The Great Depression: The Economic Crisis of 1929

The Great Depression (or Great Depression) was the most severe economic recession of the 20th century, beginning in the United States with the Wall Street crash in October 1929 and lasting through much of the 1930s. It impacted the global economy, causing mass unemployment, bank failures, deflation, and a drastic reduction in industrial production.

The main causes

In the 1920s, known as the "Roaring Twenties" in the US, an economic boom occurred, fueled by:

Excessive financial speculation on the stock market.
Massive use of credit for stock purchases.
Industrial and agricultural overproduction, without a corresponding increase in consumption.
Federal Reserve monetary policies that initially encouraged easy credit, but later restricted it.

The trigger was the Wall Street Crash:

October 24, 1929 ("Black Thursday") and especially October 29 ("Black Tuesday"), when millions of shares were sold in panic, causing a collapse in stock prices.

Other aggravating factors included protectionism (such as the Smoot-Hawley tariff of 1930, which reduced international trade) and the maintenance of the gold standard, which limited expansionary policies.

The consequences

In the US: industrial production fell by 45-50%, GDP by 30%, unemployment reached 25% (about 13 million people unemployed).
Global effects: the crisis spread to Europe (bank collapses in Germany and Austria), Latin America, and elsewhere, with a 60% decline in world trade.
Social consequences: widespread poverty, internal migration (such as the Dust Bowl in the Great Plains), and slums ("Hoovervilles").

Politically, it favored the rise of authoritarian regimes (such as Nazism in Germany) and contributed to the tensions that led to the Second World War.

The answer: the New Deal

In 1933, President Franklin D. Roosevelt launched the New Deal, a vast program of government intervention to revive the economy:

public works to create jobs.
Banking and financial reforms.
Agricultural aid and social protection (such as Social Security).

The New Deal mitigated the effects, but full recovery did not come until the mobilization for World War II. The Great Depression forever changed the modern economy, introducing a greater role for the government and influencing theories such as those of John Maynard Keynes on government intervention in crises.