Economic Impact of the Great Depression on Different Parts of the World
Every country has its economic standards, and colliding with them, but is never beneficial for the other countries. However, sometimes in some adverse situations, two or more countries may decide to come together and share their economic standards to save their lands from the current and upcoming crisis and keep it strong in the same way as it is at that moment. To analyse the impact of the great economic depression on Germany and many other countries is a very important step.
Economic barriers are the harming or most damaging agents of a country’s economy, whether it is India, Germany, or any other country. One such extremely unpleasant economic barrier is a great depression. It simply has a small definition, but the effects of the great depression are much more than usual on the economic conditions. The great depression is a phase in the economy of the world or a country where its financial status starts collapsing, and these countries start getting into more and more debts. In such situations, governments compromise on the crucial or necessary aspects provided to the people, making the lives of common people living in that country much more difficult.
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Effects of Great Depression throughout the World
Following are some adverse effects or impacts of the great depression on the economic conditions that have occurred throughout the world-
Declines in the Output are very Drastic and Unexpected:
The outputs of a country start declining rapidly, affecting normal life to a great extent.
Unemployment Issue takes up a Big Shape suddenly:
Unemployment increases to a huge extent, and people start losing their jobs unnecessarily.
Stock Market drops to an unimaginable extent:
Stock Markets all over the world have started dropping to an unimaginable extent. A great depression symbol expresses this realistically for sure.
All the above effects are the ways to describe the impact of the great depression on the Indian economy as well as other economies throughout the world and make people realize the seriousness of the same. Great depression can bring terrible outcomes for the people. This has been experienced by many developing countries such as India and Germany and developed countries like America, etc.
Impact on the Indian Economy by Great Depression:
The Indian economy is affected by a lot of day-to-day as well as unusual factors. However, the strongest and most vital one among them is a great depression. The impact of the great depression on the Indian economy is enormous and proper comparison cannot be made as to what extent the effects of their damage are. However, we can only say that the inflation rates have risen greatly, and common people suffer a lot because of this.
India has a huge population, and 80% of parents in India have two or more children. In such a situation, the effect of the great depression on the Indian economy is seen as inflation rising as well as major unemployment problems. Therefore, people suffer from all the corners when the Indian economy collapses due to the great depression and any other reasons.
Changes in the German Economy due to Great Depression:
Economic depression in Germany is not a newly invented fact. Every country experiences some economic crisis or the other at some point throughout their work. However, the great depression struck the welfare and economic freedom of the citizens of Germany so hard that its repercussions are experienced by the citizens even today. Today's generation is suffering from many financial crises in Germany, and coming up from it has been very difficult for many Parliaments and authorities of Germany.
There are many reasons if we will explain the effects of the great depression in Germany. The main cause of the economic depression in Germany was because the expenditures and resources of Germany were being wasted on things that had almost a negligible priority in the lives of its citizens. Too much was invested in some unnecessary business run under the Government of Germany's approval. This started creating a great shortage of economy day by day leading to the occurrence of the great depression in Germany. Active measures have now been taken to degrade this impact, and now Germany is starting to get itself back on the right track for sure.
Effect on American Economy by Great Depression
America has also faced a lot of economic troubles, and this can be clarified when it comes to explaining the effects of the great depression taking place in its territory. Therefore, not even America is safe from the repercussions of the great depression, and the best way to deal with it is to stop it from occurring in part of the world.
Conclusion
Great depression can result in being the worst economic phase that you will ever experience in your life. The outcomes of the great depression can make even a whole country bankrupt, and the common and poor people in that country are left with no option but to take their lives. Therefore, keeping proper track of your economic conditions well in time and avoiding all the occurrences of the great depression is a must for every country. Every country should have adequate means to analyse the impact of the great economic depression on Germany & other countries and then plan the strategies accordingly.
