Great Depression: Definition from Answers.com

Great Depression, the longest, deepest, and most pervasive depression in American history, lasted from 1929 to 1939. Its effects were felt in virtually all corners of the world, and it is one of the great economic calamities in history.

In previous depressions, such as those of the 1870s and 1890s, real per capita gross domestic product (GDP)—the sum of all goods and services produced, weighted by market prices and adjusted for inflation—had returned to its original level within five years. In the Great Depression, real per capita GDP was still below its 1929 level a decade later.

Economic activity began to decline in the summer of 1929, and by 1933 real GDP fell more than 25 percent, erasing all of the economic growth of the previous quarter century. Industrial production was especially hard hit, falling some 50 percent. By comparison, industrial production had fallen 7 percent in the 1870s and 13 percent in the 1890s.

From the depths of depression in 1933, the economy recovered until 1937. This expansion was followed by a brief but severe recession, and then another period of economic growth. It was not until the 1940s that previous levels of output were surpassed. This led some to wonder how long the depression would have continued without the advent of World War II.

In the absence of government statistics, scholars have had to estimate unemployment rates for the 1930s. The sharp drop in GDP and the anecdotal evidence of millions of people standing in soup lines or wandering the land as hoboes suggest that these rates were unusually high. It is widely accepted that the unemployment rate peaked above 25 percent in 1933 and remained above 14 percent into the 1940s. Yet these figures may underestimate the true hardship of the times: those who became too discouraged to seek work would not have been counted as unemployed. Likewise, those who moved from the cities to the countryside in order to feed their families would not have been counted. Even those who had jobs tended to see their hours of work fall: the average work week, 47 to 49 hours in the 1920s, fell to 41.7 hours in 1934 and stayed between 42 and 45 until 1942.

The banking system witnessed a number of "panics" during which depositors rushed to take their money out of banks rumored to be in trouble. Many banks failed under this pressure, while others were forced to merge: the number of banks in the United States fell 35 percent between 1929 and 1933.

While the Great Depression affected some sectors of the economy more than others, and thus some regions of the country more than others, all sectors and regions experienced a serious decline in output and a sharp rise in unemployment. The hardship of unemployment, though concentrated in the working class, affected millions in the middle class as well. Farmers suffered too, as the average price of their output fell by half (whereas the aggregate price level fell by only a third).

The Great Depression followed almost a decade of spectacular economic growth. Between 1921 and 1929, output per worker grew about 5.9 percent per year, roughly double the average in the twentieth century. Unemployment and inflation were both very low throughout this period as well. One troublesome characteristic of the 1920s, however, was that income distribution became significantly less equal. Also, a boom in housing construction, associated in part with an automobile-induced rush to the suburbs, collapsed in the late 1920s. And automakers themselves worried throughout the late 1920s that they had saturated their market fighting for market share; auto sales began to slide in the spring of 1929.

Technological advances in production processes (notably electrification, the assembly line, and continuous processing of homogenous goods such as chemicals) were largely responsible for the advances in productivity in the 1920s. These advances induced the vast bulk of firms to invest in new plants and equipment In the early 1920s, there were also innovative new products, such as radio, but the decade after 1925 was the worst in the twentieth century for new product innovation.

Causes of the Great Depression

In 1929 the standard economic theory suggested that a calamity such as the Great Depression could not happen: the economy possessed equilibrating mechanisms that would quickly move it toward full employment. For example, high levels of unemployment should put downward pressure on wages, thereby encouraging firms to increase employment. Before the Great Depression, most economists urged governments to concentrate on maintaining a balanced budget. Since tax receipts inevitably fell during a downturn, governments often increased tax rates and reduced spending. By taking money out of the economy, such policies tended to accelerate the downturn, though the effect was likely small.

As the depression continued, many economists advised the federal government to increase spending, in order to provide employment. Economists also searched for theoretical justifications for such policies. Some thought the depression was caused by overproduction: consumers did not wish to consume all that was produced. These analysts often attributed overproduction to the increased disparity in income that developed in the 1920s, for the poor spend a greater percentage of their income than do the rich. Others worried about a drop in the number of profitable investment opportunities. Often, these arguments were couched in apocalyptic terms: the Great Depression was thought to be the final crisis of capitalism, a crisis that required major institutional restructuring. Others, notably Joseph Schumpeter, pointed the finger at technology and suggested that the Great Depression reflected the failure of entrepreneurs to bring forth new products. He felt the depression was only temporary and a recovery would eventually occur.

The stock market crash of 1929 and the bank panics of the early 1930s were dramatic events. Many commentators emphasized the effect these had in decreasing the spending power of those who lost money. Some went further and blamed the Federal Reserve System for allowing the money supply, and thus average prices, to decline.

John Maynard Keynes in 1936 put forward a theory arguing that the amount individuals desired to save might exceed the amount they wanted to invest. In such an event, they would necessarily consume less than was produced (since, if we ignore foreign trade, total income must be either consumed or saved, while total output is the sum of consumption goods and investment goods). Keynes was skeptical of the strength of equilibrating mechanisms and shocked many economists who clung to a faith in the ability of the market system to govern itself. Yet within a decade the profession had largely embraced his approach, in large part because it allowed them to analyze deficient consumption and investment demand without reference to a crisis of capitalism. Moreover, Keynes argued that, because a portion of income was used for taxes and output included government services, governments might be able to correct a situation of deficient demand by spending more than they tax.

In the early postwar period, Keynesian theory dominated economic thinking. Economists advised governments to spend more than they taxed during recessions and tax more than spend during expansions. Although governments were not always diligent in following this prescription, the limited severity of early postwar business cycles was seen as a vindication of Keynesian theory. Yet little attention was paid to the question of how well it could explain the Great Depression.

In 1963, Milton Friedman and Anna Schwartz proposed a different view of the depression. They argued that, contrary to Keynesian theory, the deflationary actions of the Federal Reserve were primarily at fault. In the ensuing decades, Keynesians and "monetarists" argued for the supremacy of their favored theory. The result was a recognition that both explanations had limitations. Keynesians struggled to comprehend why either consumption or investment demand would have fallen so precipitously as to trigger the depression (though saturation in the housing and automobile markets, among others, may have been important). Monetarists struggled to explain how smallish decreases in the money supply could trigger such a massive downturn, especially since the price level fell as fast as the supply of money, and thus real (inflation-adjusted) aggregate demand need not have fallen.

