How Did Black Thursday Affect The Economy

Thursday, October 28, 2021 11:10:40 AM

How Did Black Thursday Affect The Economy

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What Happened After Black Tuesday

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Agrarian sector becomes a pillar of Russian economy — Putin. In his words, advanced technologies are actively used by the Russian agricultural sector. US nuclear submarine collides with unknown object in Indo-Pacific. The committee has decided to award the prize "for their efforts to safeguard freedom of expression, which is a precondition for democracy and lasting peace". Last night fighting dragged on for about two hours in the area of Zamankur settlement in the Anaba district. Kurz announces his resignation as Austrian chancellor. Gazprom is supplying extra gas to Europe over all routes — top manager. According to Elena Burmistrova, Gazprom ramped up deliveries to Germany - by a third against the last year, by 2. Europe fails to reach long-term deals with Russia and is left without gas, Vucic says.

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Russia looks into Navy Arctic Fleet creation — source. Lavrov points to seven years of lost opportunities in Russia-EU relations. Sergey Lavrov stressed that the current state of affairs had gone too far and nobody would manage to reverse it overnight. US must publish details of nuclear submarine incident — Chinese Foreign Ministry. Thus the unequal distribution of wealth throughout the s caused the Great Depression. According to this view, the root cause of the Great Depression was a global over-investment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. The proposed solution was for the government to pump money into the consumers' pockets.

That is, it must redistribute purchasing power, maintaining the industrial base, and re-inflating prices and wages to force as much of the inflationary increase in purchasing power into consumer spending. The economy was overbuilt, and new factories were not needed. Foster and Catchings recommended [63] federal and state governments to start large construction projects, a program followed by Hoover and Roosevelt. It cannot be emphasized too strongly that the [productivity, output, and employment] trends we are describing are long-time trends and were thoroughly evident before These trends are in nowise the result of the present depression, nor are they the result of the World War.

On the contrary, the present depression is a collapse resulting from these long-term trends. The first three decades of the 20th century saw economic output surge with electrification , mass production , and motorized farm machinery, and because of the rapid growth in productivity there was a lot of excess production capacity and the work week was being reduced. The dramatic rise in productivity of major industries in the U. The gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and a monetary contraction first hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates.

Under the gold standard's price—specie flow mechanism , countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline deflation. There is also consensus that protectionist policies such as the Smoot—Hawley Tariff Act helped to worsen the depression. Some economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the gold standard , it was suspending gold convertibility or devaluing the currency in gold terms that did the most to make recovery possible. Every major currency left the gold standard during the Great Depression. The UK was the first to do so. Facing speculative attacks on the pound and depleting gold reserves , in September the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.

Japan and the Scandinavian countries joined the UK in leaving the gold standard in Other countries, such as Italy and the US, remained on the gold standard into or , while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until — According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, The UK and Scandinavia, which left the gold standard in , recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard , almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries.

This partly explains why the experience and length of the depression differed between regions and states across the world. Many economists have argued that the sharp decline in international trade after helped to worsen the depression, especially for countries significantly dependent on foreign trade. In a survey of American economic historians, two-thirds agreed that the Smoot—Hawley Tariff Act enacted June 17, at least worsened the Great Depression. While foreign trade was a small part of overall economic activity in the U. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls".

These restrictions triggered much tension among countries that had large amounts of bilateral trade, causing major export-import reductions during the depression. Not all governments enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries reduced "trade and exchange restrictions only marginally": [73]. The consensus view among economists and economic historians including Keynesians, Monetarists and Austrian economists is that the passage of the Smoot-Hawley Tariff exacerbated the Great Depression, [74] although there is disagreement as to how much.

In the popular view, the Smoot-Hawley Tariff was a leading cause of the depression. Senate website the Smoot—Hawley Tariff Act is among the most catastrophic acts in congressional history [77]. The financial crisis escalated out of control in mid, starting with the collapse of the Credit Anstalt in Vienna in May. With the rise in violence of Nazi and communist movements, as well as investor nervousness at harsh government financial policies. The Reichsbank lost million marks in the first week of June, million in the second, and million in two days, June 19— Collapse was at hand. President Herbert Hoover called for a moratorium on Payment of war reparations. This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down, and the moratorium was agreed to in July An International conference in London later in July produced no agreements but on August 19 a standstill agreement froze Germany's foreign liabilities for six months.

Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures were more frequent in July, and spread to Romania and Hungary. The crisis continued to get worse in Germany, bringing political upheaval that finally led to the coming to power of Hitler's Nazi regime in January The financial crisis now caused a major political crisis in Britain in August The attack on welfare was unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition " National Government ".

