A Comparison Of The Great Depression Of

1922 And I Essay, Research Paper

A comparing of the Great Depression of 1922 and its effects between the United States and the remainder of the universe The debut of the treatment will concentrate on the beginnings of theGreat Depression and the intensifying events that led to it. This willprovide equal foundations to convey up inquiries and effort to answerthem in an nonsubjective manner as to why and how the Depression affecteddifferent industrialised states in different ways. The nucleus of the argument will dwell of elaborate comparable analysesof the effects of the Depression with an accent on the economicaspects. The decision will supply a brief overview of the ways used bythe different authoritiess to acquire out of that dark episode of universe economichistory. When analyzing the Great Depression and it & # 8217 ; s effects, it is notunusual for historiographers to take World War I as a starting point for theirinvestigation. The ground for that is the importance of the repercussionsthe struggle had on the economic systems of all the states that were involvedin it. First of wholly, the War made it impossible for Europe to maintainprevious degrees of production. For illustration, before the War, France, theU.K. and Germany accounted for about 60 percent1 of the universe & # 8217 ; s exports ofmanufactured goods, a portion of the market which they could non sustainduring the struggle. Consequently, Europe took many of its markets to theU.S. and Japan. The scrawny growing of the European economic systems meant a lowerdemand for natural stuffs, which in bend lowered the demand for Europeanexports. In agribusiness, things didn & # 8217 ; t look any better, as it was the sectorwhich employed the most people. At the terminal of World War I, Europe wasforced to import nutrient from the U.S.. Furthermore, these minutess wereconducted on a recognition footing since Europe could non afford to pay for itspurchase at that clip. Clearly, the U.S. was traveling from being a traditional debitor ofEurope before World War I to going its creditor: America had financedthe war and it was publishing loans for its Reconstruction. However, theattitudes in the U.S. were germinating in an unusual way: an increasingnumber of American moneymans were get downing to literally seek Greenwich Mean Time potentialborrowers which led to competition among U.S. Bankss and the spreading ofunsound lending.2 The chief object was to & # 8220 ; make the most concern & # 8221 ; , even atthe disbursal of indispensable cautiousness. What seemed like a beginning of recovery from the Great War, was infact an huge accretion of debts, which made the internationaleconomic order vulnerable to depression. Analyzing these events with theinsight we have today, they seem even more incredibly brave given thehigh instability of the adoption state. ( i.e. , Europe ) The triping event was the clang of the Wall Street stock marketin October of 1929. The stock market collapsed after steady diminutions inproduction, monetary values and incomes over three old months which forced thespeculators to revise their outlooks. Anxiety shortly gave topographic point to panicwhich led to the clang. However, the depression affected the differentindustrialized states in assorted ways and grades of strength. The depression was of particularly great magnitude in the U.S. because there were non any public assistance benefits for laid off workers. In theperiod between 1929 and 1933, money income fell by 53 per centum ( existent incomefell by 36 per centum. ) 3 As a effect, demand fell significantly, whichin bend led to take down production and more layoffs & # 8211 ; up to a high of 25percent rate of unemployment in 1933. Despite the badness of the state of affairs, the Federal Reserve did notpursue a pecuniary enlargement on policy which would hold stimulated theeconomy through lower involvement rates and increased the stock of money incirculation. This inactivity is frequently attributed to the fact that marketinterest rates in 1930-1931 fell to really low degrees, much lower than in theearlier recessions ( of 1924 and 1927 ) , and hence, the Federal ReserveBoard wrongfully saw no demand to prosecute an expansionary pecuniary policy.4An index of that inactivity is that unfastened market operations did notprovide sufficient money militias for a banking system faced withdepositors dying for liquidness ( pecuniary enlargement would hold filled thatneed ) . If the Federal Reserve had provided extra financess to the bankingsector after 1930, bank failure would non hold been so legion and thedecrease in the onslaught of? ? ? ? would hold been ( at least ) slowed down. Still, it would non be accurate to do the Federal Reserveresponsible for all these jobs. Other factors contributed to theprecipitation of what began as a cyclical recession into what we now knowas the Great Depression. One of those is the Hawley Smoot duty of 1930which in kernel made America more protectionist than of all time, directing importduties to enter highs. Obviously, revenge from other states wasquick to come. The new duty act accelerated the ruin of Americantrade volume, which was likely the last thing the U.S. needed at thatstage. President Hoover had ever been in favour of protective tariffswhich he considered a purely domestic issue and he supported the HowleySmoot Act. Therefore, he clearly failed to see the deductions of such amove. Soon, the Depression was distributing to the remainder of the universe, particularly to Europe. There, the individual state that was most affected wasGermany whose really weak economic system could non get by with the slow disappearanceof American capital. Let us advert that Germany was still payingreparations ( for World War I ) , which made its state of affairs even more delicate. Germany was forced to borrow from Great Britain and France which could notcompensate for the diminution in U.S. lending.5 The trap in which Germanyfound itself was rather upsetting: she had to prosecute deficienarypolicies to derive the assurance of investors in order to pull foreignfunds. At the same clip, devaluaton posed a major job. It increasedthe load of the external debt ( through the exchange rate mechanism ) whichwas collectible in foreign currencies.

