This ten-year horror followed the Wall Street Crash (q.v. 2 days ago), lasting from 1929 to 1939, and might have been longer had not World War 2 interrupted the economic wizards who created it. Since their dramatic and tardy entrance in the last year of the Great War, the United States of America had become the dominant nation on this planet, especially in the world economy. No-one is quite sure whether successive US presidents wanted, like Britain, a huge empire and very little money, or a huge amount of money and no empire. Whatever, the collapse of share prices indicated a rapid withdrawal of loans to other countries, tariffs were raised so that imports declined, and agricultural prices sank.
Most rural districts could not possibly buy industrial goods, which meant the closure of factories and shops going bankrupt. Unemployment shot up, and mean streets were littered with bums who might weeks before have been brokers. From 1929 to 1932 unemployment in Britain and Belgium rose to 33%, in Germany 44% and the US 27%; popular hoodlums like Bonnie and Clyde grew rich dangerously.
As industry declined the demand for raw materials fell, which affected Africa, Asia and Latin America more than most. Profits and share prices sank again as the prices of goods spiralled downwards. Banks failed in their attempts to get repayment of their loans. In Central and Eastern Europe the banking system all but collapsed. In 1931 the great Austrian bank Kredit-Ansalt failed. In both the US and Germany clients withdrew their savings, causing the banks to close their doors, some permanently. Adolf Hitler would soon be Chancellor, and Britain came off the gold standard; world trade declined by 60% over a period of four years (1929 – 32). Some countries tried to make things better by imposing high tariffs to protect industry and currencies. In the US an Act raised the duty on manufactured imports to 48%.
Agriculture was protected by tariffs, but also by controlled farm prices and by paying farmers not to produce, an Alice-in-Wonderland practice that greatly influenced the Common Agricultural Policy later, in the European Community (1970s & 80s).
The economic effects of the Depression were astonishing; America suffered the worst, with millions losing everything, starting with their jobs, homes and possessions. It is no wonder Bonnie and Clyde and people like them were popular in rural zones. Starvation became a genuine threat in the greatest food-producing country in the world, as prices were too low and grain rotted in the fields and plains. Millions of animals were slaughtered and left to decompose or be burnt in the countryside, as farmers could not afford to feed or ship them. By 1939 America had not regained its 1929 level in the economy, and not until she entered the Second War in 1941 did the need for armaments pull her out of the Depression. Meanwhile Japan was suffering horribly because the US took 90% of its silk production, and the price had fallen by three-quarters. The price of rice had also plummeted. In Brazil the railways started burning coffee in their train boilers instead of coal, because of growing coffee mountains.
In Germany Hitler got elected in 1933 and instantly began re-building the economy by concentrating on armaments, but in Britain the effects of the Great Depression were sporadic – old industrial sectors in the North-East and the North suffered, but new industries such as motor car building saved the Midlands and the South. She began to climb out of the sink after 1935, not realising that after the coming war she would face ruin and lose the Empire (q.v.). France meanwhile hardly suffered at all, as with her excellently organised and productive agriculture, she was almost self-sufficient in food without having to import.
Communist Russia was hardly affected at all by the Great Depression, as she had been isolated from the world economy and continued to develop and expand throughout the 30s. Quick industrialization within the Five Year Plan resulted in Soviet production trebling from 1939 – 40, while her share of world manufactures rose from 5% to 18%. Stalin could proudly report that there was no unemployment in Russia in the 1930s. The population in his concentration camps also grew spectacularly. Germany was impressed, and introduced her own Four Year Plan in 1936. By 1938 (one year before the War) German production was 25% more than in 1929. Some governments had learned a bitter lesson. Others had not.
Unemployment in Britain and Sweden never fell below 16/17% or 20% in the US, during the crucial 1930s. In spite of Roosevelt’s New Deal, the US economy stayed in depression, while the motor car industry (a leading sector) never regained its 1929 peak.
Across the planet, the political result of the Depression was that democracies were weakened or collapsed, and a social revolution was expected in Europe. There was a distinct move to the Right, except in Sweden where Social Democracy began a half-century of domination. In Germany the Weimar Republic (q.v.) broke down while Hitler and Nazism flourished. Dollfuss came to power in Austria in 1933, and Fascist regimes followed across most of Eastern Europe. Japan, very bothered about losing her American market, turned to Imperialism and invaded Manchuria in search of raw materials. Finally, it is painful but true to say that the Great Depression greatly helped to cause the Second World War because it greatly helped Hitler come to power.