How was the “Great Depression” — the world’s biggest economic crisis?
The International Monetary Fund, IMF has said that due to the Corona epidemic, the world is going to see the biggest economic crisis after the Great Depression. What happened during the Great Depression about 90 years ago?
The early years of the 20th century was very difficult for the western world. The First World War was fought between 1914 and 1918. After the end of the war, people breathed a sigh of relief that in 1918 the flu epidemic spread. This epidemic, popularly known as Spanish Flu, killed about five crore people. Both these incidents had a huge impact on America. But the 1920s brought prosperity to the American people. The country’s wealth had doubled between 1920 and 1929. For the first time, fewer people were living in villages and more people in cities. Capitalism was rising. Chain stores were opened all over the country, people’s spending capacity was increased and it changed their way of living. Whether readymade clothes or kitchen appliances, washing machines or vacuum cleaners, the American people were not tired of buying goods. This era of prosperity has been called the “Roaring Twenties” in history. READ MORE
This was the period when people in America started buying cars. By the late twenties, every five Americans had a car on the streets. But where was the money coming from people to buy so much? In fact, American banks had taught people to take “credit”. For people, it was nothing less than a charisma. Another charisma was the stock market. Put money, wait and watch it grow. Everybody wanted to invest in the stock market, be it big businessmen of the country, employed people or those who managed to live by sweeping the broom. The stock market grew so much that in August 1929 it had reached its peak.
And then something changed in this happy country. By August 1929, there was so much debt on the banks that it was no longer possible to repay them. Now the affordability of people was starting to decrease. The goods could not be sold in the markets. Due to this, production started falling and unemployment started increasing. Inflation has also increased in this situation. On October 24, 1924, investors sold so many shares in a panic that the stock market crashed. This day became known in history as “Black Thursday”. A record 1.29 crore shares were bought and sold on this day. Five days later, on October 29, there was more confusion among investors. More than 16 million shares were sold on the day of “Black Tuesday”. Lakhs of shares have reached the price of clams.
As a result of this deep turmoil in the market, many factories were closed, lakhs of jobs were lost. The jobs that were left also drastically reduced their salaries. People living a luxurious life by taking loans from the bank were now immersed in debt. In 1930, 4 million Americans were unemployed. By 1931, this number had increased to 60 lakhs. The country’s industrial production was halved. It was the condition of the farmers that there was no money left to give to the labourers to harvest the crop. In such a situation, the farmers were forced to leave the crop rot in the fields. On the one hand, hungry people who have no money to buy food, and on the other hand, grains are wasted in the fields.
The situation became worse when in 1930, due to the severe drought in the country, more people died. During this time there was a large scale migration from villages to cities in search of work. But in the midst of all this, President Herbert Hoover kept saying that the economic crisis would end with time. But this did not happen. By 1933, thousands of banks in the country had been locked. During this time a plan was made that the government give loans to banks and in return give loans to bank companies so that jobs can be saved. But Republican Hoover was against it. He believed that the government’s job is not to create jobs or to provide financial support to the citizens.
The public now had no hope from Hoover. The American people elected Democrat Franklin D. Roosevelt as their new president. When Roosevelt took command of the country in 1933, more than 20 per cent of America’s population was unemployed. Roosevelt ran many such programs that could provide employment to the people. He also implemented the Social Security Act in the country. With his efforts, the economy took over but the country did not emerge from the recession until the late 1930s.
This Great Depression started from America spread across the world. Britain, Germany, France, Canada, Japan and even India were affected. Not only did this phase of recession change the standard of living of the people, but their political ideology was also affected. During this period, the rise of radical rightism occurred in many countries in Europe. This was the same period in which Hitler took the reins of Germany. In 1932, Hitler’s Nazi Party became the largest party to reach the German Parliament. Six months later Hitler was made Chancellor. Politically, it was an important change for Europe and the whole world. A change that resulted in a war in Europe in 1939. The recession that lasted for ten years ended with the start of World War II.
Meanwhile, America had decided to support France and Britain against Hitler. Weapons were needed for war. America built new factories and people started getting employment here. The US entered the Second World War with the Japanese attack on Pearl Harbor in 1941, and production in factories reached full swing. The country had come out of recession but was stuck in the war which lasted till 1945.
Like a hundred years ago, an epidemic has spread again today. The IMF has announced that the impact of this epidemic financially can be like the Great Depression. People’s jobs have started going away amid the lockdown of a month. If the world does not recover from this pandemic by the end of 2020, where will the unemployment rate reach, economists, are worried about it? In the last few years, right-wing ideology has increased in many countries of the world.
The fierce right-wing AFD party has made its way into Germany. In addition to Germany in Europe, people of Austria, France, Hungary, Italy and Spain have also increased towards the right wing parties. So will the economic slowdown due to the Corona crisis further fuel the radical right? Will history repeat itself once again? If this happens, the results can be more frightening than the virus.
Originally published at https://www.mubahisa.in.