Mains Marks Booster     4th August 2023        

Causes of the Great Depression:

  • Stock Market Crash: Wall Street Collapse, 1929 led to widespread financial losses and investor bankruptcies.
  • Overproduction and Underconsumption: Technological advancements and efficiency fueled overproduction in the 1920s. Wage stagnation widened production-consumer gap, creating surplus goods and worsening the economic downturn.
  • Agricultural Crisis in the 1920s: Overproduction, falling prices, high debts, and drought conditions in Midwest led to crop failures and rural poverty.
  • International Economic Factors: War reparations, debt inability, and protectionist trade policies hindered international trade.

Impacts of the Great Depression:

  • Bank run and loss of investors’ wealth: Reduced purchasing power led to decline in demand for goods, further deepening the vicious cycle of deflation and unemployment.
  • Poverty, unemployment, homelessness, malnutrition and decline in living standards.
  • Global economic downturn, declining trade, production, and investment ???? failing economies in Europe & Asia.
  • Rise of Extremism as Great Depression led to political shifts, rise of nationalist and right-wing fascist regimes that challenged democracy (eg. Italy, Germany, Japan, etc.) ???? accelerated world towards World War II.

Responses to Tackle Great Depression:

  • New Deal: An economic package introduced by President Franklin D Roosevelt focusing on Recovery (boost employment and demand for goods), Relief (direct help to poverty stricken people), and Reform (to ensure economic disaster is not repeated).
  • Temporary takeover of Banks: by the government, guaranteeing safety of depositors money in case of another economic crises.
  • Employment programmes: in form of public works like building dams, roads, schools, houses etc. to boost purchasing power and consumption demand of the people.
  • Labour reforms: Improved working conditions, minimum wages, collective bargaining etc.

 The real factor that finally put an end to Depression in the USA was World War II, which saw rapid increase in demand for aircrafts, ships, arms & armaments, etc.

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