The United Kingdom represented another major force on the globaleconomic scene. The British econo

my was not hit immediately as violentlyas Germany’s. However, as the repercussions of the world crisis becameincreasingly clear, Great Britain experienced a notable decline in itsexports which was even greater than the decrease in its imports. Those twofactors contributed to generate a deficit in its balance of payments. Still, compared to most other industrialized countries, the U.K. got through the Depression in better economic health.6 In the case of France, things went a significantly different way. First of all, out of the four biggest industrialized countries of the time(U.S., Germany, U.K. and France), France was the last to be hit by theDepression. Many possible reasons are hypothesized to explain that fact,but the one that is most often heard is the undervaluation of the Frenchfranc. The French economy began to feel the effects of the world crisis in1932. Around that time the Depression caught up with the French economythrough an important decrease in its exports (due impart to the sheardownsizing trend in the volume of world trade), combined to an increase inimports. The problems faced by France were also worsened by the fact thatit still was maintaining the gold standard long after all of the otherindustrialized countries–starting with Great Britain in 1931–had switchedto fleeting exchange rates. As for Japan, we can safely say that it is the one country amongtoday’s industrialized nations that got through the Great Depression withthe least damage to its economy.7 Now that we have illustrated how the world crisis affected variousnations in different ways, it seems only logical that they would puttogether solutions that were adapted to their individual problems. In the United States, Hoover had failed to bring a solution to theDepression, and he was replaced by Roosevelt in 1932. The new presidentbrought with him the New Deal, which can be qualified as a collection ofprograms aimed at stimulating different sectors of the economy (like theAgricultural Adjustment Act and the National Industrial Recovery Act). Asit turned out, the New Deal was not a particularly successful economicinitiative, but it was definitely a political success, probably because itsgoal was to help the American people (even though the means used toaccomplish that were never very clear). What proved more effective atbringing economic solutions to what was really an economic problem was the”Keynesian theory”. In 1938, Roosevelt, facing the semi-failure of his NewDeal, finally gave in to an increasing number of his close advisors whowere confident that Keynes’ ideas would be more successful.8 Theunderlying theory to Keynes’ ideas was that recovery could only comethrough fiscal expansion–in other words, running a bigger budgetarydeficit. The additional expenditures were pumped into the economy througha variety of government actions–like major public works–in order tostimulate demand by providing people with income. In Germany, the Nazis’ victory at the 1933 elections was a majoraccelerating factor on the road to recovery. The Nazi program aimed firstand foremost at the reduction of unemployment and it did accomplish atleast that. However, the realization of the plans was conditioned by anomnipotent government which was best described by Peter Hayes’ analogy(1987):”It is perhaps accurate to say that, to German industry, the emergenteconomic system was stiff capitalism, but only in the same sense that for aprofessional gambler poker remains poker, even when the house shuffles,deals, determines the suite and the wild cards, and can change them atwill, even when there is a ceiling on winnings, which may be spent only asthe census permits and for the most part only on the promises.”9 One other essential vector that Nazis used toward recovery wasrearmament, starting in 1936. Hitler used the defense industry to satisfytwo of his im???: recreate a strong Germany while giving people work. The case of Great Britain is different. We have mentioned earlierhow well (relatively to other nations) the U.K. got through the Depressionyears. Let us now attempt to explain why. Three elements are oftenmentioned in the British recovery: the abandoning of the gold standard in1931, the adoption of higher tariffs and the devaluation of the pound. When the U.K. abandoned the gold standard, it gave itself a competitiveadvantage via-a-vis those countries which did not. The new tariff lawshelped by protecting domestic industries and the 30 percent devaluation ofthe pound added to the competitive edge of the U.K by making Britishproducts cheaper to the rest of the world. In the face of Depression, France reacted quite differently fromthe other industrialized countries. Confident in its strong economy until1932, France did not abandon the gold standard until June 1937 and did notdevalue the franc until October 1936. Those two factors made France ratheruncompetitive for most of the 1930’s, given the actions taken by the U.S.,the U.K., and Germany. Those measures, in time, helped lift France out ofthe Depression but the recovery there might have occurred a few yearsearlier if the French had only signed their policies to that of the UnitedStates and Great Britain in particular.10 When it comes to Japan, two reasons are proposed to explain itsgood economic performance through the Depression: the fact that it had aplanned economy, and the early understanding of the advantages ofdevaluating the yen. Japan improved its competitive position that way andit reacted very soon after the Depression hit. As a result, the effects ofthe crisis were greatly reduced from the start. Footnotes 1?The origins and nature of the Great Slump,” Fearn. 2?The origins and nature of the Great Slump,” Fearn. 3?Capitalism in Crisis,”edited by Garside. 4?La Crise economique dans le monde el en France,” Nogaro. 5?The origins and nature of the Great Slump,” Fearn. 6?The Great Depression, 1929-1938,” Saint Etienna. 7?The Origins and Nature of the Great Slump,” Fearn. 8?Capitalism in Crisis,”edited by Garside. 9?Capitalism in Crisis,”edited by Garside. 10?Capitalism in Crisis,”edited by Garside.