In the 1980s and 1990s, some economists argued that the actions of the Federal Reserve had caused banks to decrease their willingness to loan money, leading to a severe decrease in consumption and, especially, investment. Others argued that the Federal Reserve and central banks in other countries were constrained by the gold standard, under which the value of a particular currency is fixed to the price of gold.

Some economists today speak of a consensus that holds the Federal Reserve, the gold standard, or both, largely responsible for the Great Depression. Others suggest that a combination of several theoretical approaches is needed to understand this calamity.

Most economists have analyzed the depression from a macroeconomic perspective. This perspective, spawned by the depression and by Keynes's theories, focuses on the interaction of aggregate economic variables, including consumption, investment, and the money supply. Only fairly recently have some macroeconomists begun to consider how other factors, such as technological innovation, would influence the level of economic activity.

Beginning initially in the 1930s, however, some students of the Great Depression have examined the unusually high level of process innovation in the 1920s and the lack of product innovation in the decade after 1925. The introduction of new production processes requires investment but may well cause firms to let some of their workforce go; by reducing prices, new processes may also reduce the amount consumers spend. The introduction of new products almost always requires investment and more employees; they also often increase the propensity of individuals to consume. The time path of technological innovation may thus explain much of the observed movements in consumption, investment, and employment during the interwar period. There may also be important interactions with the monetary variables discussed above: in particular, firms are especially dependent on bank finance in the early stages of developing a new product.

Effects of the Great Depression

The psychological, cultural, and political repercussions of the Great Depression were felt around the world, but it had a significantly different impact in different countries. In particular, it is widely agreed that the rise of the Nazi Party in Germany was associated with the economic turmoil of the 1930s. No similar threat emerged in the United States. While President Franklin Roosevelt did introduce a variety of new programs, he was initially elected on a traditional platform that pledged to balance the budget. Why did the depression cause less political change in the United States than elsewhere? A much longer experience with democracy may have been important. In addition, a faith in the "American dream," whereby anyone who worked hard could succeed, was apparently retained and limited the agitation for political change.

Effects on individuals. Much of the unemployment experience of the depression can be accounted for by workers who moved in and out of periods of employment and unemployment that lasted for weeks or months. These individuals suffered financially, to be sure, but they were generally able to save, borrow, or beg enough to avoid the severest hardships. Their intermittent periods of employment helped to stave off a psychological sense of failure. Yet there were also numerous workers who were unemployed for years at a time. Among this group were those with the least skills or the poorest attitudes. Others found that having been unemployed for a long period of time made them less attractive to employers. Long-term unemployment appears to have been concentrated among people in their late teens and early twenties and those older than fifty-five. For many that came of age during the depression, World War II would provide their first experience of full-time employment.

With unemployment rates exceeding 25 percent, it was obvious that most of the unemployed were not responsible for their plight. Yet the ideal that success came to those who worked hard remained in place, and thus those who were unemployed generally felt a severe sense of failure. The incidence of mental health problems rose, as did problems of family violence. For both psychological and economic reasons, decisions to marry and to have children were delayed. Although the United States provided more relief to the unemployed than many other countries (including Canada), coverage was still spotty. In particular, recent immigrants to the United States were often denied relief. Severe malnutrition afflicted many, and the palpable fear of it, many more.

Effects by gender and race. Federal, state, and local governments, as well as many private firms, introduced explicit policies in the 1930s to favor men over women for jobs. Married women were often the first to be laid off. At a time of widespread unemployment, it was felt that jobs should be allocated only to male "breadwinners." Nevertheless, unemployment rates among women were lower than for men during the 1930s, in large part because the labor market was highly segmented by gender, and the service sector jobs in which women predominated were less affected by the depression. The female labor force participation rate—the proportion of women seeking or possessing paid work—had been rising for decades; the 1930s saw only a slight increase; thus, the depression acted to slow this societal change (which would greatly accelerate during World War II, and then again in the postwar period).

Many surveys found unemployment rates among blacks to be 30 to 50 percent higher than among whites. Discrimination was undoubtedly one factor: examples abound of black workers being laid off to make room for white workers. Yet another important factor was the preponderance of black workers in industries (such as automobiles) that experienced the greatest reductions in employment. And the migration of blacks to northern industrial centers during the 1920s may have left them especially prone to seniority-based layoffs.

Cultural effects. One might expect the Great Depression to have induced great skepticism about the economic system and the cultural attitudes favoring hard work and consumption associated with it. As noted, the ideal of hard work was reinforced during the depression, and those who lived through it would place great value in work after the war. Those who experienced the depression were disposed to thrift, but they were also driven to value their consumption opportunities. Recall that through the 1930s it was commonly thought that one cause of the depression was that people did not wish to consume enough: an obvious response was to value consumption more.

The New Deal. The nonmilitary spending of the federal government accounted for 1.5 percent of GDP in 1929 but 7.5 percent in 1939. Not only did the government take on new responsibilities, providing temporary relief and temporary public works employment, but it established an ongoing federal presence in social security (both pensions and unemployment insurance), welfare, financial regulation and deposit insurance, and a host of other areas. The size of the federal government would grow even more in the postwar period. Whether the size of government today is larger than it would have been without the depression is an open question. Some scholars argue for a "ratchet effect," whereby government expenditures increase during crises, but do not return to the original level thereafter. Others argue that the increase in government brought on by the depression would have eventually happened anyhow.

In the case of unemployment insurance, at least, the United States might today have a more extensive system if not for the depression. Both Congress and the Supreme Court were more oriented toward states' rights in the 1930s than in the early postwar period. The social security system thus gave substantial influence to states. Some have argued that this has encouraged a "race to the bottom," whereby states try to attract employers with lower unemployment insurance levies. The United States spends only a fraction of what countries such as Canada spend per capita on unemployment insurance.

Some economists have suggested that public works programs exacerbated the unemployment experience of the depression. They argue that many of those on relief would have otherwise worked elsewhere. However, there were more workers seeking employment than there were job openings; thus, even if those on relief did find work elsewhere, they would likely be taking the jobs of other people.

