Study sheet: The Great Depression of 1929

📋 Course Outline

1. Structural Imbalances of the 1920s
2. The Wall Street Crash
3. Globalization of the Depression
4. Social Consequences of the Crisis
5. Political Responses in the 1930s
6. The Rise of Keynesian Economics
7. A New Role for the State

📅 Key Dates

1. 24 October 1929the “Black Thursday” panic began on Wall Street when nearly 13 million shares were sold
2. 29 October 1929“Black Tuesday” intensified the crash with 16 million shares sold
3. September 1931The United Kingdom devalued the pound sterling, followed by the United States abandoning the gold standard in 1933 under Roosevelt’s New Deal
4. 1932Franklin D. Roosevelt was elected, marking a turning point before the New Deal was implemented from 1933 to 1938
5. 1936John Maynard Keynes published the General Theory of Employment, Interest and Money, providing a major expression of the new economic approach
6. 1944The Bretton Woods agreements provided a later solution to monetary instability

📖 1. Structural Imbalances of the 1920s

🔑 Key Concepts & Definitions

• Overproduction : Occurs when production exceeds consumers’ purchasing power, creating a gap between supply and demand.

★ Must-know

• American agricultural prices began falling in 1925 after European reconstruction reduced demand for American farm products, causing widespread indebtedness among farmers.

• The speculative rise of American shares was amplified because investors could buy them on credit with only 10% coverage.

Further detail

• During the 1920s, American industrial growth relied on mass consumption and products such as automobiles and household appliances, while wages increased more slowly than productivity.

💡 Memory Hook

Overproduction and weak purchasing power → unsold goods, falling prices, and debt.

📖 2. The Wall Street Crash

📝 Essential Points

• The Dow Jones index rose by 300% between 1924 and 1929 before losing 30% in three days and 89% of its 1929 value by 1932.

💡 Memory Hook

Black Thursday → Black Tuesday → prolonged collapse.

📖 3. Globalization of the Depression

★ Must-know

• 🔄 The depression developed through five linked stages:

  1. falling asset values
  2. reduced consumption
  3. declining production
  4. mass layoffs
  5. further reductions in consumption

• United States unemployment rose from 3% in 1929 to 25% in 1933, representing 15 million unemployed people.

• Protectionist policies, including the American Hawley-Smoot tariffs adopted in 1930, helped reduce international trade by 25% between 1929 and 1932.

Further detail

• More than 5,000 American banks failed between 1929 and 1933 as bank runs destroyed savings and paralyzed credit.

💡 Memory Hook

American capital withdrawal and protectionism → collapsing trade and monetary instability.

📖 4. Social Consequences of the Crisis

🔑 Key Concepts & Definitions

• Dust Bowl : A period of dust storms affecting the American Great Plains in the mid-1930s and causing hundreds of thousands of farmers to migrate to California.

★ Must-know

• In 1933, 25% of the American active population was unemployed, with unemployment reaching 50% in some industrial cities such as Detroit and Cleveland.

• German unemployment increased from 2 million in 1929 to more than 6 million in 1932, representing 30% of the active population.

Further detail

• The crisis affected women, young people, and families by changing household roles, limiting access to employment, and encouraging distrust of democratic and liberal systems among some young people.

💡 Memory Hook

Hoovervilles and Dust Bowl migrants symbolize mass unemployment, poverty, and displacement.

📖 5. Political Responses in the 1930s

★ Must-know

📌 Initial liberal policies relied on austerity, deflation, and limited state intervention, whereas the New Deal relied on substantial government intervention to restore demand and confidence.

• The first New Deal combined: banking reform, dollar devaluation, public works through the Tennessee Valley Authority, fair-competition codes through the National Recovery Administration

• The second New Deal: created Social Security, recognized trade-union rights through the Wagner Act, continued major public works

Further detail

• In Nazi Germany, public works and rearmament reduced unemployment but suppressed freedoms and prepared the country for war.

💡 Memory Hook

Hoover’s limited intervention contrasts with Roosevelt’s New Deal and authoritarian solutions.

📖 6. The Rise of Keynesian Economics

🔑 Key Concepts & Definitions

• Keynesian economics : John Maynard Keynes, 1936 — Argues that full employment is not automatic and that the state should support demand during recessions, including by accepting public deficits.

📝 Essential Points

• Keynesian policies favoring demand stimulus and accepted public deficits progressively dominated economic thought until the 1970s.

💡 Memory Hook

The failure of laissez-faire → state intervention, demand stimulus, and accepted deficits.

📖 7. A New Role for the State

🔑 Key Concepts & Definitions

• Welfare state : Provides social protection systems designed to cushion future economic shocks.

★ Must-know

• The United States Social Security Act of 1935 introduced unemployment insurance and pensions.

• The Glass-Steagall Act of 1933 separated deposit banks from investment banks, while the Securities and Exchange Commission supervised financial markets.

Further detail

• In France, the Popular Front from 1936 to 1938 introduced paid holidays and a 40-hour workweek.

💡 Memory Hook

Social protection → economic intervention → financial regulation → postwar cooperation.

📊 Synthesis Tables

Contrasting Crisis Responses

Approach	Main measures	Consequences
Classical liberalism	Austerity, deflation, limited state intervention	Deepened recession and political instability
New Deal	Banking reform, public works, social security, labor rights	Restored confidence and supported recovery
Authoritarian responses	Rearmament, public works, territorial expansion	Reduced unemployment while suppressing freedoms and preparing for war