At the end of the 30s of the twentieth century John Maynard Keynes said: “humanity lives in the shadow of one of the greatest economic catastrophes of modern history”. This statement referred to the then-greatest threat to the world economic system, which was the Great Depression. Lionel Robbins of the London School of Economics wrote the book titled “The Great Depression” (London 1934) in which he put the idea supposedly the world crisis not erupted suddenly in 1929, but lasted since 1914. World War was a terrible disaster for humanity, especially for Europe, it brought huge economic and human destruction; international division of labor has ceased to function, have broken world markets. State to finance war expenses, took out large loans in other countries or in their own nationals. After the war, winning the state had to pay off war debts and Germany - reparations. We come to this debt on the need to rebuild the economy, mainly through loans taken out of the United States.
What exactly was the Great Depression? „The Great Depression - worldwide economic downturn that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world” - Christina D. Romer wrote in her text. Great Depression originated in the United States, officially it lasted in the years 1929-1932. It resulted in drastic declines in output, severe unemployment, and acute deflation in almost every country of the globe. In the United States the Great Depression right after Civil War is considered to the gravest crisis in American history.
The then US President Herbert Hoover in 1932, presented a summary of his campaign: “(…) we could do nothing. This would lead to the final catastrophe. Reacting to the situation, we presented to entrepreneurs and the Congress of the largest in the history of the republic program of defense and counterattack. We introduced it in life. (…) So far, no government in Washington does not want to take so much responsibility for leadership in times of crisis”. Well, his actions were completely different than all previously used in America in times of crisis. So far, always guided by the principle of laissez-faire, just do not interfere to the economy, so that the government does not exacerbated the crisis, and softened its course. The president however has applied aggressive action and tossed aside laissez-faire.
The situation was really serious, since Hebert Clark Hoover decided to introduce new rules, discarding the previous one. The Great Depression brought about fundamental changes in economic institutions, macroeconomic policy, and economic theory.
On October 24, 1929, the stock market bubble burst, as investors began dumping shares en masse. A record 12.9 million shares were traded that day, known as “Black Thursday.” Five days later, on “Black Tuesday” some 16 million shares were traded after another wave of panic swept Wall Street. Millions of shares ended up worthless, and those investors who had bought stocks “on margin” (with borrowed money) were wiped out completely. From the Wall Street crash , the world economy entered a period called the Great Depression in the United States and in other countries of the Great Depression Economic. Production in the major industrial countries has fallen from 30 to 50 %, the value of world trade in 1932 was about one-third lower than three years earlier. In 1933, 30 million people were out of work, everywhere decreased gross national income . Between 1929 and 1932 the average American family income fell by 40% - from 2,300 to 1,500 dollars a year. Between 1929 and 1933 fell from 10 000 to 25 000 commercial banks USA.
British historian Paul Johnson wrote: “The collapse of Wall Street in September and October 1929 and the subsequent Great Depression them among the most important events of the twentieth century. They made the Second World War, though not inevitable, it became possible”. The unity of the world financial system collapsed ultimately prevailed monetary chaos. The breakdown of global markets and the collapse of the international financial system and trade, prepared the ground for World War II. It is not an exaggeration to say that the whole edifice of world trade and global finance has implosion. Intensified social unrest, political crises and conflicts between political elites of various countries.
The Great Depression affected not only America. The USA was the place where it was born, and later spread to the whole world. The Depression played a vital role in the development of macroeconomic policies intended to temper economic downturns and upturns. We can see dates of the Great Depression in Various Countries: United States (1929-1933), Great Britain (1930-1932), Germany (1928-1932), France (1930-1932), Canada (1929-1933), Switzerland (1929-1933), Czechoslovakia (1929-1933), Italy (1929-1933), Belgium (1929-1933), Netherlands (1929-1933), Sweden (1930-1932), Denmark (1930-1933), Poland (1929-1933), Argentina (1929-1932), Brazil (1928-1931), Japan (1930-1932), India (1929-1931), South Africa (1930-1933).
The Great Depression surprised the United States - the only one industrialized country in the world without some form of unemployment insurance or social security. In 1935, Congress passed the Social Security Act, which for the first time provided Americans with unemployment, disability and pensions for old age.
A new deal taken an unequal fight against unemployment through the launch of public works for the construction of roads and even bridges in the United States. Prosperity tried to shoot the procurement and development of the defense industry. But in fact all the plans reduce unemployment to only 10% ended in a fiasco.
What was the real problem? Economic theory shows that the business cycle can be invoked only by inflation stimulated by the government, and the inflationist and interventionist methods can only prolong and deepen the crisis. the cause of the crisis was not the principle of laissez - faire, because just government interventions have led to an unhealthy boom of the twenties , and new methods of Hoover , involving advanced interventionism, tightened the course of the Great Depression. A blame is not on the side of a free market economy - it's time to clean the free market and laissez-faire. To be honest, someone else should be blamed, it means: politicians, bureaucrats and a lot of “enlightened” economists.
T. Gabiś, Wielki kryzys - wielka zagadka? [in:] http://nowadebata.pl/2012/02/29/wielki-kryzys-wielka-zagadka [29.02.2012; access: 27.05.2016].
Tamże.
Tamże.
Christina D. Romer, Great Depression, Forthcoming in the Encyclopædia Britannica, 2003.
Murray N. Rothbard, Wielki Kryzys w Ameryce / America's Great Depression, The Ludwig von Mises Institute, 2000, p. 151.
Christina D. Romer, Great Depression, Forthcoming in the Encyclopædia Britannica, 2003.
William Starr Myers i Walter H. Newton, The Hoover Administration, New York 1936, cz. 1; William Starr Myers (red.), The State Papers of Herbert Hoover, New York 1934. Zob. też Herbert Hoover, Memoirs of Herbert Hoover, New York 1937, t. 3.
Murray N. Rothbard, Wielki Kryzys w Ameryce / America's Great Depression, The Ludwig von Mises Institute, 2000, p. 151-153.
The Great Depression [27.05.2016], in: http://www.history.com/topics/great-depression
T. Gabiś, Wielki kryzys - wielka zagadka? [in:] http://nowadebata.pl/2012/02/29/wielki-kryzys-wielka-zagadka [29.02.2012; access: 27.05.2016].
Tamże.
Tamże.
Christina D. Romer, Great Depression, Forthcoming in the Encyclopædia Britannica, 2003.
Tamże.
The Great Depression [27.05.2016], in: http://www.history.com/topics/great-depression
Redakcja Investroom, Wielki Kryzys z 1933 r. - największy kryzys gospodarczy w historii (16.03.2016, dostęp: 30.05.2016), w: https://investroom.pl/blog/307-2/
Murray N. Rothbard, Wielki Kryzys w Ameryce / America's Great Depression, The Ludwig von Mises Institute, 2000, p. 278.