The introduction of securities regulation in the 1930s has arguably done much to improve the efficiency, fairness, and thus stability of American stock markets. Enhanced bank supervision, and especially the introduction of deposit insurance from 1934, ended the scourge of bank panics: most depositors no longer had an incentive to rush to their bank at the first rumor of trouble. But deposit insurance was not an unmixed blessing; in the wake of the failure of hundreds of small savings and loan institutions decades later, many noted that deposit insurance allowed banks to engage in overly risky activities without being penalized by depositors. The Roosevelt administration also attempted to stem the decline in wages and prices by establishing "industry codes," whereby firms and unions in an industry agreed to maintain set prices and wages. Firms seized the opportunity to collude and agreed in many cases to restrict output in order to inflate prices; this particular element of the New Deal likely served to slow the recovery. Similar attempts to enhance agricultural prices were more successful, at least in the goal of raising farm incomes (but thus increased the cost of food to others).

International Effects

It was long argued that the Great Depression began in the United States and spread to the rest of the world. Many countries, including Canada and Germany, experienced similar levels of economic hardship. In the case of Europe, it was recognized that World War I and the treaties ending it (which required large reparation payments from those countries that started and lost the war) had created weaknesses in the European economy, especially in its financial system. Thus, despite the fact that trade and capital flows were much smaller than today, the American downturn could trigger downturns throughout Europe. As economists have come to emphasize the role the international gold standard played in, at least, exacerbating the depression, the argument that the depression started in the United States has become less central.

With respect to the rest of the world, there can be little doubt that the downturn in economic activity in North America and Europe had a serious impact. Many Third World countries were heavily dependent on exports and suffered economic contractions as these markets dried up. At the same time, they were hit by a decrease in foreign investment flows, especially from the United States, which was a reflection of the monetary contraction in the United States. Many Third World countries, especially in Latin America, responded by introducing high tariffs and striving to become self-sufficient. This may have helped them recover from the depression, but probably served to seriously slow economic growth in the postwar period.

Developed countries also introduced high tariffs during the 1930s. In the United States, the major one was the Smoot-Hawley Tariff of 1930, which arguably encouraged other countries to retaliate with tariffs of their own. Governments hoped that the money previously spent on imports would be spent locally and enhance employment. In return, however, countries lost access to foreign markets, and therefore employment in export-oriented sectors. The likely effect of the increase in tariffs was to decrease incomes around the world by reducing the efficiency of the global economy; the effect the tariffs had on employment is less clear.

Bibliography

Barnard, Rita. The Great Depression and the Culture of Abundance: Kenneth Fearing, Nathanael West, and Mass Culture in the 1930s. New York: Cambridge University Press, 1995. Explores the impact of the depression on cultural attitudes and literature.

Bernanke, Ben S. Essays on the Great Depression. Princeton, N.J.: Princeton University Press, 2000. Emphasizes bank panics and the gold standard.

Bernstein, Michael A. The Great Depression: Delayed Recovery and Economic Change in America, 1929–1939. New York: Cambridge University Press, 1987. Argues for the interaction of technological and monetary forces and explores the experience of several industries.

Bordo, Michael D., Claudia Goldin, and Eugene N. White, eds. The Defining Moment: The Great Depression and the American Economy in the Twentieth Century. Chicago: University of Chicago Press, 1998. Evaluates the impact of a range of New Deal policies and international agreements.

Friedman, Milton, and Anna J. Schwartz. A Monetary History of the United States, 1867–1960. Princeton, N.J.: Princeton University Press, 1963.

Hall, Thomas E., and J. David Ferguson. The Great Depression: An International Disaster of Perverse Economic Policies. Ann Arbor: University of Michigan Press, 1998.

Keynes, John M. The General Theory Of Employment, Interest, and Money. New York: St. Martin's Press, 1964. Original edition published in 1936.

Margo, Robert A. "Employment and Unemployment in the 1930s." Journal of Economic Perspectives 7, no. 2 (spring 1993): 41–59.

Rosenbloom, Joshua, and William Sundstrom. "The Sources of Regional Variation in the Severity of the Great Depression: Evidence from U.S. Manufacturing 1919–1937." Journal of Economic History 59 (1999): 714–747.

Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933–1993. Chapel Hill: University of North Carolina Press, 1997. Looks at how Keynes, Schumpeter, and others influenced later economic analysis.

Rothermund, Dietmar. The Global Impact of the Great Depression, 1929–1939. London: Routledge, 1996. Extensive treatment of the Third World.

Schumpeter, Joseph A. Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. New York: McGraw-Hill, 1939.

Szostak, Rick. Technological Innovation and the Great Depression. Boulder, Colo.: Westview Press, 1995. Explores the causes and effects of the unusual course that technological innovation took between the wars.

Temin, Peter. Did Monetary Forces Cause the Great Depression? New York: Norton, 1976. Classic early defense of Keynesian explanation.

———. Lessons from the Great Depression. Cambridge, Mass.: MIT Press, 1989. Emphasizes the role of the gold standard.

Personal Effects of the Depression

The study of the human cost of unemployment reveals that a new class of poor and dependents is rapidly rising among the ranks of young sturdy ambitious laborers, artisans, mechanics, and professionals, who until recently maintained a relatively high standard of living and were the stable self-respecting citizens and taxpayers of the state. Unemployment and loss of income have ravaged numerous homes. It has broken the spirit of their members, undermined their health, robbed them of self-respect, and destroyed their efficiency and employability. Many households have been dissolved, little children parcelled out to friends, relatives, or charitable homes; husbands and wives, parents and children separated, temporarily or permanently.…Men young and old have taken to the road. Day after day the country over they stand in the breadlines for food. … The law must step in and brand as criminals those who have neither desire nor inclination to violate accepted standards of society.… Physical privation un dermines body and heart.… Idleness destroys not only purchasing power, lowering the standards of living, but also destroys efficiency and finally breaks the spirit.

SOURCE: From the 1932 Report of the California Unemployment Commission.

This article is about the severe worldwide economic downturn in the 1930s. For other uses, see The Great Depression (disambiguation).

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.

