Great Depression of 1929

Great Depression of 1929
Name	Great Depression of 1929
Caption	Traders outside New York Stock Exchange during October 1929
Date	1929–1939
Location	Primarily United States, global
Causes	Stock market crash, banking failures, protectionism, monetary contraction
Outcomes	Widespread unemployment, policy reforms, shift toward welfare states

Contents

Great Depression of 1929 The Great Depression of 1929 was a prolonged worldwide downturn that began after the October 1929 collapse of the New York Stock Exchange and deepened through the 1930s, affecting United Kingdom, France, Germany, Japan, Canada, Australia, and many other countries. The crisis interacted with events such as the Treaty of Versailles, the Weimar Republic economic instability, and the monetary policies of the Federal Reserve System, producing cascading bank failures and severe declines in industrial output, international trade, and living standards. Responses involved leaders and institutions including Herbert Hoover, Franklin D. Roosevelt, John Maynard Keynes, Benito Mussolini, and the Bank of England, and led to policy innovations like the New Deal, the Glass–Steagall Act, and increased state intervention in finance.

Background and Causes

Global conditions preceding the collapse included an extended expansion in United States markets, heavy lending by J.P. Morgan banks, and speculative bubbles in commodities and securities tied to firms such as General Electric, United States Steel Corporation, and Ford Motor Company. International imbalances stemmed from the reparations regime of the Treaty of Versailles, war debts owed to United States Treasury Department creditors, and gold standard constraints administered by the International Monetary Fund's precursor institutions and the Bank for International Settlements, provoking deflationary pressures in nations such as Germany, Italy, and Spain. Agricultural distress in regions dominated by conglomerates like Imperial Tobacco and market shifts affecting exporters to United Kingdom and Belgium exacerbated rural crises that weakened creditworthiness at institutions including Bank of France and regional savings banks.

The October 1929 collapse at the New York Stock Exchange followed speculative excesses involving brokerage houses, margin buying practices promoted by firms such as Merrill Lynch and Lehman Brothers, and abrupt reversals influenced by policy signals from the Federal Reserve System and comments associated with financiers like Charles E. Mitchell. Initial panic led to runs on institutions including Bankers Trust and failures of regional banks, prompting interventions by figures such as Andrew Mellon and the Federal Reserve Bank of New York while precipitating liquidity crises similar to those later examined by Milton Friedman and Anna Schwartz. The immediate aftermath saw sharp contractions in prices for commodities traded through hubs like Chicago Board of Trade and declines in output at industrial centers such as Pittsburgh and Detroit.

Industrial decline hit manufacturing cites including Chicago, Cleveland, and Birmingham, Alabama as companies such as Bethlehem Steel and Studebaker cut production, while unemployment surged among workers represented by unions like the American Federation of Labor and led to mass protests influenced by activists associated with Communist Party USA and the Industrial Workers of the World. Urban poverty intensified in neighborhoods served by charities like American Red Cross and municipal relief programs originating in New York City and Chicago, while rural distress sparked migrations along routes such as Route 66 toward destinations like California, echoing narratives depicted in works by John Steinbeck and photographed by Dorothea Lange. Social consequences included housing foreclosures tied to institutions like the Home Owners' Loan Corporation, increased rates of malnutrition and illness noted by public health officials at the U.S. Public Health Service, and political mobilization that affected elections involving figures like Al Smith and Franklin D. Roosevelt.

Initial policy responses by Herbert Hoover emphasized voluntary cooperation with business leaders including executives from Chrysler and U.S. Steel, while fiscal and monetary responses involved the Treasury Department, the Federal Reserve System, and congressional legislation debated in the United States Congress. Subsequent reforms under Franklin D. Roosevelt included the New Deal, creation of agencies such as the Civilian Conservation Corps, the Works Progress Administration, the Securities and Exchange Commission, and regulatory statutes like the Glass–Steagall Act, which reshaped relationships among banks like National City Bank and the investment houses investigated by the Securities and Exchange Commission. Debates over intervention were framed by economists such as John Maynard Keynes, Friedrich Hayek, and Milton Friedman, and influenced fiscal orthodoxy in institutions like the Bank of England and the Bretton Woods Conference planners.

The crisis spread through channels including gold flows overseen by the International Monetary Fund's antecedents, trade linkages among exporters in Argentina, Brazil, and South Africa, and banking ties among institutions like Barclays and Deutsche Bank. Protectionist measures such as the Smoot–Hawley Tariff Act prompted retaliatory tariffs by United Kingdom and France, disrupting commodity markets in Canada and colonies administered by British Empire entities like the East India Company's successors, and fueling political instability that aided movements led by Adolf Hitler in the Weimar Republic and by Francisco Franco in Spain. Currency devaluations and departures from the gold standard by countries including United Kingdom and Sweden altered competitive positions, while international conferences attended by delegates from League of Nations member states attempted limited coordination.

Recovery pathways varied: the United States saw partial revival through New Deal spending and rearmament for World War II that boosted United States Department of Defense procurement; Germany pursued autarkic policies under Nazi Party leadership that reduced unemployment before wartime mobilization; and Sweden and Norway implemented social democratic reforms via parties such as the Swedish Social Democratic Party and the Labour Party (Norway). Long-term consequences included financial regulation innovations like those championed by Paul Volcker's successors, establishment of welfare-state institutions modeled on programs from United Kingdom's Beveridge Report, restructuring of international finance culminating in the Bretton Woods Conference and institutions like the International Monetary Fund and the World Bank, and ideological shifts that influenced postwar governance in democracies and authoritarian regimes alike. The Depression reshaped scholarship by figures like John Maynard Keynes and historians such as William Leuchtenburg and left legacies in cultural works by Steinbeck and photographers like Dorothea Lange.

Category:Great Depressions