Benifits of Great Depression

Great Depression:

The slump of the 1930s. It began with the Wall Street Crash in 1929. Many people lost money then and this made them less willing to spend. This had important consequences.

•    Confidence was destroyed and investment was badly affected.

•    The downward multiplier effects continued for some years.

•    Government policies were not helpful. Many governments cut spending which further reduced aggregate demand .

•    Exports fell as aggregate demand fell everywhere. Many governments retaliated by imposing import controls and competing with each other to devalue their currencies. This reduced international trade.

•    Unemployment in the UK peaked at 20%. In the US and Germany it peaked at 33%. Those who were in work experienced reduced incomes.

By 1934 the worst was over but the recovery was slow and faltering and it was not until rearmament began in 1937 that the depression finally came to an end. Meantime, in Germany the depression had contributed to the conditions which helped bring Hitler to power.

The work of J M Keynes at this time offered real insights into ways of alleviating depression. The lessons which were learnt were put into practice after World War II in the creation of the Bretton Woods system and in the moves towards freeing international trade which followed. In the late 1930s the US government under President Roosevelt got the message that governments could help with deficit spending on investment projects.


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