The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s.^[1] It was the longest, most widespread, and deepest depression of the 20th century, and is used in the 21st century as an example of how far the world's economy can decline.^[2] The depression originated in the United States, starting with the stock market crash of October 29, 1929 (known as Black Tuesday), but quickly spread to almost every country in the world.^[1]

The Great Depression had devastating effects in virtually every country, rich and poor. Personal income, tax revenue, profits and prices dropped, and international trade plunged by a half to two-thirds. Unemployment in the United States rose to 25%, and in some countries rose as high as 33%.^[3] Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60 percent.^[4]^[5]^[6] Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as cash cropping, mining and logging suffered the most.^[7]

Countries started to recover by the mid-1930s, but in many countries the negative effects of the Great Depression lasted until the start of World War II.^[8]

USA annual real GDP from 1910–60, with the years of the Great Depression (1929–1939) highlighted.

Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted.

Start of the Great Depression

US industrial production (1928–39).

US Farm Prices, (1928–35).

Historians most often attribute the start of the Great Depression to the sudden and total collapse of US stock market prices on October 29, 1929, known as Black Tuesday.^[1] However, some dispute this conclusion, and see the stock crash as a symptom, rather than a cause of the Great Depression.^[3]^[9] Even after the Wall Street Crash of 1929, optimism persisted for some time; John D. Rockefeller said that "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again."^[10] The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30% below the peak of September 1929.^[11] Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

By mid-1930, interest rates had dropped to low levels, but expected deflation and the reluctance of people to add new debt by borrowing, meant that consumer spending and investment were depressed.^[12] In May 1930, automobile sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930; but then a deflationary spiral started in 1931. Conditions were worse in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs. The decline in the US economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late in 1930, a steady decline set in which reached bottom by March 1933.

Causes

Crowd gathering on Wall Street after the 1929 crash.

Main article: Causes of the Great Depression

There were multiple causes for the first downturn in 1929, including the structural weaknesses and specific events that turned it into a major depression and the way in which the downturn spread from country to country. In relation to the 1929 downturn, historians emphasize structural factors like massive bank failures and the stock market crash, while economists (such as Barry Eichengreen, Milton Friedman and Peter Temin) point to monetary factors such as actions by the US Federal Reserve that contracted the money supply, and Britain's decision to return to the Gold Standard at pre-World War I parities (US$4.86:£1).

Recessions and business cycles are thought to be a normal part of living in a world of inexact balances between supply and demand. What turns a usually mild and short recession or "ordinary" business cycle into an actual depression is a subject of debate and concern. Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply. Those who believe in a large role for the state in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that compounded the problem.

Current theories may be broadly classified into three main points of view. First, there are structural theories, most importantly Keynesian economics, but also including those who point to the breakdown of international trade, and Institutional economists who point to underconsumption and over-investment (causing an economic bubble), malfeasance by bankers and industrialists, or incompetence by government officials. The consensus viewpoint is that there was a large-scale loss of confidence that led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could make more money by keeping clear of the markets as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand.

Second, there are the monetarists, who believe that the Great Depression started as an ordinary recession, but that significant policy mistakes by monetary authorities (especially the Federal Reserve), caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Related to this explanation are those who point to debt deflation causing those who borrow to owe ever more in real terms.

Lastly, there are various heterodox theories that downplay or reject the explanations of the Keynesian and monetarists. For example, some new classical macroeconomists have argued that various labor market policies imposed at the start caused the length and severity of the Great Depression. The Austrian school of economics focuses on the macroeconomic effects of money supply, and how central banking decisions can lead to over-investment (economic bubble). The Marxist critique of political economy emphasizes the tendency of capitalism to create unbalanced accumulations of wealth, leading to overaccumulations of capital and a repeating cycle of devaluations through economic crises. Marx saw recession and depression as unavoidable under free-market capitalism as there are no restrictions on accumulations of capital other than the market itself.

Structural explanations

Keynesian

British economist John Maynard Keynes argued in General Theory of Employment Interest and Money that lower aggregate expenditures in the economy contributed to a massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment. Keynes basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing, as the private sector would not invest enough to keep production at the normal level and bring the economy out of recession. Keynesian economists called on governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes.

As the Depression wore on, Roosevelt tried public works, farm subsidies, and other devices to restart the economy, but never completely gave up trying to balance the budget. According to the Keynesians, this improved the economy, but Roosevelt never spent enough to bring the economy out of recession until the start of World War II.^[13]

Breakdown of international trade

Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. Most historians and economists partly blame the American Smoot-Hawley Tariff Act (enacted June 17, 1930) for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade was a small part of overall economic activity in the United States and was concentrated in a few businesses like farming, it was a much larger factor in many other countries.^[14] The average ad valorem rate of duties on dutiable imports for 1921–1925 was 25.9% but under the new tariff it jumped to 50% in 1931–1935.

In dollar terms, American exports declined from about $5.2 billion in 1929 to $1.7 billion in 1933; but prices also fell, so the physical volume of exports only fell by half. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. According to this theory, the collapse of farm exports caused many American farmers to default on their loans, leading to the bank runs on small rural banks that characterized the early years of the Great Depression.

Debt deflation

Irving Fisher argued that the predominant factor leading to the Great Depression was over-indebtedness and deflation. Fisher tied loose credit to over-indebtedness, which fueled speculation and asset bubbles.^[15] He then outlined 9 factors interacting with one another under conditions of debt and deflation to create the mechanics of boom to bust. The chain of events proceeded as follows:

Debt liquidation and distress selling
Contraction of the money supply as bank loans are paid off
A fall in the level of asset prices
A still greater fall in the net worths of business, precipitating bankruptcies
A fall in profits
A reduction in output, in trade and in employment.
Pessimism and loss of confidence
Hoarding of money
A fall in nominal interest rates and a rise in deflation adjusted interest rates.^[15]

During the Crash of 1929 preceding the Great Depression, margin requirements were only 10%.^[16] Brokerage firms, in other words, would lend $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back. Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits en masse, triggering multiple bank runs. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.^[17] Outstanding debts became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By April 1933, around $7 billion in deposits had been frozen in failed banks or those left unlicensed after the March Bank Holiday.^[18]

Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending.^[17] Banks built up their capital reserves and made fewer loans, which intensified deflationary pressures. A vicious cycle developed and the downward spiral accelerated.

The liquidation of debt could not keep up with the fall of prices which it caused. The mass effect of the stampede to liquidate increased the value of each dollar owed, relative to the value of declining asset holdings. The very effort of individuals to lessen their burden of debt effectively increased it. Paradoxically, the more the debtors paid, the more they owed.^[15] This self-aggravating process turned a 1930 recession into a 1933 great depression.

