Great Depression

Definition

The Great Depression was a severe worldwide economic downturn that lasted from 1929 to the late 1930s, marked by massive unemployment, drastic declines in industrial output, and a significant drop in consumer spending. This period reshaped the global economic system, exposing vulnerabilities and prompting changes in monetary policies and international relations.

5 Must Know Facts For Your Next Test

1. The Great Depression began after the stock market crash on October 29, 1929, known as Black Tuesday, which wiped out millions of investors.
2. Unemployment rates soared during the Great Depression, reaching around 25% in the United States at its peak, leading to widespread poverty and social unrest.
3. International trade plummeted as countries implemented protectionist measures like tariffs, which worsened the global economic crisis.
4. The Great Depression prompted significant shifts in economic policy, including the adoption of Keynesian principles that emphasized government intervention to stabilize economies.
5. The social impact of the Great Depression was profound, leading to changes in labor rights, welfare programs, and an increased role of government in economic affairs.

Review Questions

• How did the Great Depression influence changes in international economic policies during its duration?
  • The Great Depression significantly influenced international economic policies as countries faced immense pressure to stabilize their economies. Many nations resorted to protectionist measures, imposing tariffs that restricted trade and further deepened the global downturn. In response to these challenges, nations began to reconsider their approaches to international cooperation, eventually leading to reforms that encouraged more collaborative economic policies post-World War II.
• Discuss how the New Deal reshaped the role of government in the U.S. economy during the Great Depression.
  • The New Deal reshaped the role of government in the U.S. economy by expanding its involvement through various programs aimed at economic recovery. President Franklin D. Roosevelt's administration implemented measures like job creation programs, financial reforms, and social safety nets to address the hardships caused by the Great Depression. This shift established a precedent for increased federal responsibility in managing economic stability and welfare, influencing future government policy.
• Evaluate how Marxist perspectives explain the causes and consequences of the Great Depression in relation to class struggle and capitalism.
  • From a Marxist perspective, the Great Depression can be seen as a manifestation of inherent contradictions within capitalism, where overproduction and underconsumption led to a collapse of market demand. Marxists argue that this crisis highlighted class struggles as working-class individuals faced unemployment and poverty while capitalists sought to maintain profits through austerity measures. The consequences of this economic downturn intensified class divisions and fostered movements for labor rights and social change, ultimately questioning the sustainability of capitalist systems.

Related terms

Stock Market Crash of 1929: The sudden and dramatic decline of stock prices on the New York Stock Exchange in October 1929, which signaled the beginning of the Great Depression.

New Deal: A series of programs and reforms introduced by President Franklin D. Roosevelt aimed at recovering the U.S. economy from the Great Depression through government intervention and social welfare.

Keynesian Economics:

An economic theory proposed by John Maynard Keynes that advocates for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of depression.