Home Uncategorized Causes of the 1929 World Economic Crisis and the Effects of the Great Depression

Causes of the 1929 World Economic Crisis and the Effects of the Great Depression

by admin
Causes of the 1929 World Economic Crisis and the Effects of the Great Depression

Causes of the 1929 World Economic Crisis and the Effects of the Great Depression

World Economic Crisis of 1929 also known as World Economic Depression of 1929is considered to be the worst crisis in terms of its great impact on the world economy. The crisis, which started with the sharp fall in stock prices in the New York Stock Exchange in the USA and accelerated in a short time, quickly spread to Europe and other industrialized regions of the world.

Although the World Economic Crisis of 1929 started with the sharp fall in stock prices on the New York Stock Exchange. Wall Street Crash This development was not the only reason for the crisis to occur. Here are the developments that led to 1929 World Economic Crisis, crisis impacts world countries and Turkey.

Causes of the 1929 World Economic Crisis

The USA, which rose to a leading position in the world after World War I, also became the world’s largest economy. It realized 42% of the world industrial production. Especially the increase in investments made in automotive production and electricity industry has been the driving force of the economy.

Increases in production and employment continued in the USA of the 1920s. Although wages did not decrease, prices remained stable. In fact, these years when people felt richer than before, in the USA The Roaring Twenties was referred to as. Because now everyone had more money and now everyone could buy a lot more. He could produce more at the manufacturers.

On the other hand, in the formation of the Roaring Twenties period in the USA Taylorism The production method known as the so-called had a great influence. Because American economist and engineer Frederick Winslow Taylor Thanks to this method of production developed by the company in the 1880s, productivity, production and, as such, profits increased enormously.

As everything went well, advertising and media in the country further fueled the consumption presented as an American lifestyle. However, consumption in the country decreased with the decrease in the wages of the workers. In order to overcome this situation, banks provided large amounts of loans, especially housing and automobile loans.

Small companies in the US had to merge in the face of the challenges brought by World War I. Monopolies formed after the war. By 1929 Has a say over 50% of the American economy the number of holding companies was 200. It was impossible not to foresee that even the bankruptcy of a single holding company could adversely affect the economy just by looking at this picture.

Investors did not even have any information about the company from which they purchased their stocks due to the bad structuring of the banks and the lack of laws regulating capital principles and loan rates. Abundant and unsupervised loans were not repaid after a while. Moreover, loans given outside the country could not be recovered. The President of the USA at that time Herbert C. HooverThe inexperience of the administration in the field of economy was added, and the response to the crisis was delayed.

On the other hand, the USA’s restriction on its imports in 1929 caused stock increases in the world. Increasing stocks were naturally followed by price decreases. During these years, the World Economic Crisis of 1929 officially began when Wall Street’s speculation market combined with the crisis in the real economy. In 1929, the financial and real economies collapsed because the prices of stocks did not go parallel with the real economic activities and the difference gradually increased.

Black Thursday and the Effects of the 1929 World Economic Crisis

The USA showed a rapid economic development in the 1920s. New cars were pouring into the streets, and homes financed by new banks were filling up formerly empty lands. Stock prices were increasing rapidly. However, in the 1920s in the USA economic bubble This growth was a virtual growth.

Although there was no significant increase in the amount of production, the increase in the amount of demand increased the prices. By 1929, the production of steel and car factories was not as intense as before. Contractors; he had begun firing carpenters, masons, and electricians.

Having lost ties with the real structure of the economy as a result of excessive speculation based on buying and selling stocks above their real value for profit, the New York Stock Exchange eventually Black Thursday It went bankrupt on October 24, 1929. Almost everyone wanted to sell their stocks. As the panic news spread, stockholders flocked to Wall Street to see the chart on which values ​​were recorded. This panic in the stock market spread to other markets. Cotton, copper and other raw material prices have started to decline.

