The Great Depression and the 1929 Stock Market Crash

The Great Crash of 1929

The Crisis of 1929, also known as the Great Crash, was probably the greatest economic crisis to confront the capitalist system. On Thursday, October 24, 1929, the Wall Street stock market crashed.

Triggers of the Economic Collapse

The main triggers were the fall in agricultural prices in international trade and credit restrictions. Other reasons included:

• The German economic collapse.
• Overproduction (due to World War I, as countries developed their own industries to supply products that war-torn Europe could no longer export).
• Significant debts for loans, among others.

The financial gains of the great bull market were shattered on "Black Thursday" when the value of shares on the NYSE collapsed. Stock prices fell that day and continued to decline for a whole month; 100,000 U.S. workers lost their jobs within just three days.

The Role of the United States

The First World War had made the U.S. the primary supplier of raw materials, foodstuffs, and industrial products worldwide. Despite this, as the world economy was in disequilibrium with respect to the United States, by 1925, stocks of various products began to accumulate. This led to:

• Falling prices: Other countries found it more suitable to buy from the U.S. than produce their own goods.
• Unemployment: Production exceeded demand, and companies could no longer afford employees following the crash.
• Loss of purchasing power: The general population faced severe financial constraints.

By the end of the decade, the stock market grew unbridled by 90%. The values of the stocks were, so to speak, of a "fictional character" as they were far above their real value. People took out bank loans and invested that money in the stock market at interest rates higher than the loans themselves.

Global Impact and Social Consequences

This crisis expanded throughout the rest of the capitalist world; by mid-1931, it affected countries such as Uruguay. The crisis resulted in the devaluation of currency almost everywhere, falling real wages, and impacts across all sectors. Exports fell, foreign capital shifted to countries like Uruguay, and banks closed due to bankruptcies, lack of credit, and ruined investors.

Social Standpoint and Recovery

From a social standpoint, the cost of living rose, and many lives were lost. Desperate individuals faced the breakdown, with many committing suicide due to debts impossible to pay, leaving many without work and causing the jobless rate to soar. The recovery of capital was very slow; the effects of the crisis lasted until 1939 and the beginning of World War II.