The Great Depression: Causes, Impact, and the New Deal
The Great Depression
Overproduction Crisis
The prosperity of the 1920s did not benefit everyone equally. Farmers suffered because they incurred debt during the war to increase production for Europe. After the war, exports declined, leading to overproduction, falling prices, and widespread farm foreclosures.
Industry experienced a similar trend. Production outpaced demand, leading to accumulating stock, falling prices, and business closures. Reduced purchasing power further decreased consumption, marking the end of the roaring twenties.
The Stock Market Crash and the Great Depression
On October 24, 1929 (Black Thursday), widespread investor mistrust triggered massive stock selling. Share prices plummeted, ruining many investors and causing widespread panic. People rushed to withdraw their savings, leading to bank closures and bankruptcies.
The stock market crash precipitated the Great Depression, impacting industry, commerce, and agriculture. Unemployment soared to 13 million in 1932, plunging many families into poverty.
The crisis spread globally as U.S. banks withdrew funds from European banks and American companies reduced foreign investments. Declining American imports further exacerbated the worldwide economic downturn.
Combating the Crisis: The New Deal
In 1932, Franklin D. Roosevelt won the presidency, proposing the New Deal, a program to revive the economy through government intervention.
Economic and Social Reforms
The New Deal implemented economic measures such as assisting struggling businesses, creating public sector jobs, and controlling banks to provide low-interest loans. Social reforms included a large-scale public works program, farm price supports, wage increases, and a 40-hour workweek.
These measures led to economic revival and reduced unemployment. By 1934, national income reached 1929 levels. However, full recovery didn’t occur until World War II, when the U.S. became the primary supplier for Allied nations.
Post-War Italy
World War I left Italy with severe human and economic consequences, including 700,000 deaths, looted industries, high foreign debt, and inflation. The peace agreements failed to deliver promised territories, leading to widespread discontent.
Economic crisis and political instability fueled social tensions. Northern Italy saw strikes and land occupations, which were repressed. Fear of social unrest grew among the conservative classes.