Macroeconomists including Ben Bernanke, the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view of the Great Depression originated by Fisher.^[19]^[20]

Monetarist explanations

Crowd at New York's American Union Bank during a bank run early in the Great Depression.

Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system.^[21]^[22] In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933, thereby transforming a normal recession into the Great Depression. Friedman argued that the downward turn in the economy, starting with the stock market crash, would have been just another recession.^[23] However, the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.^[24] With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.^[25]

One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time the amount of credit the Federal Reserve could issue was limited by laws which required partial gold backing of that credit. By the late 1920s the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. Since a "promise of gold" is not as good as "gold in the hand", during the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933 President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold.^[26]

New classical approach

Recent work from a neoclassical perspective focuses on the decline in productivity that caused the initial decline in output and a prolonged recovery due to policies that affected the labor market. This work, collected by Kehoe and Prescott,^[27] decomposes the economic decline into a decline in the labor force, capital stock, and the productivity with which these inputs are used. This study suggests that theories of the Great Depression have to explain an initial severe decline but rapid recovery in productivity, relatively little change in the capital stock, and a prolonged depression in the labor force. This analysis rejects theories that focus on the role of savings and posit a decline in the capital stock.

Austrian School

Another explanation comes from the Austrian School of economics. Theorists of the "Austrian School" who wrote about the Depression include Austrian economist Friedrich Hayek and American economist Murray Rothbard, who wrote America's Great Depression (1963). In their view and like the monetarists, the Federal Reserve, which was created in 1913, shoulders much of the blame; but in opposition to the monetarists, they argue that the key cause of the Depression was the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable. According to the Austrians, the artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market's adjustment and made the road to complete recovery more difficult.^[28]

Inequality of wealth and income

Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas, 1938.

Two economists of the 1920s, Waddill Catchings and William Trufant Foster, popularized a theory that influenced many policy makers, including Herbert Hoover, Henry A. Wallace, Paul Douglas, and Marriner Eccles. It held the economy produced more than it consumed, because the consumers did not have enough income. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.^[29]^[30]

According to this view, the root cause of the Great Depression was a global overinvestment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. The solution was the government must pump money into consumers' pockets. That is, it must redistribute purchasing power, maintain the industrial base, but reinflate prices and wages to force as much of the inflationary increase in purchasing power into consumer spending. The economy was overbuilt, and new factories were not needed. Foster and Catchings recommended^[31] federal and state governments start large construction projects, a program followed by Hoover and Roosevelt.

Turning point and recovery

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The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period.^[32]

Various countries around the world started to recover from the Great Depression at different times. In most countries of the world recovery from the Great Depression began in 1933.^[1] In the United States recovery began in the spring of 1933.^[1] However, the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933.

There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and the 1937 recession that interrupted it).

The common view among mainstream economists is that Roosevelt's New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt's words and actions portended.^[33]^[34] However, opposition from the new Conservative Coalition caused a rollback of the New Deal policies in early 1937, which caused a setback in the recovery.^[35]

According to Christina Romer, the money supply growth caused by huge international gold inflows was a crucial source of the recovery of the United States economy, and that the economy showed little sign of self-correction. The gold inflows were partly due to devaluation of the U.S. dollar and partly due to deterioration of the political situation in Europe.^[36] In their book, A Monetary History of the United States, Milton Friedman and Anna J. Schwartz also attributed the recovery to monetary factors, and contended that it was much slowed by poor management of money by the Federal Reserve System. Current Chairman of the Federal Reserve Ben Bernanke agrees that monetary factors played important roles both in the worldwide economic decline and eventual recovery.^[37] Bernanke, also sees a strong role for institutional factors, particularly the rebuilding and restructuring of the financial system,^[38] and points out that the Depression needs to be examined in international perspective.^[39] Economists Harold L. Cole and Lee E. Ohanian, believe that the economy should have returned to normal after four years of depression except for continued depressing influences, and point the finger to the lack of downward flexibility in prices and wages, encouraged by Roosevelt Administration policies such as the National Industrial Recovery Act.^[40]

Gold standard

Economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the Gold Standard, it was suspending gold convertibility (or devaluing the currency in gold terms) that did most to make recovery possible.^[41]^[42] What policies countries followed after casting off the gold standard, and what results followed varied widely.

Every major currency left the gold standard during the Great Depression. Great Britain was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.

The Depression in international perspective.^[43]

Great Britain, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–1936.

According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies.^[44]

World War II and recovery

A female factory worker in 1942, Fort Worth, Texas. Women entered the workforce as men were drafted into the armed forces.

The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression. However, some consider that it did not play a very large role in the recovery, although it did help in reducing unemployment.^[1]^[45]^[46]

The massive rearmament policies leading up to World War II helped stimulate the economies of Europe in 1937–39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 finally ended unemployment.^[8]

America's late entry into the war in 1941 finally eliminated the last effects from the Great Depression and brought the unemployment rate down below 10%.^[47] In the United States, massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts.

Effects

Unemployed men march in Toronto, Ontario, Canada.

During the Depression bankers became so unpopular that bank robbers, such as Bonnie and Clyde, became folk heroes.^[48]

The majority of countries set up relief programs, and most underwent some sort of political upheaval, pushing them to the left or right. In some states, the desperate citizens turned toward nationalist demagogues—the most infamous being Adolf Hitler—setting the stage for World War II in 1939.

Australia

Main article: Great Depression in Australia

Australia's extreme dependence on agricultural and industrial exports meant it was one of the hardest-hit countries in the Western world, amongst the likes of Canada and Germany. Falling export demand and commodity prices placed massive downward pressures on wages. Further, unemployment reached a record high of 29% in 1932,^[49] with incidents of civil unrest becoming common. After 1932, an increase in wool and meat prices led to a gradual recovery.

Canada

Main article: Great Depression in Canada

Harshly impacted by both the global economic downturn and the Dust Bowl, Canadian industrial production had fallen to only 58% of the 1929 level by 1932, the second lowest level in the world after the United States, and well behind nations such as Britain, which saw it fall only to 83% of the 1929 level. Total national income fell to 56% of the 1929 level, again worse than any nation apart from the United States. Unemployment reached 27% at the depth of the Depression in 1933.^[50] During the 1930s, Canada employed a highly restrictive immigration policy.^[51]

Chile

France

Main article: Great Depression in France

The Depression began to affect France around 1931. France's relatively high degree of self-sufficiency meant the damage was considerably less than in nations like Germany. However, hardship and unemployment were high enough to lead to rioting and the rise of the socialist Popular Front.

