Great Depression of 1929

3549 WordsApr 25, 200715 Pages
The Great Depression was a worldwide economic downturn which started in October of 1929 and lasted through most of the 1930s. It began in the United States and quickly spread to Europe and every part of the world, with devastating effects in both industrialized countries and producers of raw materials. International trade declined sharply, as did personal incomes, tax revenues, prices and profits. Cities all around the world were hit hard, especially those based on heavy industry. Unemployment and homelessness soared. Construction was virtually halted in many countries. Farming and rural areas suffered as prices for crops fell by 40–60%. Mining and logging areas had perhaps the most striking blow because the demand fell sharply and there…show more content…
slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. They built up their capital reserves, which intensified the deflationary pressures. The vicious cycle developed and the downward spiral accelerated. This kind of self-aggravating process may have turned a 1930 recession into a 1933 depression. Trade decline and the U.S. Smoot-Hawley tariff act 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 assign the American Smoot-Hawley Tariff Act of 1930 part of the blame for worsening the depression by seriously reducing international trade and causing retaliatory regulations in other countries. Foreign trade was a small part of overall economic activity in the United States and was concentrated in a few business like farming; it was a much larger factor in many other countries. 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 in half. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. According to this theory, the
Open Document