The Conservative and Liberals parties signed on, along with a small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the gold standard , and suffered relatively less than other major countries in the Great Depression. In most countries of the world, recovery from the Great Depression began in There is no consensus among economists regarding the motive force for the U.

The common view among most economists is that Roosevelt's New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt's words and actions portended. According to Christina Romer , the money supply growth caused by huge international gold inflows was a crucial source of the recovery of the United States economy, and that the economy showed little sign of self-correction. The gold inflows were partly due to devaluation of the U.

Schwartz also attributed the recovery to monetary factors, and contended that it was much slowed by poor management of money by the Federal Reserve System. Former — Chairman of the Federal Reserve Ben Bernanke agreed that monetary factors played important roles both in the worldwide economic decline and eventual recovery. Women's primary role was as housewives; without a steady flow of family income, their work became much harder in dealing with food and clothing and medical care.

Birthrates fell everywhere, as children were postponed until families could financially support them. Among the few women in the labor force, layoffs were less common in the white-collar jobs and they were typically found in light manufacturing work. However, there was a widespread demand to limit families to one paid job, so that wives might lose employment if their husband was employed. In France, very slow population growth, especially in comparison to Germany continued to be a serious issue in the s. Support for increasing welfare programs during the depression included a focus on women in the family. In rural and small-town areas, women expanded their operation of vegetable gardens to include as much food production as possible.

In the United States, agricultural organizations sponsored programs to teach housewives how to optimize their gardens and to raise poultry for meat and eggs. Quilts were created for practical use from various inexpensive materials and increased social interaction for women and promoted camaraderie and personal fulfillment. Oral history provides evidence for how housewives in a modern industrial city handled shortages of money and resources.

Often they updated strategies their mothers used when they were growing up in poor families. Cheap foods were used, such as soups, beans and noodles. They purchased the cheapest cuts of meat—sometimes even horse meat—and recycled the Sunday roast into sandwiches and soups. They sewed and patched clothing, traded with their neighbors for outgrown items, and made do with colder homes. New furniture and appliances were postponed until better days. Many women also worked outside the home, or took boarders, did laundry for trade or cash, and did sewing for neighbors in exchange for something they could offer. Extended families used mutual aid—extra food, spare rooms, repair-work, cash loans—to help cousins and in-laws.

In Japan, official government policy was deflationary and the opposite of Keynesian spending. Consequently, the government launched a campaign across the country to induce households to reduce their consumption, focusing attention on spending by housewives. In Germany, the government tried to reshape private household consumption under the Four-Year Plan of to achieve German economic self-sufficiency. The Nazi women's organizations, other propaganda agencies and the authorities all attempted to shape such consumption as economic self-sufficiency was needed to prepare for and to sustain the coming war. The organizations, propaganda agencies and authorities employed slogans that called up traditional values of thrift and healthy living.

However, these efforts were only partly successful in changing the behavior of housewives. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery, though it did help in reducing unemployment. The rearmament policies leading up to World War II helped stimulate the economies of Europe in — By , unemployment in Britain had fallen to 1. The mobilization of manpower following the outbreak of war in ended unemployment. When the United States entered the war in , it finally eliminated the last effects from the Great Depression and brought the U.

Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts. The majority of countries set up relief programs and most underwent some sort of political upheaval, pushing them to the right. Many of the countries in Europe and Latin America that were democracies saw them overthrown by some form of dictatorship or authoritarian rule, most famously in Germany in The Dominion of Newfoundland gave up democracy voluntarily.

Australia's dependence on agricultural and industrial exports meant it was one of the hardest-hit developed countries. By , GDP had shrunk to less than half of what it had been in , exacting a terrible toll in unemployment and business failures. Influenced profoundly by the Great Depression, many government leaders promoted the development of local industry in an effort to insulate the economy from future external shocks. After six years of government austerity measures , which succeeded in reestablishing Chile's creditworthiness, Chileans elected to office during the —58 period a succession of center and left-of-center governments interested in promoting economic growth through government intervention.

Consequently, as in other Latin American countries, protectionism became an entrenched aspect of the Chilean economy. China was largely unaffected by the Depression, mainly by having stuck to the Silver standard. However, the U. China and the British colony of Hong Kong , which followed suit in this regard in September , would be the last to abandon the silver standard. In addition, the Nationalist Government also acted energetically to modernize the legal and penal systems, stabilize prices, amortize debts, reform the banking and currency systems, build railroads and highways, improve public health facilities, legislate against traffic in narcotics and augment industrial and agricultural production.

On November 3, , the government instituted the fiat currency fapi reform, immediately stabilizing prices and also raising revenues for the government. The sharp fall in commodity prices, and the steep decline in exports, hurt the economies of the European colonies in Africa and Asia. For example, sisal had recently become a major export crop in Kenya and Tanganyika.

