Global Effects of the Great Depression

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Date: 2017
Publisher: Gale, a Cengage Company
Document Type: Topic overview
Length: 1,385 words
Content Level: (Level 3)
Lexile Measure: 1100L

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The Great Depression of the 1930s was one of the most catastrophic global economic declines in history. It began with the 1929 US stock market crash, which plunged millions of Americans into sudden poverty. The effects of the crash quickly spread around the world. The Great Depression struck Europe particularly hard, since the United States and its European allies had integrated their economies after World War I (1914–1918). Poverty and unemployment were rampant, and many people resorted to crime simply to survive.

Aside from economic consequences, the Great Depression also led to the rise of the German dictator Adolf Hitler (1889–1945). Hitler promised to lead the German people out of poverty by making the nation a powerful empire. The world’s military response to Hitler and his allies led to the outbreak of World War II (1939–1945). The industrial activity needed to sustain the war incidentally helped bring many countries out of the poverty of the Great Depression.

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Critical Thinking Questions

  • How did the Great Depression affect the availability of food in the United States?
  • How did the Smoot-Hawley Tariff Act negatively affect other industrialized countries?
  • How did the Great Depression partly contribute to the rise of Adolf Hitler in Germany?

Great Depression Begins

The Great Depression occurred after years of booming economic activity in the United States. The country had become a powerful global financial center after World War I. Numerous European nations bought American products or took American financial loans. Many Americans became confident in their personal financial outlooks and lived lavishly throughout the 1920s. This era became known as the Roaring Twenties for this reason.

The US stock market, based on Wall Street in New York City, peaked in August 1929. Stock prices were high, but actual industrial production had decreased by this time. This meant people were buying expensive stocks not knowing they would not yield returns. Much of the money people were using to buy the stocks came from loans. Individuals assumed they would eventually make enough money from selling the stocks to pay back their lenders.

However, by October 1929, US stock prices began falling, and investors quickly sold off their stocks. The false inflation of these stocks had made the investments worthless, and many people’s life savings suddenly disappeared. The sudden wave of selling caused great panic throughout the United States. With everyone selling their stocks, stock prices fell dramatically. Borrowers could not pay back their lenders, and banks could not even pay out cash to the people who owned it. The stock market crash of October 29, 1929, began the Great Depression.

Great Depression around the World

The stock market crash and the Great Depression that followed it affected not only the United States but also other Western nations such as Australia and the countries of Europe. These nations’ economies were closely linked to the United States through industrial trade. They felt the ripple effects of the crash almost immediately.

United States

About fifteen million Americans were unemployed by the early 1930s. People had lost their life savings, jobs, and homes. Many had to move into squalid housing or became homeless altogether.

Even food was difficult to obtain. Farmers had already been floundering to make profits after droughts destroyed their crops. Now, during the Depression, many farmers could not even afford to harvest the crops they had. With agricultural production in a slump and millions of Americans unable to afford necessities, people were forced to seek assistance from charities such as soup kitchens, which provided food to the needy. Some people simply stole food to keep themselves and their families alive. Many Americans became malnourished.

Other effects of the Great Depression in the United States included rises in cases of suicide, alcoholism, and sales of cigarettes, which people started smoking as a cheaper alternative to cigars. Financial ruin also caused fewer young Americans to attend college or get married. Fewer couples had children as the Depression continued, and married men seeking to end their marriages simply abandoned their wives rather than pay the legal fees of divorce. These poor economic conditions continued in the United States throughout the 1930s.

Other Western Nations

Because the United States was a principal actor in global industrial commerce of the era, the American stock market downturn affected many other nations of the world, particularly those that traded with the United States. This was due to several reasons. Left with no returns on their loans from US citizens, American lenders demanded that foreign governments and individuals repay their loans. This sudden call for repayment strained national economies and became a burden on individual borrowers.

Furthermore, in 1930, US president Herbert Hoover (1874–1964) signed the Smoot-Hawley Tariff Act. The law raised tariffs, or taxes, on imported goods. This discouraged Americans from purchasing foreign products in an effort to spur strictly American business. However, the act had the unintended consequences of damaging the economies of the United States’ trading partners while causing these countries to raise their own tariffs on American products. The tariff act only aggravated the already dire economic situations in the United States and various other nations.

In the United Kingdom, 25 percent of the national workforce, or about 2.5 million people, had become unemployed by 1933. Most of these people were workers in the heavy industrial sectors of northern England, Wales, Scotland, and Northern Ireland. Because most of the United Kingdom’s trade with the United States was based on manufacturing, it was the British industries of iron, steel, coal, and shipbuilding that suffered the most during the Depression. Intense international competition had already been hurting these enterprises. The Depression, combined with the harmful effects of the American tariff act, forced some of these British operations to lay off workers or close entirely.

The Great Depression affected all industrialized Western nations in about the same ways. Australia was another particularly hard-hit country. Its unemployment rate was already at 10 percent before the stock market crash. By 1932, this figure had risen to 32 percent. Jobless Australians soon lost their homes and lived in poverty on the streets. People turned to crime to survive, and many people succumbed to alcoholism.

Many Australians started doubting whether their existing government could help the country recover from its economic and social problems. As a result, people starting turning to extremist political parties that supported communist, socialist, or fascist views. Communism and socialism support equal societies in which the public owns capital and goods equally. Fascism seeks to glorify nations themselves above all else, and supports a dictator ruling over the nation by controlling its economy and suppressing opposition. The Great Depression also notably helped cultivate the rise of fascist politics in Germany.

Appearance of Fascism and End of Depression

The Depression struck Germany deeply. American lenders’ sudden calls for their loans left millions of Germans with little money, and the national economy suffered as a result. Unemployment quickly rose, and existing wages sharply decreased. Against this backdrop, Adolf Hitler of the National Socialist German Workers’ Party, or Nazi Party, became chancellor of Germany in 1933. He had promised to rescue Germany from its humiliating economic situation and restore the country to its former glory.

Hitler had partly used German frustration over the Depression to come to power. Within a few years, he started building up Germany’s military and preparing to expand the nation across Europe. Hitler ruled Germany through fascism, with himself as dictator. His invasion of Poland in 1939 started World War II.

The war forced American factories to hire more workers to produce national defense equipment. The US government then instituted a military draft that required American males to serve in the US armed forces during the war. The war effort helped reduce US unemployment. Other Western countries saw similar economic effects from World War II, and the global financial crisis was brought to an end.

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Timeline—Great Depression Worldwide

  • 1929: The US stock market crashes on October 29.
  • 1930: US president Herbert Hoover passes the Smoot-Hawley Tariff Act to try to bolster American businesses.
  • 1932: More than 20 percent of Americans are unemployed.
  • 1932: Australia’s unemployment rate rises to 32 percent.
  • 1933: 25 percent of British laborers are unemployed.
  • 1933: Adolf Hitler becomes chancellor of Germany based on promises to save Germans from the effects of the worldwide financial crisis.
  • 1939: World War II begins, forcing nations around the world to increase military spending.
  • 1941: The United States enters the war and increased industrial production helps end the Great Depression.

Source Citation

Source Citation   

Gale Document Number: GALE|NBHGBI759911820