Germany

"Diligent young man seeks work"

Main article: Great Depression in Central Europe

Germany's Weimar Republic was hit hard by the depression, as American loans to help rebuild the German economy now stopped.^[52] Unemployment soared, especially in larger cities, and the political system veered toward extremism.^[53] The unemployment rate reached nearly 30% in 1932.^[54] Repayment of the war reparations due by Germany were suspended in 1932 following the Lausanne Conference of 1932. By that time Germany had repaid 1/8th of the reparations. Hitler's Nazi Party came to power in January 1933.

Japan

The Great Depression did not strongly affect Japan. The Japanese economy shrank by 8% during 1929–31. However, Japan's Finance Minister Takahashi Korekiyo was the first to implement what have come to be identified as Keynesian economic policies: first, by large fiscal stimulus involving deficit spending; and second, by devaluing the currency. Takahashi used the Bank of Japan to sterilize the deficit spending and minimize resulting inflationary pressures. Econometric studies have identified the fiscal stimulus as especially effective.^[55]

The devaluation of the currency had an immediate effect. Japanese textiles began to displace British textiles in export markets. The deficit spending, however proved to be most profound. The deficit spending went into the purchase of munitions for the armed forces. By 1933, Japan was already out of the depression. By 1934 Takahashi realized that the economy was in danger of overheating, and to avoid inflation, moved to reduce the deficit spending that went towards armaments and munitions. This resulted in a strong and swift negative reaction from nationalists, especially those in the Army, culminating in his assassination in the course of the February 26 Incident. This had a chilling effect on all civilian bureaucrats in the Japanese government. From 1934, the military's dominance of the government continued to grow. Instead of reducing deficit spending, the government introduced price controls and rationing schemes that reduced, but did not eliminate inflation, which would remain a problem until the end of World War II.

The deficit spending had a transformative effect on Japan. Japan's industrial production doubled during the 1930s. Further, in 1929 the list of the largest firms in Japan was dominated by light industries, especially textile companies (many of Japan's automakers, like Toyota, have their roots in the textile industry). By 1940 light industry had been displaced by heavy industry as the largest firms inside the Japanese economy.^[56]

Latin America

Main article: Great Depression in Latin America

Because of high levels of United States investment in Latin American economies, they were severely damaged by the Depression. Within the region, Chile, Bolivia and Peru were particularly badly affected.

Netherlands

Main article: Great Depression in the Netherlands

From roughly 1931 until 1937, the Netherlands suffered a deep and exceptionally long depression. This depression was partly caused by the after-effects of the Stock Market Crash of 1929 in the United States, and partly by internal factors in the Netherlands. Government policy, especially the very late dropping of the Gold Standard, played a role in prolonging the depression. The Great Depression in the Netherlands led to some political instability and riots, and can be linked to the rise of the Dutch national-socialist party NSB. The depression in the Netherlands eased off somewhat at the end of 1936, when the government finally dropped the Gold Standard, but real economic stability did not return until after World War II.^[57]

Buried machinery in a barn lot; South Dakota, May 1936. The Dust Bowl on the Great Plains coincided with the Great Depression.^[58]

Entering Gulag (a leaf from Eufrosinia Kersnovskaya's notebook). During the Depression thousands of Americans emigrated to the Soviet Union. Many were arrested as potential “spies” during the Great Terror of 1937-38.^[59]

South Africa

Main article: Great Depression in South Africa

As world trade slumped, demand for South African agricultural and mineral exports fell drastically. The Carnegie Commission on Poor Whites had concluded in 1931 that nearly one-third of Afrikaners lived as paupers. It is believed that the social discomfort caused by the depression was a contributing factor in the 1933 split between the "gesuiwerde" (purified) and "smelter" (fusionist) factions within the National Party and the National Party's subsequent fusion with the South African Party.^[60]

Soviet Union

Main article: Economy of the Soviet Union#Economic development

Having removed itself from the capitalist world system both by choice and as a result of efforts of the capitalist powers to isolate it, the Great Depression had little effect on the Soviet Union. A Soviet trade agency in New York advertised 6,000 positions and received more than 100,000 applications.^[61] Its apparent immunity to the Great Depression seemed to validate the theory of Marxism and contributed to Socialist and Communist agitation in affected nations. Many Western intellectuals, like New York Times reporter Walter Duranty, looked upon Soviet Union with sympathy, either ignorant of or ignoring reports about the Holodomor that killed millions of people.^[62]

United Kingdom

Main article: Great Depression in the United Kingdom

The effects on the industrial areas of Britain were immediate and devastating, as demand for British products collapsed. By the end of 1930 unemployment had more than doubled from 1 million to 2.5 million (20% of the insured workforce), and exports had fallen in value by 50%. In 1933, 30% of Glaswegians were unemployed due to the severe decline in heavy industry. In some towns and cities in the north east, unemployment reached as high as 70% as ship production fell 90%.^[63] The National Hunger March of September–October 1932 was the largest^[64] of a series of hunger marches in Britain in the 1920s and 1930s. About 200,000 unemployed men were sent to the work camps, which continued in operation until 1939.^[65]

Shacks, put up by the Bonus Army (World War I veterans) on the Anacostia flats, Washington, DC, burning after the battle with the 1,000 soldiers accompanied by tanks and machine guns, 1932.^[66]

United States

Main articles: Great Depression in the United States and New Deal

Bennett buggies, or "Hoover wagons", cars pulled by horses, were used by farmers too impoverished to purchase gasoline.