During the depression, it suffered severely from low prices and marketing problems that affected all colonial commodities in Africa. Sisal producers established centralized controls for the export of their fibre. The depression severely hurt the export-based Belgian Congo economy because of the drop in international demand for raw materials and for agricultural products. For example, the price of peanuts fell from to 25 centimes. In the country as a whole, the wage labour force decreased by Political protests were not common.

However, there was a growing demand that the paternalistic claims be honored by colonial governments to respond vigorously. The theme was that economic reforms were more urgently needed than political reforms. Students were trained in traditional arts, crafts, and farming techniques and were then expected to return to their own villages and towns. The crisis affected France a bit later than other countries, hitting hard around Ultra-nationalist groups also saw increased popularity, although democracy prevailed into World War II. France's relatively high degree of self-sufficiency meant the damage was considerably less than in neighbouring states like Germany.

The Great Depression hit Germany hard. The impact of the Wall Street Crash forced American banks to end the new loans that had been funding the repayments under the Dawes Plan and the Young Plan. An international conference in London later in July produced no agreements but on August 19 a standstill agreement froze Germany's foreign liabilities for six months. Business failures became more frequent in July, and spread to Romania and Hungary. The government did not increase government spending to deal with Germany's growing crisis, as they were afraid that a high-spending policy could lead to a return of the hyperinflation that had affected Germany in Germany's Weimar Republic was hit hard by the depression, as American loans to help rebuild the German economy now stopped.

Hitler ran for the Presidency in , and while he lost to the incumbent Hindenburg in the election, it marked a point during which both Nazi Party and the Communist parties rose in the years following the crash to altogether possess a Reichstag majority following the general election in July Hitler followed an autarky economic policy, creating a network of client states and economic allies in central Europe and Latin America.

By cutting wages and taking control of labor unions, plus public works spending, unemployment fell significantly by Large-scale military spending played a major role in the recovery. The reverberations of the Great Depression hit Greece in The Bank of Greece tried to adopt deflationary policies to stave off the crises that were going on in other countries, but these largely failed. For a brief period, the drachma was pegged to the U. Remittances from abroad declined sharply and the value of the drachma began to plummet from 77 drachmas to the dollar in March to drachmas to the dollar in April This was especially harmful to Greece as the country relied on imports from the UK, France, and the Middle East for many necessities.

Greece went off the gold standard in April and declared a moratorium on all interest payments. The country also adopted protectionist policies such as import quotas, which several European countries did during the period. Protectionist policies coupled with a weak drachma, stifling imports, allowed the Greek industry to expand during the Great Depression. These industries were for the most part "built on sand" as one report of the Bank of Greece put it, as without massive protection they would not have been able to survive. Despite the global depression, Greece managed to suffer comparatively little, averaging an average growth rate of 3.

The dictatorial regime of Ioannis Metaxas took over the Greek government in , and economic growth was strong in the years leading up to the Second World War. The Depression hit Iceland hard as the value of exports plummeted. The total value of Icelandic exports fell from 74 million kronur in to 48 million in , and was not to rise again to the pre level until after How much India was affected has been hotly debated. Historians have argued that the Great Depression slowed long-term industrial development. However, there were major negative impacts on the jute industry, as world demand fell and prices plunged.

Local markets in agriculture and small-scale industry showed modest gains. Frank Barry and Mary E. Daly have argued that:. The Great Depression hit Italy very hard. This led to a financial crisis peaking in and major government intervention. IRI did rather well with its new responsibilities—restructuring, modernising and rationalising as much as it could. It was a significant factor in post development. The Great Depression did not strongly affect Japan. Japan's Finance Minister Takahashi Korekiyo was the first to implement what have come to be identified as Keynesian economic policies: first, by large fiscal stimulus involving deficit spending ; and second, by devaluing the currency. Takahashi used the Bank of Japan to sterilize the deficit spending and minimize resulting inflationary pressures.

Econometric studies have identified the fiscal stimulus as especially effective. The devaluation of the currency had an immediate effect. Japanese textiles began to displace British textiles in export markets. The deficit spending proved to be most profound and went into the purchase of munitions for the armed forces. By , Japan was already out of the depression. By , Takahashi 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 his assassination in the course of the February 26 Incident. This had a chilling effect on all civilian bureaucrats in the Japanese government. From , 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 remained 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 s. Further, in the list of the largest firms in Japan was dominated by light industries, especially textile companies many of Japan's automakers, such as Toyota , have their roots in the textile industry.

By light industry had been displaced by heavy industry as the largest firms inside the Japanese economy. Because of high levels of U. Within the region, Chile , Bolivia and Peru were particularly badly affected. Before the crisis, links between the world economy and Latin American economies had been established through American and British investment in Latin American exports to the world. As a result, Latin Americans export industries felt the depression quickly. World prices for commodities such as wheat, coffee and copper plunged. Exports from all of Latin America to the U. But on the other hand, the depression led the area governments to develop new local industries and expand consumption and production.

