Policy
  26, no. 3 (2010): 385–413. DOI 10.1093/oxrep/grq029
• Galbraith, John K.
  El crac del 29
  . Barcelona: Ariel, 1993.
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  Breve historia de la euforia financiera
  . Barcelona: Ariel, 2011.
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  The German Inflation, 1914–1923
  . New York: Walter de Gruyter, 1986. DOI 10.1515/9783110860078
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  The Memoirs of Herbert Hoover: The Great Depression, 1929–1941
  , volume III. New York: Macmillan, 1952/2016.
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  European Review of Economic History
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  Las consecuencias económicas de la Paz