The Great Depression: Causes, Impacts, and Solutions
The End of Prosperity
Hidden Structural Problems
Since 1928, the U.S. economy began to show signs of exhaustion due to several hidden structural problems:
- The agricultural sector experienced overproduction and farmers struggled with debt from mechanization.
- Traditional industries faced a crisis while new industrial sectors emerged from the Second Industrial Revolution.
- Speculation in the stock market became prominent, with banks and individuals investing heavily.
- The strong dollar caused the depreciation of other currencies and inflation.
Euphoria Before the Crash
Despite these warning signs, optimism prevailed. In his last State of the Union address in December 1928, President Coolidge expressed confidence in the future of the U.S. economy, a sentiment shared by his successor, Herbert Hoover.
The Crash of 1929
Early Warning Signs
In the spring of 1929, the economy began to show signs of exhaustion, with fluctuating prices. The Federal Reserve faced a dilemma: warn of the risks of a stock market crash and potentially trigger panic, or raise interest rates and ruin small investors. They chose to wait, hoping the situation would improve.
Black Thursday and Black Tuesday
On Thursday, October 24, 1929 (Black Thursday), share sales soared as investors panicked. Wall Street banks intervened with massive investments to curb the fall, but the relief was short-lived. On Tuesday, October 29 (Black Tuesday), the New York Stock Exchange crashed. Sell orders flooded in, and stock values plummeted. Money vanished from the market.
The Great Depression
Ripple Effects
The stock market crash triggered a ripple effect that impacted all economic sectors:
- The financial system suffered as banks stopped lending and demanded loan repayments, ruining many savers.
- Consumer spending dropped, forcing businesses to reduce production and leading to further job losses.
- Unemployment soared, reducing consumer demand and increasing poverty.
- The agricultural sector went bankrupt due to falling prices and demand, leading to farm foreclosures and unemployment.
The Great Depression had begun, threatening the collapse of capitalism.
The Expansion of the Crisis to Europe
: U.S. economic crisis affecting the continent europeo.los reasons are as follows: The United States reduced its imports and its Exports.-paralyzed their overseas investments and repatriate capital, which had been the basis on which had underpinned the recovery, “in Germany and Austria the absence of American capital unleashed the collapse of their banking systems and extendio.en unemployment economicos.el Germany, the Nazis used the opportunity to broaden its social base .- in the UK panic at the depreciation of the pound led the government to abandon the pattern oro.todo this causes all countries were affected by the crisis along the thirties.solutions unidos.el New Deal state. in the early thirties in the United States had fourteen million unemployed in an atmosphere of overproduction and falling of Republican politics precios.la Hoover was shown ineffective in the face hoover depresion.para representative of orthodox capitalism and the crisis was temporary breve.En 1933 the Democrat won the elections to draft a program FDRoosevelt out of the crisis, the new deal the new deal was a new economic orientation denounced by liberals as interventionist and pro-socialist:
“devalued the dollar to encourage Exports.-to recover the income of farmers, restrict output, raised prices and subsidizes Exports.-favored the industry in technology innovation and launching a comprehensive program of subsidies to boost production. -undertook to reform the banking sector in order to control the activities of entities financieras.-launched a program of grants and subsidies for desempleados.-design a program of public works to reduce desempleo.-promulga Labor Relations Act to protect trade union negotiation and dignified working conditions, by reducing working hours and wage setting minimo.Dos were the most significant aspects from the program that Roosevelt, broke with the inhibition of government would intervene to address imbalances and boost the economy in times of crisis.-served to mitigate the most serious social effects of economic activity crisis.en 1937 had failed to regain 1929 levels. from laissez faire to the welfare state . the Scandinavian social model was used in other countries europeos.las regular and frequent crisis experienced by the capitalist economy with its attendant social discontent and tensions contributed in some advanced nations to go progressively adopting legislation this evolution social.es juice a crucial role its impact in Europe the Russian Revolution and the fear of the propertied classes that they will reproduce these events in their social achievements sociedades.determinadas now seems Irrelo lift everyday were hardly more than a desire in the western world entreguerras.fue during these years that laid the foundation of these measures of social security that constitute the so-called state of bienestar.en this time when fascism and Stalinism propagandistic weapons deployed, capitalism had to assume certain social and concessions for the sake of supervivencia.la labor crisis of 1929 was the toughest test faced by the liberal capitalist system, if in some countries imposed authoritarianism in others, governments were able to intervene capitalismo.el mitigating the injustices of the American New Deal mean the first steps of the welfare state.