Great Depression

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31 President Hoover (1929-1932)

1929 - 1932

Opposed state intervention in economy

1929 Great Depression-Black Tuesday (Oct.29)

1929 - 1940
  • The Great Depression was a worldwide economic crisis that in the United States was marked by widespread unemployment, near halts in industrial production and construction, and an 89 percent decline in stock prices.
  • Began in US collapse of stock market: Wall Street Crash (works on selling small portions of companies bec they need investors to grow and money to be sustained) spread into global collapse in most of Europe in 1930
  • The use of credit for the purchase of homes, cars, furniture and household appliances resulted in foreclosures and repossessions. As consumers lost buying power industrial production fell, businesses failed, and more workers lost their jobs. Farmers were caught in a depression of their own that had extended through much of the 1920s. This was caused by the collapse of food prices with the loss of export markets after World War I and years of drought that were marked by huge dust storms that blackened skies at noon and scoured the land of topsoil. As city dwellers lost their homes, farmers also lost their land and equipment to foreclosure.
  • Collapse of American stock values
  • loss of American credit
  • Rise of Am tariffs
  • withering of exports to Am ALL CAUSED DEEP DECLINES IN EUROPEAN PRODUCTION + UNEMPLOYMENT:
  • small shops went bankrupt
  • big industries closed down (ship building)
  • decline in production *Depression in agriculture (US)
  • Hoover (president US) refused to provide direct federal assistance.(efforts to provide federal money for relief and public works were resisted by Hoover)
  • Ppl migrated back to the countryside, they starved, lost their homes in foreclosures
  • France and US had to provide their citizens with significant welfare benefits to restore economy bec it had no system of social security.
  • tested the Western world belief in liberal-democratic gov and capitalist economics.
  • many countries abandoned democracy in favor of authoritarian leaderships
  • Strangely, Americans did not lose confidence in the capitalist system. Communism did not attract them, nor did fascism—unlike citizens of several European nations.
  • Br, US, France abandoned classic precepts of market capitalism as free trade and adopted 18th c economics of autarchy (self-sufficiency)

1931-35 National Coalition gvmnt of all major parties

1931 - 1935
  • abandoned gold standard
  • devalued the pound
  • adopted protective tariffs (new Corn Law in 1932)
  • cut waged of gov employees (teachers-soldiers)
  • reduced unemployment benefits BRITAIN:
  • riots
  • royal navy mutinied
  • crime rate soared
  • Unemployed marches on Parliament

1931 Wave of Bank Failures

1931

Banks could not obtain repayments of outstanding loans/banking system collapsed/banks closings
Most of Europe was struggling to recover from this when WWI began in 1939. (the banking system collapsed be people did not have the money to pay for the loans)

1932-1945 Roosevelt/ 1933-34 First New Deal

1932 - 1945

Elected 4 times, administration changed from a Republican to him, democrat.He died in office. Criticized by the right and far left (Conservative democrats and Republicans)
Inaugural address FIRST NEW DEAL:(Abandonment of “laissez- faire” capitalism. Belief in greater regulation. Structured around theories of British economist John Maynard Keynes)
* Three Rs (relief, recovery reform)
* he aimed at paying people money from the gov to create jobs to reduce unemployment-created a program to build large public works such as building roads, repairing bridges, parks, playgrounds(his main aim was to put the ppl to work-Unemployment programs based on work relief rather than welfare)while Hoover believed it was not the gov's job to address the social crisis.
* national planning and supervision of all forms of transportation and communications
* closed all banks 4 days
*Summoned Congress to a special session (the Hundred Days March to June. It succeeded in enacting a comprehensive corps of legislation involving banking, agriculture, labor,industry, and unemployment relief (public assistance/welfare):
* 3/4 of all banks reopened and confidence was restored
HE TOOK MEASURES WITHIN BOTH THE 1ST AND 2ND NEW DEAL PROGRAM AIMED AT FIGHTING THE THREE RS:RELIEF, RECOVERY AND REFORM

1935 Social Security Act

1935

1935-38 Second New Deal

1935 - 1938

Proposed because people still were unemployed and lost their homes, wages were low and banks kept on failing.
* Aimed at long term reform

1936 -40 Roosevelt's second term

1936

1937-38 Another more modest economic crash

1937

1938 Fair Labor Standars Act

1938

1939 WWI

1939 - 1945

Hitler’s invasion of Poland in September 1939, following Japan’s invasion of China two years earlier and the continuing war there, turned national attention to defense.Roosevelt, who had been re-elected in 1936, sought to rebuild a military infrastructure that had fallen into disrepair after World War I.amped up defense manufacturing began to produce private sector jobs and reduce the persistent unemployment that was the main face of the Depression. Jobless workers were absorbed as trainees for defense jobs and then by the draft that went into effect in 1940, when Roosevelt was elected to a third term.
Despite the New Deal’s many measures and their alleviation of the worst effects of the Great Depression, it was the humming factories that supplied the American war effort that finally brought the Depression to a close.

1940 Consequences of Great Depression

1940

Roosevelt
Hitler
* Soviet Union unaffected by depression=deemed economic rival + alternative system (communism) to capitalism bec the capitalist world economy collapsed (inter-war Depression)
* Trade cycle-fluctuations (boom and slump as familiar and it was excepted to repeat itself every 7-11 years. Marx believed that bec of this capitalism would choke on itself, the system would collapse
* GLOBALIZATION: accelerating technological progress, continuous economic uneven growth.
* Globalization=every country's economy depends on the other in a international global market
* Technology which allowed for the spread of European and Am culture
* It failed to erase nationalism (born in opposition to it)Extreme nationalism in the Middle East, China? It failed in the Eastern Hemisphere.

