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02 THE CRISIS OF 1929 AND THE GREAT DEPRESSION, Garazi García Anturejo,…
02 THE CRISIS OF 1929 AND THE GREAT DEPRESSION
AN ABRUPT END TO PROSPERITY
During the euphoria of the Roaring Twenties
the boom in the US economy was based on massive financial growth
Company profits
savings of many middle-class families
invested in unprecedented speculative operations on the stock market
hoped to get rich in a short period buying and reselling stocks that were continually rising in value
there was an increase in credit operations without sufficient repayment guarantees
the New York Stock Exchange
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
Investors sold huge amounts of shares at a much lower price than the original
priority
to get rid of shares which were dropping in value
led to
crash of the New York Stock Exchange
end of the period of prosperity
Companies lost their value and their capital
Savers saw their money disappear
unpayable debts
Most banks went bankrupt
Companies were no longer given new credit
many companies had to close down and fire their workers
Industrial production declined a great deal in a short period of time
In other countries
Many countries depended on US loans that were cancelled
Great Depression
the worst crisis the capitalist system had ever endured
Its most acute phase was from 1930 to 1932
the serious economic and political difficulties lasted the entire decade
the main effect of the crisis was an increase in unemployment
MEASURES TO OVERCOME THE GREAT DEPRESSION
Affected countires
especially affected industrialised countries
In Europe
Germany
Austria
Great Britain
suffered consequences similar to those endured by the US economy
Countries and colonies that exported raw materials
the industrial countries who bought their products no longer had the same purchasing power
Brazil, Argentina, Chile, India, Malaysia and Australia
Solutions
In general based on economic nationalism and state intervention in the economy
In the United States
1933
President Roosevelt proposed a shock plan
New Deal
state intervention
involved the promotion of public works, subsidies for firms, the control of banking and more social welfare
In Great Britain
the state did not intervene in the economy
restricted itself to devaluing the pound by 25%
the pound lost part of its value against other foreign currencies
this favoured exports and gave strength to the domestic market
a change from the traditional British free trade policy to protectionism
free trade
the free movement of goods without the state intervening to regulate international trade
protectionism
establishing customs tariffs on imports to favour the country’s own industry
Garazi García Anturejo
