Nalini started her own business after 20 years in his field. After initial investor conversations, she was ecstatic about her company proposal. Nalini’s enterprise went off nicely, but after a few months, the news of coronavirus outbreak struck the market. Nalini’s business failed and eventually closed. Covid-19 has affected global economic indicators. After governments across the globe enacted mass lockdowns and people practised social distancing to contain the epidemic, the global economy experienced a downturn. Some hints of recovery appeared, but the ongoing Russia-Ukraine war kept the world economy in limbo. All economies face declining growth and rising inflation.
Similar awful events occurred throughout 1929-39 during the Great Depression. Some experts compare the global economic downturn to the great depression. We know what caused the current recession, but the Great Depression’s causes were unknown. Understanding how the great depression affected the international economy a century ago and the lessons it provided is a smart precaution.
Depression Causes
A decade of economic instability put many people under pressure to live, causing mental and emotional turmoil. All the world’s economies were shocked, notably the American economy, which was enjoying a booming stock market.
Experts and market leaders couldn’t predict a way out. Weak stock market, declining aggregate demand, global agrarian crises, overproduction, and ineffective governmental decisions triggered the worst economic misery of the 20th century. It changed global socio-political and economic order.
Workforce Change
After independence from England, America was predominantly agrarian, but industrialization changed that. The 19th-century industrial revolution transformed the American workforce. Non-agricultural employment rose after 1870. By 1930, 1 in 5 Americans was a farmer. In 1870, America had 23% of the world’s industrial production. By 1930, it accounted for 42% of global industrial production.
WWI and Roaring 20s
Second-decade 1900s saw World War I. (WWI). Many soldiers were martyrs and amputees. Men’s absence forced women to work.
War’s atrocities disillusioned the youth. The Lost generation questioned a civilised society that couldn’t end World War II.
Central countries were striving to recover from the war’s devastation, and Britain owed America money from WWI. The American economy was growing, and materialism was soaring. Jazz and fashion comforted Americans. Stocks kept rising. Most Americans started investing for stock market profits. Banks lent money into the system. In such euphoria, nobody saw the danger coming.
Overproduction increases supply through surplus. Oversupply lowers pricing. In 1923, when the stock market was booming, individuals ignored this reality. People were spending lavishly on cars, washing machines, and radios. Companies kept making products to attract customers, assuming prosperity would last. The 1920s were called ‘roaring’
Pre-depression agriculture
WWI benefited American agriculture. Due to the war, Europe bought American agriculture products. Farm produce demand increased prices. The U.S. government encouraged farmers to produce more by establishing federal land banks. Farmers wanted to farm more land with less labor-intensive machinery. They borrowed money to buy more land and equipment.
Post-WWI, farm product demand was constant for a few years, but as European nations recovered, it fell. With increased production capacity and greater farmland, American farmers struggled to limit output. They overproduced without realising it would lower prices.
Monetary Policy
American farmers and industries were protected by import levies. International traders disliked America’s protectionist tactics and higher import tariffs. The surplus grew as exports fell. Slowly, the overproduction surplus entered the market, causing a demand-supply imbalance. Losers didn’t buy goods. Banks couldn’t recoup money lent to employees, farmers, and companies. Weak markets and banks hurt jobs. Several businesses were affected by the downturn, farmers had to sell their land cheaply, and workers experienced wage cuts and job losses. Unemployment soared. The booming American economy is now falling.
Euphoria-to-depression
Investors panicked when the market fell. Their penny-stock sales fueled the fire. Already-weak market slowed further. 12.9 million shares were exchanged on “Black Thursday” in 1929. 1929 US stock prices dropped 33%. The Great Crash of 1929 saw stock prices plummet. Many enterprises closed due to lack of finances, thousands of banks went bankrupt, and those living a luxury lifestyle quickly became indebted. Layoffs and wage cuts caused widespread anxiety.
Depression’s impact on India
1929’s stock market meltdown sparked the Great Depression. It engulfed Europe, Japan, and every major economy. These economies’ problems seeped down to dependent smaller ones. During the Great Depression, the population suffered agonising mental anguish, which impeded the world’s economic and political stability for years.
Britain’s decline
British industrialization began there. It was the world’s largest industrial producer for decades. The British Empire’s riches and strength came from industrial industry. As industrialization spread, Britain struggled to maintain its economic dominance. End of the 19th century, America took over. France and Britain fought over trade resources, while Germany’s growing naval power endangered Britain’s status as the world’s greatest navy.
Despite being a triumphant ally in WWI, Great Britain faced terrible repercussions. Beginning in the 20th century, Britain’s power waned and its grip over its colonies eroded. Great Depression reduced its global power.
British exploitation united Indians.
Britishers levied new taxes on Indians who had lost riches due to British exploitation to mitigate the global economic crisis. The worldwide agriculture crisis affected India. Agriculture prices plummeted. Indian peasants protested the British Raj because of their exploitative practises.
Congress raised the problem. Mahatma Gandhi led the 1930 Dandi March to disobey the salt prohibition. Rural India, women, students, and merchants engaged in the first nationwide movement. The movement was nationwide. Indians learned the British government’s motives during the four-year agitation. This movement used nonviolence against the tyrannical British Raj.
The faith of India’s farmers helped the National Congress win 1936-37 provincial elections under the Government of India Act, 1935. The movement boosted congress’s standing as a national party.
WWII and Fascism
Conservative right-wing politics received an opportunity to stabilise in the minds of the public, who were vulnerable owing to economic suffering and unemployment. Hitler’s fascist goal convinced Germans to change the world’s geopolitical equations. World War II ended with nuclear explosions in Nagasaki and Hiroshima, Japan. Europe lost its political primacy to the United States and the Soviet Union.