Financial & Economic Crisis
Effects of Great Depression in Different Countries
Australia's extreme dependence on agricultural and industrial exports meant it was one of the hardest-hit countries in the Western world, together with Canada and Germany. Falling export demand and commodity prices placed massive downward pressures on wages. Further, unemployment reached a record high of almost 32% in 1932, with incidents of civil unrest becoming common. After 1932, an increase in wool and meat prices led to a gradual recovery.
Harshly impacted by both the global economic downturn and the Dust Bowl, Canadian industrial production had fallen to only 58% of the 1929 level by 1932, the second lowest level in the world after the United States, and well behind nations such as Britain, which saw it fall only to 83% of the 1929 level. Total national income fell to 55% of the 1929 level, again worse than any nation apart from the United States.
The Depression began to affect France from about 1931. France's relatively high degree of self-sufficiency meant the damage was considerably less than in nations like Germany. However, hardship and unemployment were high enough to lead to rioting and the rise of the socialist Popular Front.
Germany's Weimar Republic was hit hard by the depression, as American loans to help rebuild the German economy now stopped. Unemployment soared, especially in larger cities, and the political system veered toward extremism. Repayment of the war reparations due by Germany were suspended in 1932 following the Lausanne Conference of 1932. By that time Germany had repaid 1/8th of the reparations. Hitler's Nazi Party came to power in January 1933.
The Great Depression did not strongly affect Japan. The Japanese economy shrank by 8% 1929–31. However, Japan's Minister of Finance (MoF) Osachi Hamaguchi implemented the first version of Keynesian economic policies: first, by increasing deficit spending; and second, by devaluing the currency. The MoF believed that the deficit spending could easily be paid for when productivity improved.
The devaluation of the currency had an immediate effect. Japanese textiles began to displace British textiles in export markets. The deficit spending however proved to be most profound. The deficit spending went into the purchase of munitions for the armed forces. By 1933, Japan was already out of the depression. By 1934 the MoF realized that the economy was in danger of overheating, and to avoid inflation, moved to reduce the deficit spending that went towards armaments and munitions. This resulted in a strong and swift negative reaction from nationalists, especially those in the Army, culminating in an assassination attempt on the MoF, leading to his eventual demise from poor health some months later. This had a chilling effect on all civilian bureaucrats in the Japanese government. From 1934, the military's dominance of the government continued to grow. Instead of reducing deficit spending, the government introduced price controls and rationing schemes that reduced, but did not eliminate inflation, which would remain a problem until the end of World War II.
The deficit spending had a transformative effect on Japan. Japan's industrial production doubled during the 1930s. Further, in 1929 the list of the largest firms in Japan was dominated by light industries, especially textile companies (many of Japan's automakers, like Toyota, have their roots in the textile industry). By 1940 light industry had been displaced by heavy industry as the largest firms inside the Japanese economy.
These events obviously set the stage for World War II. In 1929, Japan's GNP was about a sixth of the U.S. and its per capita GNP was about a third. However, during the 1930s, the U.S. economy contracted by a third. By 1939, Japan's GNP was nearly half that of the United States, and its per capita GNP was nearly equal to the United States. Faced with having to face two Oceans, it was easy to see how some Japanese planners felt that they had an even chance against the U.S. What they may not have considered is that the U.S. had yet to truly kick in deficit financing for munitions until after 1940 when the United States would experience its own doubling of industrial production during four short years.
Because of high levels of United States investment in Latin American economies, they were severely damaged by the Depression. Within the region, Chile, Bolivia and Peru were particularly badly affected. One result of the Depression in this area was the rise of fascist movements.
Between 1931 and 1937, the Netherlands suffered a deep and exceptionally long depression. This depression was partly caused by the after-effects of the Stock Market Crash of 1929 in the United States, and partly by internal factors in the Netherlands. Government policy, especially the very late dropping of the Gold Standard, played a role in prolonging the depression. The Great Depression in the Netherlands led to some political instability and riots, and can be linked to the rise of the Dutch national-socialist party NSB. The depression in the Netherlands eased t some extent at the end of 1936, when the government finally dropped the Gold Standard, but real economic stability did not return until after World War II.
As world trade slumped, demand for South African agricultural and mineral exports fell drastically. It is believed that the social discomfort caused by the depression was a contributing factor in the 1933 split between the "gesuiwerde" (purified) and "smelter" (fusionist) factions within the National Party and the National Party's subsequent fusion with the South African Party.
Having removed itself from the capitalist world system both by choice and as a result of the capitalist powers efforts to isolate it, the Great Depression had little effect on the Soviet Union. This was a period of industrial expansion for the USSR as it recovered from revolution and civil war, and its apparent immunity to the Great Depression seemed to validate the theory of Marxism and contributed to Socialist and Communist agitation in affected nations. This in turn increased fears of Communist revolution in the West, strengthening support for anti-Communists, both moderate and extreme.
Other Great Depressions
There have been other downturns in economic history called a "Great Depression," but none has been as worldwide for so long. British economic historians use the term "Long Depression" to describe British conditions in the late 19th century, especially in agriculture between 1873-1896. Several Latin American countries had severe downturns in the 1980s. Finnish economists refer to the Finnish economic decline around the breakup of the Soviet Union during 1989-1994 as a great depression. Kehoe and Prescott define a great depression to be a period of diminished economic output with at least one year where output is 20% below the trend. By this definition Argentina, Brazil, Chile, and Mexico experienced great depressions in the 1980s, and Argentina experienced another one during 1998-2002. This definition also includes the economic performance of New Zealand during 1974-1992 and Switzerland from 1973 to the present, although this designation for Switzerland has been controversial.
|This article uses material from the Wikipedia article "Great Depression"|