The Wall Street Crash of 1929 had a global impact as it triggered the Great Depression, a period of major economic crisis that affected many countries around the world, leading to a collapse of financial markets and dramatic social consequences.
Before 1929, the United States quickly became the world economic engine. After World War I, while Europe struggled to rebuild, America was achieving industrial and financial successes. Its industrial production accounted for almost half of the global total. It was responsible for about 40% of the world's manufactured goods. Essentially, the country was generating a huge amount of money, and this money was circulating worldwide in the form of loans and investments. In Europe in particular, many countries were surviving largely thanks to American money through loans and war debts. So, inevitably, when the US economy collapsed in 1929, the whole planet was going to feel the shock.
In the 1920s, the United States was clearly the world's economic engine: they were selling everywhere, lending tons of money to Europe, and seemed unbeatable. But when everything collapsed in October 1929 with the famous stock market crash, the consequences didn't take long to cross the Atlantic. Since American banks had spent a good amount of time lending massively to European countries to help them rebuild after World War I, the entire continent quickly found itself trapped. Loans were abruptly halted, European banks faltered in turn, businesses closed, and unemployment skyrocketed. The result: a wave of recessions, a chain of business closures, and many people suddenly losing all their savings. Europe, which was barely recovering from the war, then plunged into the heart of the Great Depression.
The American crash directly led to a huge decline in demand in the United States. As a result, Americans were buying much fewer foreign products. Since the USA represented a large share of the international trade pie, this change seriously impacted European, South American, and Asian producers. Soon, the drop in activity prompted each nation to want to protect its own market through protectionist measures (like extremely high taxes on foreign products). The result? A chain reaction: even less international trade and a real collapse of global commerce, falling by more than 60% between 1929 and 1933. Many export-dependent countries (like Brazil for its coffee or Argentina for its grains) were severely affected by this decline in demand. Without international outlets, they too faced certain crisis.
The global financial system of the 1920s was particularly vulnerable due to a common practice at the time: banks were massively lending money, sometimes more than they could actually secure. In other words, a large portion of the funds deposited by savers was invested or lent elsewhere. When the United States crashed in 1929, these banks abruptly realized that they would never recover a substantial part of their money. Many savers, sensing the impending disaster, rushed to withdraw all their savings. As a result, the catastrophic scenario set in: what is known as a banking panic. Faced with a massive influx of cash withdrawals, many European banks, particularly fragile and ill-prepared, had to close their doors entirely. This phenomenon spread rapidly, causing a cascade of bankruptcies worldwide. This was notably the case in Austria with the bankruptcy in 1931 of the large Austrian bank, Kreditanstalt. This spectacular fall amplified the general panic, dragging many other European banks down with it and spreading a significant global financial chaos.
The economic crisis triggered a wave of discontent everywhere, causing people to lose faith in their political leaders. It is no surprise that many sought refuge in more radical ideas, such as extreme nationalism or even totalitarianism. Germany, for example, experienced a real rise of the Nazis, exploiting the economic chaos to promise a better future. Elsewhere in Europe, like in Spain, social tensions led to armed conflicts, notably the Spanish Civil War. Fragile democracies sometimes succumbed to authoritarian regimes because people, desperate from poverty and unemployment, more readily accepted these supposed strong regimes. All of this created a rather tense atmosphere: everyone watched their neighbors with a suspicious eye, paving the way for confrontations in the following decade.
Did you know that the 1929 crisis indirectly contributed to the rise of authoritarian regimes in Europe, such as Nazism in Germany, by exacerbating economic and social difficulties?
Did you know that the renowned British economist John Maynard Keynes developed part of his economic theories in direct response to the Great Depression, advocating for active government intervention to stimulate the economy?
Did you know that during the Great Depression following the stock market crash of 1929, global trade fell by more than 60%, drastically intensifying the international economic crisis?
Did you know that the 1929 crisis prompted the creation of financial regulatory institutions such as the Securities Exchange Commission (SEC) in the United States to prevent such financial disasters from happening again?
The global economic and social crisis triggered by the Wall Street crash created an environment conducive to extremism and political radicalism. In Germany, for example, the crisis facilitated the rise to power of the Nazi Party by providing desperate populations with an authoritarian and nationalist response to economic difficulties.
Before 1929, the United States played a central role in the global economy due to its industrial, commercial, and financial power. Their prosperity attracted international investments, but it also concealed flaws such as excessive speculation, overproduction in both industry and agriculture, as well as significant indebtedness.
Initially, governments were slow to react or adopted protectionist measures such as increasing tariffs (e.g., the Hawley-Smoot Tariff in the United States), which worsened the slowdown in global trade and prolonged the global economic crisis.
Due to the central role of the United States in the global economy, the financial crisis rapidly spread through the massive withdrawal of American capital invested in Europe and other countries. This led to bank failures, massive job losses, and a paralysis of international trade, transforming a local crisis into a global one.
Industrialized countries such as Germany, the United Kingdom, France, and Canada have been particularly affected due to their economic interdependence with the United States. However, almost all industrialized countries or those dependent on international trade have experienced significant economic and social repercussions.
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