Following the example of the New Deal, governments in the area approved regulations and created or improved welfare institutions that helped millions of new industrial workers to achieve a better standard of living. From roughly to , the Netherlands suffered a deep and exceptionally long depression. This depression was partly caused by the after-effects of the Stock Market Crash of in the US, 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 fascist political party NSB.

The depression in the Netherlands eased off somewhat at the end of , when the government finally dropped the Gold Standard, but real economic stability did not return until after World War II. New Zealand was especially vulnerable to worldwide depression, as it relied almost entirely on agricultural exports to the United Kingdom for its economy. The drop in exports led to a lack of disposable income from the farmers, who were the mainstay of the local economy. Jobs disappeared and wages plummeted, leaving people desperate and charities unable to cope.

In , riots occurred among the unemployed in three of the country's main cities Auckland , Dunedin , and Wellington. Many were arrested or injured through the tough official handling of these riots by police and volunteer "special constables". Poland was affected by the Great Depression longer and stronger than other countries due to inadequate economic response of the government and the pre-existing economic circumstances of the country. As a result, Poland was unable to perform a more active monetary and budget policy. Additionally, Poland was a relatively young country that emerged merely 10 years earlier after being partitioned between German , Russian and the Austro-Hungarian Empires for over a century. After independence, these markets were largely lost, as Russia transformed into USSR that was mostly a closed economy, and Germany was in a tariff war with Poland throughout the s.

Material conditions deprivation led to strikes, some of them violent or violently pacified - like in Sanok March 6, , Lesko county June 21 - July 9, and Zawiercie April 18, To adopt to the crisis, Polish government employed deflation methods such as high interest rates , credit limits and budget austerity to keep a fixed exchange rate with currencies tied to the gold standard.

Only in late the government created a plan to fight the economic crisis. With the budget balanced in , the effects of the depression were relaxed through harsh measures towards budget balance and autarky , causing social discontent but stability and, eventually, an impressive economic growth. In the years immediately preceding the depression, negative developments in the island and world economies perpetuated an unsustainable cycle of subsistence for many Puerto Rican workers. The s brought a dramatic drop in Puerto Rico's two primary exports, raw sugar and coffee, due to a devastating hurricane in and the plummeting demand from global markets in the latter half of the decade. Romania was also affected by the Great Depression.

As world trade slumped, demand for South African agricultural and mineral exports fell drastically. The Carnegie Commission on Poor Whites had concluded in that nearly one-third of Afrikaners lived as paupers. The social discomfort caused by the depression was a contributing factor in the 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. The Soviet Union was the world's only socialist state with very little international trade. Its economy was not tied to the rest of the world and was mostly unaffected by the Great Depression. At the time of the Depression, the Soviet economy was growing steadily, fuelled by intensive investment in heavy industry.

The apparent economic success of the Soviet Union at a time when the capitalist world was in crisis led many Western intellectuals to view the Soviet system favorably. Jennifer Burns wrote:. As the Great Depression ground on and unemployment soared, intellectuals began unfavorably comparing their faltering capitalist economy to Russian Communism [ Due to having very little international trade and its policy of isolation, they did not receive the benefits of international trade once the depression ran its course, and were still effectively poorer than most developed countries at their worst sufferings in the crisis. Soviet Russia was at first happy to help these immigrants settle, because they believed they were victims of capitalism who had come to help the Soviet cause.

However, when the Soviet Union entered the war in , most of these Germans and Finns were arrested and sent to Siberia, while their Russian-born children were placed in orphanages. Their fate remains unknown. Spain had a relatively isolated economy, with high protective tariffs and was not one of the main countries affected by the Depression. The banking system held up well, as did agriculture. By far the most serious negative impact came after from the heavy destruction of infrastructure and manpower by the civil war, — Many talented workers were forced into permanent exile.

By staying neutral in the Second World War, and selling to both sides [ clarification needed ] , the economy avoided further disasters. By the s, Sweden had what America's Life magazine called in the "world's highest standard of living". Sweden was also the first country worldwide to recover completely from the Great Depression. Taking place amid a short-lived government and a less-than-a-decade old Swedish democracy, events such as those surrounding Ivar Kreuger who eventually committed suicide remain infamous in Swedish history. The Social Democrats under Per Albin Hansson formed their first long-lived government in based on strong interventionist and welfare state policies, monopolizing the office of Prime Minister until with the sole and short-lived exception of Axel Pehrsson-Bramstorp 's "summer cabinet" in During forty years of hegemony, it was the most successful political party in the history of Western liberal democracy.

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