THE GREAT DEPRESSION
"ONLY A PERIODIC LOW-POINT, OR A
BREAKDOWN OF CAPITALISM?"
The great depression from 1929 and into the 1930's, is the period in modern times with the largest unemployment, and the highest frequencies of bankruptcies. But can one from this say that "the Great Depression" was a breakdown of capitalism? Or was it simply an economic low-point that had to follow the prosperous 20's?
In the 1920's everything seemed to be running smoothly over the whole world. People had a good time and business prospered. Lots of new inventions were introduced such as the first planes, the radio and many families got hold of a refrigerators. In the more wealthy families they even had washing machines and vacuum cleaners. As the 20's were coming to an end, over 20 million Americans had cars.
During the 1920's there was a free marked where all was manufactured from the play of
supply and demand on the world marked. The whole production was based on credit i.e..
promise to pay in the future. The system was based on mutual confidence and exchange.
The economy was dependent on foreign loans, and government expenditure was
dangerously high, with businesses suffering from low profit margins.
The world believed that the great expansion, as in the early 20's, would continue and with all
the new inventions life would become pure joy and happiness. Sales, profits and wages went
through the roof.
The acute phase of the Great Depression began in October 1929, on "the Black Friday", with the Wall Street Crash and continued through the early 1930s. The stock marked crash was not the cause of the depression, but a symptom of a problem whose real causes lay much deeper. Some of them even so fare away from Wall Street, as the farmers of eastern Europe,
After share prices plunged on Wall Street in 1929 the US banks began to call in their foreign
loans. They had also loaned money to many people who as a result of the Crash could not
repay it. Meanwhile, those who had money on deposit at the bank began to withdraw it.
Without enough money to pay depositors, many banks collapsed. A shortage of cash meant
that there was less money to invest in industry and less money to be spent on industrial and
farm products. Many banks had to close down, and was the mere symbol of how terrifying the depression was. The first bank to close down in Europe was the "Creditanstalt" in Vienna in 1931.
As the depression got worse the years following the "Black Friday" (1929), different views developed on what had to be done. The optimists, people like president H.C. Hoover, believed this was just a periodic low point that had to follow the prosperity of the 20's, and that the prosperity was just around the corner. They said this based on earlier experiences, and knowledge of that history repeats itself. They said that the depression followed the prosperity as WW1 had followed the prosperity at the change of the century. Hoovers way of tackling the depression made him very unpopular.
Hoover was inaugurated in March 1929, and enjoyed only half a year of the economic prosperity with which the country had become familiar. He took unprecedented measures to deal with the depression as for the interest of maintaining consumer purchasing power, he urged business leaders not to cut wages, as had been their usual custom during hard times. His policy was only temporarily successful; production declined, unemployment grew, and eventually wages for those still employed were cut after all.
The people not so optimistic as Hoover, took measures to prevent getting dragged down into the dark whole of economic ruin.
On the international scene this meant an end to the old economic system, with manufacturing from the play of supply and demand. Now every country tried to protect itself by putting up high tariffs so to make sure it got to sell its own products. This again gradually lead to the abandoning of the gold standard. In this way the world capitalism was effected, but not broken down. There was still buying and selling across boarders even though in a much smaller scale. Some measures were though taken at the bottom of the depression which reminded strongly of the communism of the Soviet Union. When Hoover was replaced by Roosevelt in 1933, factories were put on manufacturing schemes and rationalism appeared in many aspects of life. The governments took hold of production to get the countries up of the dump. This can be said to be a breakdown of capitalism to a certain extent, but can also be viewed as a strengthening and return to capitalism. It would take more than two-three years to breakdown a system that it had taken so long to build up.
In Germany, the withdrawal of foreign finance in the early 1930s and the resulting
hardships opened the way for the rise of fascism and Adolf Hitler. The withdrawal of loans from Germany was not meant as a punishment of Germany, but a measure of saving ones own skin. In the totalitarian system of Hitler Germany there was a special kind of capitalism, which was run by the government, but distributed by the people. In many countries the Great Depression resulted in a big shift in public attitudes and in government policy towards welfare provision.
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