Please enable JavaScript.
Coggle requires JavaScript to display documents.
02 THE CRISIS OF 1929 AND THE GREAT DEPRESSION, image, image, image, image…
02 THE CRISIS OF 1929 AND THE GREAT DEPRESSION
1 AN ABRUPT END TO PROSPERITY
massive financial growth
During the euphoria of the Roaring Twenties
much of the boom in the US economy
there was an increase in credit operations without sufficient repayment guarantees
crash of the New York Stock Exchange
New York Stock Exchange
main indicator of the world economy, was overvalued
financial bubble grew and quickly burst
Black Thursday and Tuesday
panic spread across the United States
the share price fell sharply
On 24 and 29 October 1929
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
end of the period of prosperity
of short-lived Roaring Twenties
Companies lost their value and their capital
Most banks went bankrupt as they could not collect money for credit granted
Companies were no longer given new credit
Savers saw their money disappear, transformed into unpayable debts
many companies had to close down and fire their workers
Industrial production declined a great deal in a short period of time
Great Depression
Many countries depended on US loans that were cancelled as a result of the crisis and its effects
Its most acute phase was from 1930 to 1932
although the serious economic and political difficulties lasted the entire decade.
The repercussions of the economic crisis were quickly felt around the world
Because of its intensity, duration and reach, this was the worst crisis the capitalist system had ever endured
Main effects of the crisis
was an increase in unemployment
millions of people had no work and thousands lived in poverty
affected almost all social classes
Many firms were ruined, but workers, employees and technicians
were the most affected because unemployed workers did not collect any unemployment benefits
2 MEASURES TO OVERCOME THE GREAT DEPRESSION
Great Depression especially affected industrialised countries
Great Britain, Austria and Germany,
a loss of value of shares on the stock markets,
decline of industrial production
bankruptcy of firms
fall of prices and salaries and an alarming increase in unemployment
economic nationalism and state intervention
were attempted to overcome the crisis
each country carried out the solutions it considered most appropriate
Both strategies were embodied by the main economic powers of the time
the United States
1933
President Roosevelt proposed a shock plan
‘New Deal’
to revive the economy
proposed state intervention
which involved the promotion of public works, subsidies for firms, the control of banking and more social welfare.
Great Britain
despite having more than 3 million unemployed workers
the state did not intervene in the economy and restricted itself to devaluing the pound by 25%
the pound lost part of its value against other foreign currencies
this favoured exports and invigorated the domestic market
this favoured exports and invigorated the domestic market
free trade
committed to the free movement of goods without the state intervening to regulate international trade
protectionism
consists of establishing customs tariffs on imports to favour the country’s own industry
JOHN MAYNARD KEYNES (1883–1946)
defended state intervention in the economy to protect workers from the negative effects of crises.
Keynes tried to prevent excessive burdens being placed on the defeated Germany, to avoid its ruin.
he inspired the policies of the ‘New Deal