President Herbert Hoover started numerous programs, all of which failed to reverse the downturn.^[67] In June 1930 Congress approved the Smoot-Hawley Tariff Act which raised tariffs on thousands of imported items. The intent of the Act was to encourage the purchase of American-made products by increasing the cost of imported goods, while raising revenue for the federal government and protecting farmers. However, other nations increased tariffs on American-made goods in retaliation, reducing international trade, and worsening the Depression.^[68] In 1931 Hoover urged the major banks in the country to form a consortium known as the National Credit Corporation (NCC).^[69] By 1932 unemployment had reached 23.6%, and it peaked in early 1933 at 25%,^[70] a drought persisted in the agricultural heartland, businesses and families defaulted on record numbers of loans,^[71] and more than 5,000 banks had failed.^[72] Hundreds of thousands of Americans found themselves homeless and they began congregating in the numerous Hoovervilles that had begun to appear across the country.^[73] In response, President Hoover and Congress approved the Federal Home Loan Bank Act, to spur new home construction, and reduce foreclosures. The final attempt of the Hoover Administration to stimulate the economy was the passage of the Emergency Relief and Construction Act (ERA) which included funds for public works programs such as dams and the creation of the Reconstruction Finance Corporation (RFC) in 1932. The RFC's initial goal was to provide government-secured loans to financial institutions, railroads and farmers. Quarter by quarter the economy went downhill, as prices, profits and employment fell, leading to the political realignment in 1932 that brought to power Franklin Delano Roosevelt.

Great Depression: man lying down on pier, New York City docks, 1935.

Shortly after President Roosevelt was inaugurated in 1933, drought and erosion combined to cause the Dust Bowl, shifting hundreds of thousands of displaced persons off their farms in the Midwest. From his inauguration onward, Roosevelt argued that restructuring of the economy would be needed to prevent another depression or avoid prolonging the current one. New Deal programs sought to stimulate demand and provide work and relief for the impoverished through increased government spending and the institution of financial reforms. The Securities Act of 1933 comprehensively regulated the securities industry. This was followed by the Securities Exchange Act of 1934 which created the Securities and Exchange Commission. Though amended, key provisions of both Acts are still in force. Federal insurance of bank deposits was provided by the FDIC, and the Glass-Steagall Act. The institution of the National Recovery Administration (NRA) remains a controversial act to this day. The NRA made a number of sweeping changes to the American economy until it was deemed unconstitutional by the Supreme Court of the United States in 1935.

CCC workers constructing road, 1933. Over 3 million unemployed young men were taken out of the cities and placed into 2600+ work camps managed by the CCC.^[74]

Early changes by the Roosevelt administration included:

Instituting regulations to fight deflationary "cut-throat competition" through the NRA.
Setting minimum prices and wages, labor standards, and competitive conditions in all industries through the NRA.
Encouraging unions that would raise wages, to increase the purchasing power of the working class.
Cutting farm production to raise prices through the Agricultural Adjustment Act and its successors.
Forcing businesses to work with government to set price codes through the NRA.

These reforms, together with several other relief and recovery measures, are called the First New Deal. Economic stimulus was attempted through a new alphabet soup of agencies set up in 1933 and 1934 and previously extant agencies such as the Reconstruction Finance Corporation. By 1935, the "Second New Deal" added Social Security (which did not start making large payouts until much later), a jobs program for the unemployed (the Works Progress Administration, WPA) and, through the National Labor Relations Board, a strong stimulus to the growth of labor unions. In 1929, federal expenditures constituted only 3% of the GDP. The national debt as a proportion of GNP rose under Hoover from 20% to 40%. Roosevelt kept it at 40% until the war began, when it soared to 128%.

WPA employed 2 to 3 million unemployed at unskilled labor.

By 1936, the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high at 11%, although this was considerably lower than the 25% unemployment rate seen in 1933. In the spring of 1937, American industrial production exceeded that of 1929 and remained level until June 1937. In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.^[75] The American economy then took a sharp downturn, lasting for 13 months through most of 1938. Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938.^[76] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.^[77] Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production. By May 1938 retail sales began to increase, employment improved, and industrial production turned up after June 1938.^[78] After the recovery from the Recession of 1937–1938, conservatives were able to form a bipartisan conservative coalition to stop further expansion of the New Deal and, when unemployment dropped to 2%, they abolished WPA, CCC and the PWA relief programs. Social Security, however, remained in place.

Political consequences

The crisis had many political consequences, among which was the abandonment of classic economic liberal approaches, which Roosevelt replaced in the United States with Keynesian policies. These policies magnified the role of the federal government in the national economy. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state.^[79] The Great Depression was a main factor in the implementation of social democracy and planned economies in European countries after World War II. (see Marshall Plan). Although Austrian economists had challenged Keynesianism since the 1920s, it was not until the 1970s, with the influence of Milton Friedman that the Keynesian approach was politically questioned.^[80]

Literature

The Great Depression has been the subject of much writing, as authors have sought to evaluate an era that caused financial as well as emotional trauma. Perhaps the most noteworthy and famous novel written on the subject is The Grapes of Wrath, published in 1939 and written by John Steinbeck, who was awarded both the Nobel Prize for literature and the Pulitzer Prize for the work. The novel focuses on a poor family of sharecroppers who are forced from their home as drought, economic hardship, and changes in the agricultural industry occur during the Great Depression. Steinbeck's Of Mice and Men is another important novel about a journey during the Great Depression. The Great Depression is a novella written by Alon Bersharder about a sad, disgruntled temporary worker, making the title both a homage to the historical event and a pun. Additionally, Harper Lee's To Kill a Mockingbird is set during the Great Depression. Margaret Atwood's Booker prize-winning The Blind Assassin is likewise set in the Great Depression, centering on a privileged socialite's love affair with a Marxist revolutionary. The era spurred the resurgence of social realism, practiced by many who started their writing careers on relief programs such as the Federal Writers' Project; that experience and its effects is described in the history Soul of a People: The WPA Writers' Project Uncovers Depression America, by David Taylor (2009).

