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The crisis of 1929 and the great depresion - Coggle Diagram
The crisis of 1929 and the great depresion
An abrupt end to prosperity
During the euphoria of the Roaring Twenties, much of the boom in the US economy was based on massive financial growth
Company profits and the savings of many middle-class families were invested in unprecedented speculative operations on the stock market
They hoped to get rich in a short period of time by buying and reselling stocks that were continually rising in value
In addition, there was an increase in credit operations without sufficient repayment guarantees
As a result of intense speculation, the New York Stock Exchange, the main indicator of the world economy, was overvalued
A financial bubble grew and quickly burst
On 24 and 29 October 1929, Black Thursday and Tuesday, the share price fell sharply
Within hours, panic spread across the United States
Investors sold huge amounts of shares at a much lower price than the original
Their priority was to get rid of shares which were dropping in value
This led to the crash of the New York Stock Exchange
Companies lost their value and their capital
Savers saw their money disappear, transformed into unpayable debts
Most banks went bankrupt as they could not collect money for credit granted
As a result, many companies had to close down and fire their workers
Industrial production declined a great deal in a short period of time
This was the end of the period of prosperity and of the short-lived Roaring Twenties
Companies were no longer given new credit
The repercussions of the economic crisis were quickly felt around the world
Many countries depended on US loans that were cancelled as a result of the crisis and its effects
This generalisation of the crisis is known as the Great Depression
Because of its intensity, duration and reach, this was the worst crisis the capitalist system had ever endured
Its most acute phase was from 1930 to 1932, although the serious economic and political difficulties lasted the entire decade
Economic crises are a phenomenon that are part of the capitalist system and happen in cycles
At that time, consumption fell dramatically, so there was much less business activity
However the main effect of the crisis was an increase in unemployment
Millions of people had no work and thousands lived in poverty
This affected almost all social classes
Many firms were ruined
Workers, employees and technicians were the most affected because unemployed workers did not collect any unemployment benefits
Measures to overcome the great depression
Although some joint measures were attempted to overcome the crisis
Such as trade agreements between countries
Each country carried out the solutions it considered most appropriate
In general, they were based on economic nationalism and state intervention in the economy
Both strategies were embodied by the main economic powers of the time
In the United States, in 1933, President Roosevelt proposed a shock plan, known as the ‘New Deal’, to revive the economy
He proposed state intervention which involved:
The promotion of public works
Subsidies for firms
The control of banking
More social welfare
Franklin D. Roosevelt
Roosevelt was the only president of the USA that won the elections four times
He led the country from 1932 to 1944
During his mandate, many important historical events took place
The crisis of 1929
The rise of totalitarianism
World War II
