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An overview of the effects of the great depression in the united states

What brought about the worst economic downturn in modern history?

Economic history

Economic history The timing and severity of the Great Depression varied substantially across countries. Perhaps not surprisingly, the worst depression ever experienced by the world economy stemmed from a multitude of causes. Declines in consumer demandfinancial panicsand misguided government policies caused economic output to fall in the United States, while the gold standardwhich linked nearly all the countries of the world in a network of fixed currency exchange ratesplayed a key role in transmitting the American downturn to other countries.

The recovery from the Great Depression was spurred largely by the abandonment of the gold standard and the ensuing monetary expansion. The economic impact of the Great Depression was enormous, including both extreme human suffering and profound changes in economic policy.

Great Depression

Timing and severity The Great Depression began in the United States as an ordinary recession in the summer of 1929. The downturn became markedly worse, however, in late 1929 and continued until early 1933.

  1. Once this became reality, devaluation of the currency permitted expansion in the money supply and inflation which, rather than promoting a policy of beggar-thy-neighbor, allowed countries to escape the deflationary vortex of economic decline.
  2. Although certainly not universal, the descriptions above suggest that no small part of the conventional wisdom at the time believed the Depression to be a penitence for past sins. As a countermove, the United States imposed an embargo on export of scrap iron to Japan.
  3. State governments were unable to respond to the situation and many charities could no longer provide even minimum assistance for all those in need. Traditional labor unions almost entirely excluded women during the early 1930s.
  4. Thus the price—specie flow mechanism ceased to function and the equilibrating forces of the pre-World War I gold standard were absent during the interwar period.
  5. It operated successfully because countries that were gaining gold allowed their money supply to increase and raise the domestic price level to restore equilibrium and maintain the fixed exchange rate of their currency. It is also called high-powered money since the monetary base is the quantity that gets multiplied into greater amounts of money supply as banks make loans and people spend and thereby create new bank deposits.

Real output and prices fell precipitously. Between the peak and the trough of the downturn, industrial production in the United States declined 47 percent and real gross domestic product GDP fell 30 percent. The wholesale price index declined 33 percent such declines in the price level are referred to as deflation.

Although there is some debate about the reliability of the statistics, it is widely agreed that the unemployment rate exceeded 20 percent at its highest point. The Depression affected virtually every country of the world.

However, the dates and magnitude of the downturn varied substantially across countries. Table 1 shows the dates of the downturn and upturn in economic activity in a number of countries. Table 2 shows the peak-to-trough percentage decline in annual industrial production for countries for which such data are available. Great Britain struggled with low growth and recession during most of the second half of the 1920s. Britain did not slip into severe depression, however, until early 1930, and its peak-to-trough decline in industrial production was roughly one-third that of the United States.

France also experienced a relatively short downturn in the early 1930s. The French recovery in 1932 and 1933, however, was short-lived.

Randall Parker, East Carolina University

French industrial production and prices both fell substantially between 1933 and 1936. The decline in German industrial production was roughly equal to that in the United States. A number of countries in Latin America fell into depression in late 1928 and early 1929, slightly before the U.

  • However, Eichengreen 1992 points out that the world in which the gold standard functioned before World War I was not the same world in which the gold standard was being re-established;
  • The nation rapidly geared itself for mobilization of its people and its entire industrial capacity;
  • These terrible deaths took there toll on the deceased family in terms of grief, loss and in their quality of life;
  • The public may very well have believed that the business cycle downturn was not going to be reversed, but rather was going to get worse than it was;
  • As the cost of credit intermediation increased, sources of credit for many borrowers especially households, farmers and small firms became expensive or even unobtainable at any price;
  • Health Issues - Personal Problems Influenza - Loss of self esteem Pneumonia - Stress, Anxiety and Despair Tuberculosis - Loss of ability and will to care for oneself and family Diphtheria - Suicidal Tendencies Rickets - Increased danger of violence, abuse and turning to crime Skin diseases - Lack of confidence and lack of control Diarrhea - Isolation and loneliness Sleep deprivation - Lack of informal support networks Social Effects of the Great Depression Fact 18:

While some less-developed countries experienced severe depressions, others, such as Argentina and Brazilexperienced comparatively mild downturns. Japan also experienced a mild depression, which began relatively late and ended relatively early.

  • Under the circumstances, however, Roosevelt could only wait until public opinion regarding U;
  • The Depression affected virtually every country of the world;
  • Under the WPA, buildings, roads, airports and schools were constructed;
  • Social Effects of the Great Depression Fact 3:

Peak-to-trough decline in industrial production in various countries annual data country.