Economic Impact of the 1930s Global Crisis

The Economic Depression of the 1930s

The fall of the New York Stock Exchange in 1929 was the starting point of a global economic crisis for all countries, in all economic sectors, and all social classes.

The 1929 Crash

The stock market crash surprised a society steeped in the optimism of apparent prosperity. Late in the expansion of the Roaring Twenties, the volume of investments was very high, with high gains due to productivity growth and wage moderation. But this situation, helped by high unemployment rates, caused output to exceed the demand. Towards 1928, the ability to invest in profitable productive activity was limited. The precarious balance between supply and demand caused the economic reality of the stock market collapse of the values of the shares of the NYSE in New York.

On October 24, 1929, called Black Thursday, an excessively high number of shares were put up for sale, while demand was insignificant. The shares fell in price and a wave of panic invaded; the shares fell sharply. The stock market crisis continued until 1933 and provoked the ruin of millions of large and small investors.

The Extent of the Crisis

The stock market crash led to a vicious circle resulting in a financial crisis. Non-returns on loans for investors provoked bankruptcy and ruined the banking system; at the same time, business bankruptcies occurred in the chain of financing.

• Industrial and Commercial Crisis: This situation increased the unemployment rate, which, together with falling wages, contracted the capability of purchase. As a result, stocks increased and industrial production was reduced.
• International Impact: The U.S. financial crisis provoked the reduction of loans to Europe and the repatriation of American capital invested abroad. This was the reason for business failures, banking collapses, and currency devaluations, depriving the majority of European countries of the means to pay for advances.

The industrial crisis led, as in the United States, to the adoption of protectionist measures to try to boost domestic production. Austria and, above all, Germany were the European countries most affected by the crisis, as their economies were based on the contributions of American capital.