World Depression of 1929-34 | Famous Books for UPSC Exam (Summary & Tests) PDF Download

Economic Impact: Unemployment and Policy Changes

The Devastating Human Suffering

The Great Depression led to a severe unemployment crisis, with as much as one-fourth of the labor force in industrialized nations struggling to find work during the early 1930s. Although conditions improved gradually by the mid-1930s, complete recovery was not achieved until the end of the decade.

The End of the International Gold Standard

One of the most significant changes was the abandonment of the international gold standard. The policy response to the Great Depression hastened the decline of the gold standard, and by 1973, fixed exchange rates gave way to floating rates.

The Rise of Labor Unions and Welfare State

During the 1930s, labor unions and the welfare state expanded considerably. In the United States, union membership more than doubled, stimulated by the high unemployment rates and the National Labor Relations (Wagner) Act of 1935, which promoted collective bargaining. The Social Security Act of 1935 established unemployment compensation and old-age and survivors' insurance, addressing the hardships faced by the population during the Great Depression.

Government Regulation and Financial Markets

In response to the economic crisis, many countries increased government regulation of their economies, particularly financial markets. The United States, for example, introduced the Securities and Exchange Commission (SEC) in 1934 to regulate stock trading and new stock issues. The Banking Act of 1933 (Glass-Steagall Act) established deposit insurance and prevented banks from engaging in securities underwriting or dealing, effectively eliminating banking panics as a factor in U.S. recessions.

The Development of Macroeconomic Policies

The Great Depression played a pivotal role in shaping macroeconomic policies. British economist John Maynard Keynes developed ideas in his "General Theory of Employment, Interest, and Money" (1936) that emphasized using government spending, tax cuts, and monetary expansion to counteract economic downturns. This insight, coupled with the growing consensus on stabilizing employment, led to more active policy measures worldwide to prevent or moderate recessions.

Culture and Society During the Great Depression

The American Experience

The 1930s were a terrifying decade for Americans, characterized by economic disorder and joblessness. The worst drought in modern American history transformed the Great Plains into the infamous Dust Bowl, forcing millions to migrate in search of a better life. Images of breadlines, shuttered factories, and Hoovervilles etched into the American memory, capturing the struggle and hardships faced by the nation during this period.

Social and Economic Changes

The Great Depression brought about significant social changes, including an increase in women entering the workforce. While this helped needy families, it also added to the psychological strain on American males, traditionally seen as the "breadwinners" of the family. Marriages were postponed, engagements prolonged, and birth rates declined as teens became drifters and children assumed adult responsibilities.

The Global Concerns

Europe and Totalitarianism

Europeans were haunted by the rise of totalitarianism, epitomized by Adolf Hitler's drive to conquer the continent. The Great Depression created political instability and vulnerability, facilitating the Nazi seizure of power and fascist expansion. As a result, Europeans were preoccupied with the spread of totalitarianism rather than their economic difficulties.

Intellectual Exodus to the United States

The 1930s witnessed a massive hemorrhage of talent from Europe to the United States. Hitler's actions led many intellectuals, scientists, scholars, artists, and filmmakers to flee Europe. Among the notable émigrés were Albert Einstein, Thomas Mann, and Igor Stravinsky, contributing to a significant cultural shift, making New York City and Hollywood the new cultural hubs.