The Great Depression was a severe worldwide economic downturn that began in 1929 and lasted until the late 1930s or early 1940s, depending on the country. It was the most prolonged and widespread depression of the 20th century, affecting both industrialized and non-industrialized nations. The Great Depression led to widespread unemployment, poverty, and significant declines in industrial production, trade, and investment. ## What caused The Great Depression? The causes of the Great Depression were complex and multifaceted, with a combination of factors contributing to the crisis: 1. **Stock market crash of 1929**: The Great Depression started with the sudden and dramatic collapse of the U.S. stock market, which began on October 24, 1929, known as Black Thursday. Panic selling ensued, and by mid-November, the market had lost about a third of its value. This event shattered consumer and business confidence, leading to reduced spending and investment. 2. **Economic imbalances**: The 1920s saw a period of economic growth and prosperity in the United States, but this growth was unevenly distributed, leading to income [inequality](https://doctorparadox.net/dictionaries/economics/inequality-definition/) and overproduction in some sectors. Farmers, in particular, faced significant challenges due to falling crop prices and increasing debt. 3. **Reduction in international trade**: High levels of debt from [[World War I]] and protectionist trade policies, such as the Smoot-Hawley Tariff Act in the United States, led to a reduction in international trade. Countries retaliated with their own tariffs, further exacerbating the decline in global trade. 4. **Bank failures and credit contraction**: As the economic situation worsened, many banks faced insolvency due to bad loans and a loss of depositor confidence. As banks failed, the [[money supply]] contracted, making it more difficult for businesses and individuals to access credit. This further deepened the economic crisis. 5. **Inadequate policy responses**: Initially, governments and central banks did not respond effectively to the crisis. Monetary policies were constrained by the [[gold standard]], and fiscal policies were often focused on balancing budgets rather than stimulating the economy. This led to a prolonged and deep economic downturn. ## Consequences of The Great Depression The Great Depression had profound social, political, and economic consequences. Unemployment rates soared, reaching 25% in the United States and even higher in some European countries. Poverty and homelessness increased, leading to the growth of shantytowns known as "[[Hoovervilles]]" in the United States. The economic hardship and social unrest also contributed to the rise of extremist political movements in Europe, such as [fascism](https://doctorparadox.net/category/politics/fascism/) and [[Nazis]]m. Governments eventually responded to the crisis with a range of policy measures designed to stimulate economic growth and alleviate suffering. In the United States, President [[Franklin D. Roosevelt]] implemented [[The New Deal]], a series of programs, public work projects, financial reforms, and regulations to provide relief, recovery, and reform. Other countries adopted similar policies, and some, such as Germany and Japan, turned to militarization and territorial expansion as a way to address their economic woes. The Great Depression ultimately came to an end with the onset of World War II (see: [[World War II Timeline]]), which led to a massive increase in government spending and industrial production, pulling the global economy out of the depression. The experience of the Great Depression significantly influenced economic policy and theory in the following decades, with greater emphasis on the role of governments and central banks in managing economies and preventing such crises in the future.