The Great Depression: Causes, Consequences, and Global Impact
Economic Imbalances of the 1920s
In 1920, a crisis began that brought down prices and expectations. Anglo-Saxon countries, including those who had remained neutral in the war, like Japan, proposed to regain a sound economy based on a stable currency, but only partially succeeded. In Germany, a completely chaotic monetary system emerged, causing the currency to lose value and wiping out private savings. Companies had to resort to foreign borrowing to survive, a fact that placed Germany in a position of high dependency on external credits in the following years. Since 1924, the crisis was overcome, and a new period of economic prosperity began.
The Fall of the New York Stock Exchange
On Thursday, October 24, 1929, the stock market crashed on Wall Street. More than 13,000,000 shares on the low failed to find buyers, causing the ruin of thousands of investors. This led to panic, and those who had money in bank accounts ran to withdraw it. Thereafter began a period of global economic downturn, known as the “Great Depression.” The New Deal aimed to regulate the economy by encouraging investment, credit, and consumption, thereby reducing unemployment. The steps taken by Roosevelt were to help banks, subsidize farmers, increase wages, reduce working hours, and create new jobs in public administration and public works, giving a strong impetus to the construction industry and its derivatives. The results of the New Deal were mixed, achieving stabilization instead of growth. Full employment was not achieved, and the retention of high numbers of unemployed marked the 1930s.
The Crash of 1929
On October 24, 1929, the crash occurred on the New York Stock Exchange. The crash of 1929 had clear precedents in Europe and the USA. In 1927 came the fall of the German stock market, in 1928 this was repeated in Britain, and in February 1929 in France. The NYSE was the principal focus of speculation in the world. The sale of speculative shares dragged down others and caused an irreversible crisis. Banks failed and needed capital for industry, but it was suddenly unavailable. Fear stopped investment, unemployment rose, prices fell, and banks made a loss, so they could not lend. Consumer spending contracted, especially for industrial products. Producer prices also fell, and overproduction led to deflation in consumer prices, but purchases were even smaller. The main trigger was the fall in agricultural prices in international trade and credit restrictions. The outbreak of the crisis forced governments worldwide to adopt protectionist measures, such as raising interest rates and tariffs, which eventually led to the return of the crisis in the US. Currency was devalued by almost everyone.
Causes of the Great Depression
- Overproduction
- Monetary disorder
- Uneven and relative economic recovery
Social Implications
- Unemployment
- Demographic decline
- Inequality in the social structure
Economic Consequences
State intervention in the economy. State intervention to increase consumption and investment also advocated expanding aid to enterprises, the promotion of public works, and state protectionism.
Political Consequences
The triumph of communism in Russia and the separation between socialism and communism. But the most important political consequence of the crisis was, without a doubt, the rise of fascist movements and the ascension of another party in this spirit to power: the National Socialist Party in Germany.
The Impact of the Crisis in Argentina
Argentina had to face certain problems like the falling prices of its exports, the end of credits, and the depletion of various payments available to pay for committed imports. State revenues depended to a large extent on international trade taxes. There was an increase in domestic demand and a simultaneous diversification of it. The effects of the crisis were severe: increased unemployment, increased inflation, and increased state debt.
Implications of the Crisis in Argentina
- The decline of Argentine exports
- The increase in customs duties from 1931
- Governmental regulation of imports to reflect the level of Argentine sales
- Abundant labor
- The dismantling of industries in more developed countries
The Coup of 1930
The military coup of September 6, 1930, was led by General José Félix Uriburu and overthrew President Hipólito Yrigoyen of the Radical Civic Union, who had been democratically elected to exercise his second term in 1928. General Uriburu had been one of the organizers of the Revolution of 1890, a civic-military uprising that led to the formation of the Radical Civic Union. On September 10, Uriburu was recognized as de facto president of the Nation by the Supreme Court. He established a repressive regime that included the systematic use of torture against political opponents by creating the Special Section of the Federal Police for this purpose. He arrested several political leaders, including Hipólito Yrigoyen, imposed censorship on newspapers, and intervened in universities, overriding the autonomy and co-governance regime established since the 1918 University Reform. After outlawing the Radical Civic Union, the regime organized an electoral process that was restricted and controlled by the armed forces, which led to a series of fraudulent and corrupt conservative governments that came to be known as the Infamous Decade. On February 20, 1932, General José Félix Uriburu handed over power to General Agustín P. Justo, the true intellectual architect of the coup.