FAQs on Economic Impact of the Great Depression
1. What was the Great Depression and what was its general time frame?
The Great Depression was a severe worldwide economic depression that took place mostly during the 1930s. It began in the United States after a major fall in stock prices that started around September 4, 1929, and became a worldwide event with the stock market crash of October 29, 1929, known as Black Tuesday. The downturn lasted for about a decade, with its most severe impacts felt between 1929 and 1933.
2. What were the most significant economic impacts of the Great Depression in the United States?
The economic impact on the United States was catastrophic, fundamentally changing its economy and government's role in it. The key impacts included:
Mass Unemployment: The unemployment rate soared to nearly 25%, meaning one in four workers was jobless.
Bank Failures: Thousands of banks collapsed, wiping out the life savings of millions of people.
Drastic Fall in Production: Industrial production fell by nearly 47%, and the Gross Domestic Product (GDP) declined by 30%.
Widespread Homelessness: Many families lost their homes, leading to the creation of shantytowns known as 'Hoovervilles'.
3. How did the Great Depression impact the Indian economy under British colonial rule?
While India was less integrated into the global industrial economy, it was severely affected, especially in agriculture. The primary impacts were:
Collapse of Agricultural Prices: The prices of raw materials that India exported, such as jute and wheat, plummeted. Between 1928 and 1934, wheat prices in India fell by 50%.
Peasant Indebtedness: Farmers who had taken loans to expand production were ruined by the falling prices and rising colonial taxes, falling into a deep cycle of debt.
Contraction of Trade: India’s exports and imports nearly halved, crippling the colonial trade structure.
Drain of Gold: Britain's financial crisis led to a large outflow of gold from India, which further impacted the Indian economy.
4. What was the effect of the Great Depression on international trade and finance?
The Great Depression caused a near-total collapse of the international economic system. As the US economy faltered, it drastically cut its imports and recalled loans from other countries. This triggered a global chain reaction. Countries adopted protectionist policies, raising tariffs (like the US Smoot-Hawley Tariff) to protect their own industries. This led to a sharp decline in world trade, which fell by an estimated 66% between 1929 and 1934, deepening the global crisis.
5. What was the difference in the economic impact felt by urban industrial workers compared to rural farmers?
Both groups suffered immensely, but in different ways. Urban industrial workers faced mass layoffs as factories closed, leading to widespread unemployment, poverty, and reliance on charity. Rural farmers, on the other hand, were hit by a catastrophic drop in crop prices. While they could often grow their own food, they could not earn enough cash to pay their debts or taxes, leading to widespread farm foreclosures and migration.
6. Why did the failure of American banks have such a devastating economic impact on European countries like Germany?
The global economy was heavily reliant on loans from the US. Germany, in particular, depended on American short-term loans to make its World War I reparation payments and rebuild its economy. When the US banking system began to collapse, American banks recalled these loans abruptly. This sudden withdrawal of capital caused major German banks to fail, industries to shut down, and unemployment to skyrocket, creating the economic desperation that fueled political extremism.
7. Beyond job losses, how did deflation (falling prices) worsen the economic crisis?
Deflation created a vicious cycle that paralyzed the economy. While falling prices might seem good, they had several negative effects:
Increased Debt Burden: The real value of debt increased. A loan of $1,000 became much harder to repay when wages and profits were falling.
Delayed Spending: Consumers postponed purchases, assuming prices would drop even further. This caused demand to collapse.
Reduced Business Investment: With falling prices and low demand, businesses had no incentive to invest or hire, leading to more layoffs.
This deflationary spiral continuously shrank the economy, making the depression deeper and longer.
8. What is an important example of how the Great Depression's economic impact led to major political changes?
A prime example is the rise of government intervention in the economy. In the United States, the severe economic failure led to the election of Franklin D. Roosevelt and the implementation of his New Deal. This was a series of programs, public work projects, financial reforms, and regulations that significantly expanded the federal government's role in the economy to provide relief, recovery, and reform—a major shift from the previous laissez-faire approach.