* Globalization of economy stagnated during inter-war years although there were new states created out of WWI which should have allowed for more interstate commerce.
* Between 1927-33 economic stagnation:
The largest world national economy US was getting self sufficient, never been dependent on foreign trade and other countries showed the same trend like Britain (self-sufficiency) each state wanted to protect their economy.
* Stronger labor unions: rising productions costs via higher wages
* Japan and the Anglosaxon world did what they could to deflate (stable currencies and gold standard)
* Germany's currency value reduced to zero
* Private savings disappeared creating a vacuum of working capital for business
* Massive reliance of German economy on foreign loans (US)very vulnerable with the slump
* Europe was made ready for fascism?
* US farmers worried bec prices of primary products turned down again (roaring 20s not such for the Farms of the US)
* Falling of primary prices demonstrated that the demand for them could not keep pace with the capacity to produce.
* Germany borrowed lost of money which made her very vulnerable when the American money was withdrawn. The shock produced in this country paved the way for Nazism (they were fertile for communism but wanted to preserve their capitalist economy, they were very nationalistic and communism tended to be universal/worldwide.
* When the stock market fell US economy and German one fell and prostrated the countries listed by the League of Nations whose international trade depended on a few primary commodities.
* For farmers dependent on the export market this meant ruin, they tried to compensate buy growing and selling more crops but this made prices sink further
* Only Nazi Germany succeed in eliminating unemployment between 1933-1938
* a solution was sought on he left or right
LONG TERM CONSEQUENCES:
* The Slump destroyed economic liberalism for half a century
* The gold standard was abandoned
* GB abandoned Free Trade
* Governments were forced to give social considerations priorities over economic ones in their state policies (danger not do to so as radicalization of the Left and of the Right as in Germany were too menacing)
* Tariffs were raised even higher
* elimination of unemployment became key according the KEYNES:

the demand which incomes of fully employed workers must generate would stimulate economy
Criticized the Versailles Treaty by saying that without a restoration of a German economy a restoration of a stable liberal civilization and economy in Europe was not possible. Keeping Germany feeble was counterproductive. The French wanted to feel secure from Germany but they were too weak to impose their policy. IN 1923 they occupied the Industrial Heartland of West Germany on the excuse they were refusing to pay.
* The French wanted Germany to pay in cash rather than goods out of current production or out of the income from German exports which would have strengthened her economy.
* Germany was forced into borrowing from the US loans massive.Germany run into deep debt.Her imports soared
* also bec mass unemployment was believed to be politically and socially explosive so
* Installation of modern welfare system (prophylactic measure)
* USSR was engaged in ultra rapid massive industrialization in its new 5 Year Plans under Stalin, its industrial production tripled (1929-1940). It had no unemployment.
* This impressed the world bec of the collapse of Western Capitalism
* Social democratic parties adopted "plans". (Hitler introduced its 4 years plan)
* WWI had benefited US economy as after WWII, became the dominant economy, reinforced its position as the world's greatest industrial producer and the world's greatest creditor-main international lender.
* US was the premier exporting and importing nation= principal victim of the Slump
* CAUSES IN EUROPE:
* Payments imposed on Germany "reparations"
* war guilt clause (gift to German nationalism=Hitler)
* US proposed fixing Germany's payments according to the country's capacity to pay
* France insisted on recovering the entire cost of the war (wanted to keep Germany weak)
* Reparations gave way to endless debates and crises bec the US wished to link the questions of German's debts to that of their won wartime debts to Washington (British and French debts)
* All payments ceased in 1932 for practical purposes (German and Allied)
* THE WORLD SYSTEM DID NOT WORK BECAUSE: imbalance in development between USA and rest of the world and unlike GB US did not need the rest of the world and did not act as a global stabilizer.
* The US after WWI needed to import less capital, labour and fewer commodities and her exports made a small contribution to the national income
* SECOND PERSPECTIVE ON THE DEPRESSION:
* failure of the world economy to generate enough demand for a lasting expansion.
* mass demand could not keep pace with the rapidly increasing productivity of the industrial system the result was overproduction and speculation which in turn triggered off the collapse.
* consumer credit was greatly expanded and customers did not use their loans to buy traidtional mass consumption goods (food, clothing)instead they bought the durable consumer goods of the modern consumer society (cars, houses) which have a high income elasticity of demand
* the new products required high and expanding levels of income and high degree of confidence about the future.
* POLITICAL EFFECTS
* Countries moved to the right (Japan, Germany, Italy, Br) nationalistic, conservative, isolationist. On the Moderate Left the US (socialist progressiveness assisting ppl. Scandinavia: socialist democracy, stage in between capitalism and communism.
* Radical right reinforced during Slump
* International communist movement outside USSR became feeble
* increased anti imperialist activity ec the collapse of the commodity prices on which colonial economies depended and the metropolitan countries rushed to protect their agriculture and employment without regard if the effect of policies on colonies.
* Colonies: social discontent out of the crisis of local export crops
* old fashioned liberalism seemed doomed and there were 3 options: Marxist communism, capitalism that no longer relied on free markets and their optimality married to moderate social democracy, and FASCISM which the slump transformed into a world movement and danger (National Socialism in Germany or Nazism)
* Nazism benefited from German intellectual tradition hostile to theories of economic liberalism and from a ruthless gov determined to get rid of unemployment at all costs.
* Was born as a counterpart of communism, a countermovement to communism to protect their private property

1940 Roosevelt's ThirdTerm

1940

1944 Roosevel'ts Fourth Term

1944

1945 Roosevelt dies

1945