Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 to the late 1930s, marked by unprecedented levels of unemployment, poverty, and deflation. It significantly affected global trade and finance, leading to major changes in the international monetary system and shaping the future of globalization as countries reevaluated their economic policies and relationships.

5 Must Know Facts For Your Next Test

1. The Great Depression began with the stock market crash on October 29, 1929, known as Black Tuesday, which triggered a chain reaction of bank failures and economic collapse.
2. Unemployment rates soared during the Great Depression, reaching as high as 25% in the United States, drastically affecting families and communities.
3. International trade plummeted as countries adopted protectionist policies, further deepening the economic crisis globally.
4. The Great Depression prompted significant changes in government economic policy, leading to the implementation of welfare programs and regulations that shaped modern social safety nets.
5. The global economic impact of the Great Depression played a critical role in the rise of totalitarian regimes in several countries, altering political landscapes around the world.

Review Questions

• How did the Great Depression influence changes in the international monetary system?
  • The Great Depression prompted countries to abandon the gold standard and adopt more flexible exchange rate systems as they struggled to stabilize their economies. This shift reflected a move toward a more managed monetary approach, as nations sought to regain control over their domestic economies and promote economic recovery. The effects of these changes laid the groundwork for the Bretton Woods system established after World War II, which aimed to create a stable international monetary framework.
• Evaluate the impact of the Great Depression on globalization and international economic relations.
  • The Great Depression significantly slowed down globalization by fostering protectionist policies that restricted international trade. Countries focused on national self-sufficiency rather than interdependence, which led to a decline in cross-border investments and trade. As nations struggled with their domestic issues, cooperative international agreements were largely sidelined, which hindered global economic integration during this period.
• Assess how the legacy of the Great Depression continues to influence economic policies and international relations today.
  • The legacy of the Great Depression is evident in today's economic policies, as many governments prioritize social safety nets and regulatory measures to prevent severe downturns. The lessons learned from this period shaped contemporary approaches to financial crises, emphasizing coordinated international responses. Additionally, the Great Depression's impact on nationalism versus globalization debates continues to resonate today, influencing how countries balance domestic priorities with global engagement.

Related terms

Stock Market Crash of 1929: A dramatic decline in stock prices that marked the beginning of the Great Depression, leading to widespread financial panic and loss of savings.

New Deal: A series of programs and reforms implemented by U.S. President Franklin D. Roosevelt in response to the Great Depression aimed at economic recovery and social reform.

Protectionism:

Economic policy of restricting imports from other countries through tariffs and regulations, which increased during the Great Depression as nations sought to protect domestic industries.