Other "great depressions"

There have been other downturns called a "Great Depression," but none has been as worldwide for so long. British economic historians used the term "Great depression" to describe British conditions in the late 19th century, especially in agriculture, 1873–1896, a period also referred to as the Long Depression.^[81] Several Latin American countries had severe downturns in the 1980s. Finnish economists refer to the Finnish economic decline around the breakup of the Soviet Union (1989–1994) as a great depression. Kehoe and Prescott define a great depression to be a period of diminished economic output with at least one year where output is 20% below the trend. By this definition Argentina, Brazil, Chile, and Mexico experienced great depressions in the 1980s, and Argentina experienced another in 1998–2002. This definition also includes the economic performance of New Zealand from 1974–1992 and Switzerland from 1973 to the present, although this designation for Switzerland has been controversial.^[82]^[83]

The economic crisis in the 1990s that struck former members of the Soviet Union was almost twice as intense as the Great Depression in the countries of Western Europe and the United States in the 1930s.^[84]^[85] Average standards of living registered a catastrophic fall in the early 1990s in many parts of the former Eastern Bloc - most notably, in post-Soviet states.^[86] Even before Russia's financial crisis of 1998, Russia's GDP was half of what it had been in the early 1990s.^[85] Some populations are still poorer today than they were in 1989 (e.g. Ukraine, Moldova, Serbia, Central Asia, Caucasus). The collapse of the Soviet planned economy and the transition to market economy resulted in catastrophic declines in GDP of about 45% during the 1990–1996 period^[87] and poverty in the region had increased more than tenfold.^[88]

People have been taking to calling the current economic recession the "Great Recession".^[89]^[90]^[91]^[92]

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^ "Weimar Republic and the Great Depression"
^ Germany - Economic, Public Broadcasting Service (PBS).
^ Myung Soo Cha, "Did Takahashi Korekiyo Rescue Japan from the Great Depression?," The Journal of Economic History 63, No. 1 (Mar 2003): 127–44.
^ (For more on the Japanese economy in the 1930s see "MITI and the Japanese Miracle" by Chalmers Johnson)
^ E. H. Kossmann, The Low Countries: 1780–1940 (1978)
^ The Dust Bowl, Geoff Cunfer, Southwest Minnesota State University
^ The Forsaken: From the Great Depression to the Gulags: Hope and Betrayal in Stalin's Russia, The Sunday Times, July 27, 2008
^ The Great Depression and the 1930S, Federal Research Division of the Library of Congress
^ The Foresaken: An American Tragedy in Stalin's Russia, by Timotheos Tzouliadis
^ Orest Subtelny. Ukraine: a history. University of Toronto Press. 2000. ISBN 9780802083906 p. 416
^ Unemployment During The Great Depression, thegreatdepression.co.uk
^ Cook, Chris and Bewes, Diccon; What Happened Where: A Guide To Places And Events In Twentieth-Century History p. 115; Routledge, 1997 ISBN 1-85728-533-6
^ Work camps that tackled Depression, BBC News
^ The Great Depression (1929–1939), The Eleanor Roosevelt Papers
^ Waren, Herbert Hoover and the Great Depression
^ "Smoot-Hawley Tariff", U.S. Department of State.
^ "Reconstruction Finance Corporation", EH.net Encyclopedia.
^ Joseph Swanson, and Samuel Williamson, "Estimates of national product and income for the United States economy, 1919–1941," Explorations in Economic History 10 (1972) pp 53–73
^ Great Depression. The Concise Encyclopedia of Economics.
^ "Great Depression in the United States", Microsoft Encarta. Archived 2009-10-31.
^ "The Great Depression and New Deal" by Joyce Bryant, Yale-New Haven Teachers Institute.
^ National Park History: “The Spirit of the Civilian Conservation Corps”
^ The Great Depression, Robert Goldston, Fawcett Publications, 1968, page 228
^ Economic Fluctuations, Maurice W. Lee, Chairman of Economics Dept., Washington State College, published by R. D. Irwin Inc, Homewood, Illinois, 1955, page 236.
^ Business Cycles, James Arthur Estey, Purdue Univ., Prentice-Hall, 1950, pages 22–23 chart.
^ Maurice W. Lee, 1955
^ Schlesinger, Jr., Arthur M. The Coming of the New Deal: 1933–1935. Paperback ed. New York: Houghton Mifflin, 2003. (First published in 1958) ISBN 0-618-34086-6; Schlesinger, Jr., Arthur M. The Politics of Upheaval: 1935–1936. Paperback ed. New York: Houghton Mifflin, 2003. (First published in 1960) ISBN 0-618-34087-4
^ Lanny Ebenstein, Milton Friedman: A Biography (2007)
^ T. W. Fletcher, "The Great Depression of English Agriculture 1873–1896," The Economic History Review, Vol. 13, No. 3 (1961), pp. 417–432 in JSTOR
^ Abrahamsen Y, R.; Aeppli, E.; Atukeren, M.; Graff, C.; Müller; Schips, B. (2005). "The Swiss disease: Facts and artefacts. A reply to Kehoe and Prescott". Review of Economic Dynamics 8 (3): 749–758. doi:10.1016/j.red.2004.06.003.
^ Kehoe, T. J.; Ruhl, K. J. (2005). Is Switzerland in a Great Depression?. 8. Review of Economic Dynamics. pp. 759–775.
^ See “What Can Transition Economies Learn from the First Ten Years? A New World Bank Report,” in Transition Newsletter (http://worldbank.org/transitionnewsletter/janfeb2002). [4]
^ ^a ^b Who Lost Russia?, New York Times, October 8, 2000
^ Child poverty soars in eastern Europe, BBC News, October 11, 2000
^ Poverty, crime and migration are acute issues as Eastern European cities continue to grow, A report by UN-Habitat, January 11, 2005
^ Study Finds Poverty Deepening in Former Communist Countries, New York Times, October 12, 2000
^ http://economix.blogs.nytimes.com/2009/03/11/great-recession-a-brief-etymology/
^ http://www.time.com/time/nation/article/0,8599,1891527,00.html
^ http://krugman.blogs.nytimes.com/2009/03/20/the-great-recession-versus-the-great-depression/
^ http://online.wsj.com/article/SB124874235091485463.html

External links

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Theories of the Great Depression, R. L. Norman, Jr.
America in the 1930s Extensive library of projects on America in the Great Depression from American Studies at the University of Virginia
The 1930s Timeline year by year timeline of events in science and technology, politics and society, culture and international events with embedded audio and video. AS@UVA
Recession? Depression? What's the difference? (About.com)
An Overview of the Great Depression from EH.NET by Randall Parker.
Great Myths of the Great Depression by Lawrence Reed
Franklin D. Roosevelt Library & Museum for copyright-free photos of the period
Economic Depressions: Their Cause and Cure by Murray Rothbard (1969)
An Age of Lost Innocence: Childhood Realities and Adult Fears in the Depression American Studies at the University of Virginia
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Soul of a People documentary on Smithsonian Networks
Great Apprehensions, Prolonged Depression: Gauti Eggertsson on the 1930s

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Great Depression