Whether a small or a big country, every country has suffered a major economic crisis due to COVID-19 pandemic. From industry to farming, every sector of all countries has suffered before standing up again. This incident reminds us of the Great Depression that went on for ten years.
During this period, the entire world economy collapsed, leaving people in a miserable state. With the economic collapse, and shut down of industries and banks, every country suffered for years. So, in this article, we shall find out what the Great Depression is, its causes, and its results.
What Was The Great Depression (1929-39)?
The Great Depression is the historical incident when the American stock market crashed by 33% within a month. This fall resulted in both mental and emotional turmoil, causing a noticeable slowdown in all the major economies of the world.
Though it all started in America, it did not take much time to spread throughout the world. After this share market fall, the growing American economy suffered a major loss, causing this country’s economy to go backward for years.
But what were the reasons behind this downfall? Well, not one, there were multiple reasons why the United States of America, the great economic powerhouse, and the other countries had to face the Great Depression. We shall figure those out below.
Causes Behind the Great Depression
The Great Depression was the reason for the worldwide economic collapse. Weak governmental policies, a weakening stock market, and overproduction were the reasons behind the Great Depression. Now, we are about to discuss the reasons thoroughly below:
● World War 1
With the emergence of World War 1, all the major economies in the world got caught up in fighting the war. However, America’s stock market started blooming. While the central powers were still struggling to overcome the devastation of the war, America’s blooming fashion sense and jazz became a part of people’s life. On the other hand, Britain, one of the most important economies in the world, struggled to pay its debt owed to America.
Most Americans started to invest more money in the share market, and banks invested more money in the system, not knowing the imminent danger.
World War 1 proved to be one of the most pivotal reasons for the growth in the farm sector. With powerful countries getting caught up in the war, they were unable to produce crops. As a result, all these countries had to depend on America for the production and supply of food. This instigated farmers to buy more land. However, with the European power getting up on their feet, they stopped feeling the need to depend on America for the supply of food. That slowed down the American economy to some extent.
● Weak Government Policy
Observing the lack of dependency on the American food supply, the American Government put more tariffs on the food supply. However, this incident could not please the European traders, and they increased the import fees on American products. As a result, the surplus kept growing while exports slowed down. This overproduction started hitting the market, resulting in a stock market crash.
People started selling their shares at a low price, thousands of banks could not recover the money they had lent to the customers, and many industries were shut down. Within a month, the American stock market crashed by 33%, causing all the countries to suffer for the coming years.
Result Of The Great Depression
The Great Depression transformed America from being a utopian economic powerhouse to a country battling an economic crisis. But it affected other countries too. We have discussed the impact of the Great Depression below. Check out What those are:
● Weakening Of Great Britain
Being the most powerful industrial hub, Great Britain maintained its hegemony over the economies. But with the industrial revolution in America, Great Britain was already losing its power. On the other hand, France had always been a competitor of Great Britain. Though Britain had achieved victory in World War 1, it was still facing great repercussions. The great depression worked as another reason to lose its position as a global power.
● United Indians
The British imposed more taxes on India to bear the economic slowdown that the country had been facing. However, it caused Mahatma Gandhi to declare the Great Civil Disobedience Movement, which proved to be a sharp weapon against the British. This protest united the Indians to fight for their freedom, weakening the dominance of the British government.
The Great Depression, a period full of industrial and share market fall, taught us about governmental policies. Though the Great Depression was a period known as hopelessness and disappointment, it worked as a lesson that economic expansion is a necessity. But every country needs to be informed about how to make the expansion happen. It also helps us understand that the right governmental decisions can help countries to become economic powerhouses.