Great Depression: Causes, Global Impact, and New Deal

The Great Depression

At the end of the 1920s, a series of problems in the USA caused a major economic crisis, known as the Great Depression. This crisis lasted until the end of the 1930s and brought an end to the prosperous, consumer lifestyle of the previous decade.

USA Crisis: Triggers of the Depression

The problems that led to the crisis in the USA included:

• Overproduction: American industry produced more goods than the population needed. When companies could not sell their products, they went bankrupt and had to close.
• Falling Consumption: When companies closed down, people lost their jobs and stopped spending money. Rising unemployment reduced demand. As a result, more and more companies went out of business.
• The Wall Street Crash: When many companies whose shares were sold on the stock market began to fail, investors panicked and tried to sell all of their shares. As a result, share values fell dramatically, and in October 1929, the New York Stock Market crashed.

Global Spread and Economic Fallout

The effects of the crash soon spread to Europe and other parts of the world because the USA asked other countries to repay the loans that they had received after the war. As a consequence, consumption decreased in Europe, and companies there also went out of business. Wages fell, and unemployment increased. In addition, some banks collapsed because many people panicked and withdrew all their money.

The depression also had a negative impact on international trade because many countries adopted protectionist measures in response to the economic crisis. During the depression, living standards declined dramatically. In many countries, there were protests against the government and against the capitalist system that had produced the crisis.

Roosevelt's New Deal: A Path to Recovery

In 1933, one of the worst years of the Great Depression, a Democrat, Franklin D. Roosevelt, won the elections. In his electoral platform, he promised to help the economic recovery and to end the crisis. To achieve this, he created an interventionist program to reactivate the economy. It was called the New Deal and can be divided into two branches:

New Deal: Economic Interventions

This branch had two objectives: to restrain or control the fall in prices and to relaunch company activities. Different measures were adopted to achieve them:

• Helping companies in trouble.
• Creating public companies in sectors lacking private investment.
• Destroying agricultural stocks.
• Implementing banking controls (e.g., low-interest loans to facilitate business expansion).

New Deal: Social Relief Measures

Decreasing unemployment was made possible thanks to a big public works plan. Roads, bridges, and dams were built, and a lot of workers were needed. Different measures were implemented to increase workers' purchasing power:

• A new policy supporting agricultural prices.
• Raising salaries.
• Reducing working hours.

Depression's End and WWII's Dawn

All of this caused a relaunch of the USA economy and a decrease in unemployment, but despite this, the crisis did not end until the beginning of the Second World War.