Great Depression

What caused the Great depression and what were its effects?

The Great Depression refers to the world economic crisis which lasted from 1929-33. The crisis started In USA but soon engulfed almost every country except Soviet Union.

REASONS

• Overproduction : The factories were overproducing through out the period which was much higher than the demand. This led them to realize that they need to reduce production. The reduced production led to throwing away workers from jobs
• Less wage : While the profits of industries increased, the wages did not increased in the same manner. This led to lesser consumption by the workers. This led to lesser demand and consequently firing of the workers. Thus a vicious circle started
•  Speculation : To augment their incomes a lot of people started investing in the stock markets. Great deal of speculation started where banks, people with all the savings started investing. But once the crash began, it engulfed everyone.
• Exports began to fall : The other countries imposed barriers on the American goods as America had itself imposed barriers on its goods.This further reduced the demands for the goods.

EFFECTS

• A lot of banks closed
• Industrial production fell and was reduced to half in 1933 of what it was in 1929.
• People lost their savings in the stock markets.
• Workers were laid off from the factories. Unemployment rose and reached 14 million.
• It also affected a lot of countries in Europe.Short term loans were cancelled.There were political effects as well and right wing governments came in power in many states like Germany and Italy.