The Great Depression: Social, Psychological, and Cultural Effects

• Great Depression was one of the major economic events in world history.
• It affected every sphere of life. The outcomes were such that they changed
the face of world economy.
• This article deals in detail with the economic, political, social and cultural
effects of this crisis and the process of restoration

• Economic Effects
• As it was a major economic phenomenon it had serious and widespread
economic effects.
• Trade Collapse: The Depression became a worldwide business downturn of the
1930s that affected almost all countries. International commerce declined
quickly. There was a sharp reduction in tax revenues, profits and personal
incomes. It affected both countries that exported raw materials and the
industrialized countries. It led to a sharp decrease in world trade as each country
tried to protect their own industries and products by raising tariffs on imports.
World Trade collapsed with trade in 1939 still below the 1929 level. It set the
wheels rolling towards the end of international gold standards and consequently
the emergence of the fixed exchange rate system.
• Reduction in Government Spending: Governments all around the world reduced
their spending, which led to decreased consumer demand. Construction came to
a standstill in many nations. As a consequence of government actions, the real
Gross National Product of nations like United States and Britain fell by 30.5%,
wholesale prices fell by 30.8%, and consumer prices fell by 24.4%.
• Employee Distress: Wages were scaled down to 20 percent, whereas 25 percent
of the workforce was left unemployed. This led to decrease in the standard of
living pushing the economy further into the depth of the Depression.
• Breakdown of the Financial Machinery: Thousands of investors lost large sums
of money and several were wiped out, losing everything. Banks, stores, and
factories were closed and left millions of people jobless, penniless and
homeless. In 1929, 659 public sector banks were shut and by the end of 1931
this number rose to 2294. Many people came to depend on the government or
charities to provide them with food.
• Effect on Agriculture
Due to lack of subsidies and loans, farmers were unable to support mass
produce leading to under-capacity output. Textile farming faced the major blow.
The period served as a precursor to one of the worst droughts in modern
American history that struck the Great Plains in 1934. Although a few segments
under agriculture - e.g. cotton - benefited from the crisis, in general the whole
agricultural sector experienced a setback.
• Political Effects
• The Depression had profound political effects. In countries such as Germany
and Japan, reaction to the Depression brought about the rise to power of
militarist governments who adopted the aggressive foreign policies that led to
the Second World War. In Germany, weak economic conditions led to the rise
to power of Adolf Hitler. Germany suffered greatly because of the huge debt
the country was burdened by following World War I.
• The Japanese invaded China and developed mines and industries in Manchuria.
Japan thought that this economic growth would relieve the Depression.
• In countries such as the United States and Britain, the government intervened
which ultimately resulted in the creation of welfare systems. Franklin D.
Roosevelt became the United States President in 1933.
• He promised a "New Deal" under which the government would intervene to
reduce unemployment by work-creation schemes such as painting of the post
offices and street cleaning. Both agriculture and industry were supported by
policies to limit output and increase prices.