As stock prices fell, real estate prices followed suit. In almost every country, prices of major commodities fell sharply. Nine thousand small banks shut down in the US alone, with huge declines in consumption and investment.

The agricultural sector was also directly affected by the situation. The thought of preventing price reductions in agricultural products led to the destruction of tons of crops in the hungry country. Shares in the stock market lost value by three quarters compared to 1925. This loss amounted to $ 74 billion. Hundreds of companies went bankrupt, 50 million people were unemployed. Total production in the world decreased by 42% and world trade volume decreased by 65%.

In 1930, half of the world’s population lived directly or indirectly on trade. The disruption of trade with the depression endangered people’s jobs and lowered their living standards. People stopped buying goods they deemed unnecessary.

New cars could not easily find customers anymore. Auto factories in Detroit and Tulin started buying less steel and tires. As a result, their suppliers decided to fire workers. As workers’ families were unable to buy new clothes, the demand for cotton, wool and leather produced in cities and farms thousands of kilometers away also declined. Half of the facilities in the mountains in South Africa, Japan, and Switzerland were empty when vacation time came.

The collapse in the United States, the country most affected by the 1929 World Economic Crisis, was prolonged. For the US economy, 1933 was the bottom of the crisis. The US economy, which started to recover in the following years, could only reach the pre-depression level in 1940.

New Deal and Clearing Application

The American people blamed President Hoover’s administration for the crisis. President Hoover believed that the economy should be left alone and that this process was temporary. Failure to intervene in the crisis in a timely manner caused a rapid decrease in prices and contractions in trade. With the election in the USA in 1932 Franklin D. Roosevelt became president. Due to the decline in people’s purchasing power and insufficient demand, Roosevelt New Deal He implemented economic policies.

In the 1930s, protectionism in foreign trade increased and customs tariff, quota, clearing and clearing There have been years when restrictive measures such as trade were taken. The loss of economic influence of classical economists caused fascism to gain power, placing the idea that capitalism collapsed in the political sphere.

In addition to its economic consequences in the world, the depression also caused political developments, especially in industrialized countries. As a result of political changes, pro-war and de facto aggressive parties triumphed in many countries. The victory of the pro-war parties in the elections created a rapid arms race in the world, especially in Europe. This situation II. It opened the doors of the World War.

1929 World Economic Crisis Impact on Turkey

In the first place with the economic crisis in Turkey, a decline in the price of raw materials and agricultural products. In particular, reduced foreign exchange earnings from exporting agricultural products in Turkey. Therefore, agricultural producers entered the process of impoverishment.

1929 World Economic Depression simultaneously with the whole world with the influence of Turkey in 1933, also from the statist policies gained weight. During this period, state interventions in the economy increased and a shift from agriculture to industry began. The concrete equivalent of this policy, Five-Year Industrial Plan happened. This plan was revealed raw materials with applications for the establishment of the industry can be supplied from Turkey.

worldwide economic crisis that occurred in 1929, particularly in the balance of payments and explain emerged as the financial crisis in Turkey. Established in 1929 to reduce the impact of the crisis National Economy and Savings Society he encouraged the people to be economical and use domestic goods.

In order to determine the money market in the post-economic crisis period, in 1930 the central bank was established. Turkish Currency Protection Law It was accepted by the Turkish Grand National Assembly. The first steps of protectionism were taken with the law enacted in 1931 on the imposition of quotas on imports and on the control of exports. From 1931 on, clearing and clearing were also used in addition to quota applications in imports.

Foreign trade was largely carried out by bilateral agreements and clearing system. Import against export approach became valid and regulations in this area were carried out through the Foreign Trade Office established in 1934. After 1936, foreign trade budgets were prepared.

Also Read:

What is Parity 2021? Types & How Are They Calculated? – Introduction to Forex

What is Forex Swap 2021? Swap Calculation Formula – Introduction to Forex

How to Make the Most Profitable Gold Investment 2021📈? – Introduction to Forex

Spread the love

Related Posts