Economic Crisis of 1929

The Great Depression was launched in the United States on October 24, 1929 ("Black Thursday") by the Wall Street stock market crash and spread rapidly to the rest of the world and plunged it into recession during the 1930s. The profound social and political upheavals that it engendered favored the rise to power in Europe of fascist parties which pursued an expansionist policy, a direct cause of the Second World War.

The onset of the crisis
Despite the good health of the US economy in the late 1920s, the foundations of growth were becoming increasingly fragile due to industrial overproduction, stock market speculation, widespread indebtedness and persistent The crisis of agriculture.

At the announcement of the fall in prices and industrial profits in mid-October 1929, some speculators decided to sell their shares in order to obtain a capital gain at a time when the stock market prices of Wall Street (New York) were still at A high level. Stock prices fell rapidly, leading to a panic that culminated on October 24, when 16 million shares were offered at low prices on the market without finding buyers. After a pause, the course collapse spread to all values ​​and even touched the symbols of American industry. Hundreds of thousands of small shareholders were ruined. The banks, which had multiplied the loans for several years, could not recover their funds from the indebted, while at the same time, those who had money in deposit began to withdraw. Not having the necessary funds to repay them, many banks went bankrupt. This lack of liquidity led to a decrease in industrial investment and in the consumption of manufactured and agricultural products. In three years, most American banks closed their doors.

The crisis spread to the entire world when American banks demanded repayment of their loans abroad and repatriated the capital they had invested. Austria was the first affected, with the bankruptcy of the bank Kreditanstalt. In Germany, the bankruptcy of Danat Bank in July 1931 caused the collapse of the banking system. The decline in prices of manufactured goods, which was uneven across countries and sectors, was a general phenomenon. It was about 30%. In agriculture, which has been in crisis for a decade, the decline has reached 65%. 100 for the wholesale prices of agricultural commodities. As a logical consequence of the overproduction of the 1920s, industrial and agricultural production collapsed. Whole stocks of standing wheat and unsold cars were destroyed. Countries whose growth was dependent on foreign investment (Germany, Poland) and those where credit had exploded (United States, Canada) were the first to be affected.

Highly indebted and unable to repatriate its invested capital in Germany, the United Kingdom had to abandon the reference of the gold standard for its currency which was devalued by 40%. In September 1931, the fall of the pound sterling resulted in the collapse of some 30 currencies linked to it (Scandinavia, Portugal, Egypt, etc.). International financial flows were totally disorganized and world trade sank into doldrums. International trade began to decline in 1930 and reached its lowest point in 1932, with currency devaluations and protectionist measures taken by the various governments increasing the recession.

Remaining relative to the global slump due to its weak integration into the international banking system, France was hit by the crisis in 1932, due to the devaluation of the British pound which undermined the stability of the franc. The fall in agricultural prices, which began in 1930, accelerated and the fall in exports caused a drop in industrial production. In 1933 the country already had 1.5 million unemployed. The measures taken by the radical governments (subsidies to firms in difficulty, customs barriers, encouragement to the fall of agricultural production) could not stop the crisis, but compromised the public finances.

On the human level, the most tragic aspect of the crisis was the increase in unemployment, estimated at 30 million at the end of 1932 (undoubtedly undervalued), against 10 million three years earlier. The workers, but also the employees, were the main victims. In Germany and France, the middle classes (white-collar workers, craftsmen, shopkeepers, small industrialists) were depleted and dropped consumption. Social uneasiness spread throughout all countries. By the mid-1930s, it was estimated that one-fifth of the British population was undernourished. In 1934 the most celebrated march against hunger took place, which led the unemployed from Jarrow, in the north-east of England, to London. In the United States, drought struck parts of the Midwest and Southwest regions, and the area became known as the Dust Bowl.

The establishment of pro-active policies
In the United States, the crisis reached its climax in early 1933, just after the election of Democrat Franklin D. Roosevelt in November 1932. Under the New Deal, the new president increased state intervention, Infrastructure programs to tackle unemployment and boost growth, and to clean up the economy. These measures, the effects of which were immediate, restored confidence. Gradually, the depression declined, but it was the United States' entry into the war in 1941 that completely eliminated the recession.

Roosevelt's policy was directly inspired by the theories of the English economist Keynes, for whom the state had a regulatory role to play in the event of a market failure. A policy of public spending (social distribution, major works) compensating for the lack of investment by the private sector and the reduction in purchasing power should allow a return of consumption and employment. This orientation was also adopted in Germany and France.

In Germany, the crisis had dramatic political consequences. The Nazi party increased its audience among the unemployed and promised a return to growth. When Adolf Hitler came to power in 1933, he pursued a policy of industrialization and militarization that allowed for a return to equilibrium, but led Europe to war. Right-wing regimes also appeared in the Balkans. Other countries, such as the United Kingdom and Australia, turned instead to left-wing political movements.

In France, the government of Laval set up a policy of deflation in 1934. He blocked the salaries of civil servants, but these measures proved ineffective and provoked a strong social unrest. This failure and the fear of a rise of the extreme right, which had been violently manifested at the demonstration of February 6, 1934, brought about the victory of the Popular Front in 1936. But the new government failed to stop the crisis Economic and financial. Touched later than the other countries by the effects of the crisis of 1929, France still had not left it when the Second World War broke out.