The Great Depression Explained

The Great Depression was a time when the world economy contracted significantly, it was a time of mass unemployment, bankruptcies and human suffering that spanned from the poorest regions of Africa and Asia to the richest regions of Europe and America and in this video we will look at all of these regions, unlike many other sources that cover Europe or the US, this video will cover all continents, but before we can look at the Great Depression, we have to look at the world before the Great Depression in this world, the United Kingdom was the world's only superpower. where a United Kingdom defended a global economic policy based on free trade where countries could buy and sell to other countries without many trade restrictions, the poorest regions sawed crops and raw materials for the industrialized countries, these in turn used their factories to convert those resources into manufactured products. and eventually those manufactured goods were sold around the world, as a result, countries that had industrialized were able to produce more goods at lower prices than ever before, creating an interconnected global trade network linking almost all parts of the world.

The United States had one of the most comfortable positions in this world. It was one of the first to industrialize in a secure position and had a large population, meaning it could build factories to stay out of destructive wars and had many people to work in. those factories and then what did that do? A large group of people with relatively well-paid jobs in that country are sure to get by with all the wealth they had earned well, they bought a lot of new things made in those factories, but not only new things, they also bought shares of companies, there are two reasons The main reasons why people did this, the first is that a company pays you a small amount of profit per share you own, secondly, if the company makes a lot of profits, the price of those shares goes up and you can sell your shares. stocks to make a profit, in fact this became so popular that people often took out bank loans to buy stocks with the expectation that they could also sell them for a profit;

With that profit they would pay off their bank loan and have money left over, but then, in 1929, the stock market price plummeted, the value of the company's shares fell 40 percent in just one month, this meant that if they had invested his money in stocks, suddenly he had a lot less money if he sold those stocks and if he took out a loan to buy his stocks you could no longer pay your loan by selling stocks and this happened to many people in the US at the beginning, this did not It was too big a problem in the US.

After all, the stock market is just one part of the economy, but what's important is the effect this had on the people who flunked out because if you had lost a lot of money then you probably wouldn't go. people are more likely to pay off their loans or save some money before buying new things, but the question is why is it so bad that people buy less things? When a company sells something, they use some of their money to pay employees' salaries, buy supplies from suppliers, pay mortgages from banks, etc. If you work in a store at a bank or factory, that means companies buy your products and services less frequently.

This means that these companies no longer make enough money to continue operating normally, so they need to cut costs, such as layoffs. employees produce less things or simply go bankrupt, this in turn means that there are fewer people and companies spending money, which causes more bankruptcies and more people lose their jobs, and each problem adds to the previous problem and makes things worse . This is not so bad. If you are rich, but for everyone else, this means that you could lose your job, you cannot provide food or shelter for yourself and your family and you can no longer live the life you are accustomed to or because your business or the business of Your boss no longer sells enough things to pay your salary and that is why people buying less things is bad for the economy, but there is more because people who still have jobs decide that instead of spending money on new things like a car, they will simply save that money. in case you get laid off, and when a business owner sees other businesses go bankrupt, he will also spend less money in case he needs it to avoid bankruptcy and if he owns a business that sells to other businesses, such as building buildings. offices or factory machines, then your company now has many fewer customers, not because you have done something wrong but because your customers decided to be more cautious with their money, as a result, even more companies go bankrupt and more people are laid off, which eventually It results in an unemployment rate of about 25% in the US, similar to other nations at the time, but the problems do not end here as more and more companies went bankrupt and people were laid off, unable to pay their loans and mortgages, which caused many banks to fail.

You had your savings in that bank, so that money ran out and since people were afraid of losing their savings, they decided to take all their money out of the bank, but in the United States at that time most had small banks that didn't have much. of money in the vaults, so when people found out that the banks were going bankrupt, they decided to take money out of their own bank in case many banks quickly ran out of money to give to the people and as a result , also went bankrupt, causing ever-increasing demand. domino effect and the banks were trapped, fewer loans and mortgages were sold to people, which in turn meant that if you worked in a business that depended on them, for example construction, then your business was in danger as there were fewer people building and buying homes.

As banks were now selling fewer mortgages, making the Great Depression even worse, businesses went bankrupt, savings disappeared, and employees were laid off, people began to buy fewer products and discussed another problem while people bought fewer products, companies still produced many products. This is because companies had to continue paying investors their mortgages and other fixed expenses, they simply could not significantly reduce their production, and therefore, as companies produced more things than there were people to buy them, prices They went down because imagine you are a customer and ten different companies sell the same product well, you are likely to buy the cheapest option, so any company with higher prices had to reduce those prices or lose all their customers and this happened with a wide range of products, cotton for example, dropped the price by two thirds at first this might seem like a good thing, lower prices mean people can buy more things, but let me ask you something if you wanted to buy a new computer, a new car or fancy new clothes, they would see that it would reduce in price every month, what would do the majority good?

The answer is to wait until the price drops even further, so many people delayed purchasing expensive products, meaning companies were selling even less, causing more companies to go bankrupt and more people to lose their income. The Great Depression was not just one problem, it was a collection of all these problems combined interconnected with each other causing an economic recession that would eventually be known as the Great Depression, but why was it called the Great Depression? Well every three months there is a report on how well the economy is doing in very simple terms, this is measured by adding up all the things that were produced in those three months, if two of those reports in a row show that fewer products were produced than the previous three months, then it's called a recession it doesn't matter if it's a dollar or a trillion dollars as long as it's less when a recession is particularly bad it's called a

depression

but this

depression

was so big that they called it the Great Depression because economists They're just as bad Naming things like historians are, as someone who makes history videos but graduated with four degrees in Business and Economics, it probably won't surprise you that my girlfriend was the one who came up with my YouTube name, so what?

What did the United States do to solve it? Well, these problems first increase the tariffs, which means that if you wanted to buy something from another country, then you would have to pay an additional tax on top of the regular price. The US government hoped that by making foreign products more expensive, people would buy more products. of American companies, what happened was that other countries raised their own tariffs against the US, which means that American companies lost a lot of foreign customers, which means that even more companies went bankrupt. This policy, like almost every other time, clearly backfired and would be rejected throughout the In the 1930s, the US wanted to prevent prices from falling further and the way it did this was to get rid of something called the pattern gold.

This is a policy where you can always take your local currency to the government and get cold feet in exchange for your money. This system allowed people to easily know how much the coin was worth because they could always see how much gold they could get for each coin. This made it easy to exchange currencies because you could always check the gold prices of the respective currencies to know how much you could exchange one currency for another, but it also had a big drawback because if people can exchange your currency for gold, then you will always need to have one. certain amount of gold in your vaults for people to trade if you were to print more money than more people. would come to exchange more money for gold, meaning it would need even more gold in its vaults, meaning it couldn't just print more money because it would run out of gold, so the US decided to abandon the gold standard and print a lot of money.

By printing more money everything becomes more expensive as people now want more dollars for their products as there are now more dollars in general but products were becoming less expensive at the same time so the government of The US printed enough money to make extra money. they raised prices as much as other forces were lowering prices and so by printing extra money the US managed to prevent prices from falling further and then spent that extra money it was printing on building new infrastructure parks, schools and other public works, which helped improve the economy because better-educated and more connected people make doing business easier, while the U.S. raised taxes to provide financial aid to people in need, such as the unemployed , the disabled elderly, something that was finally not common at that time.

To solve the banking crisis, the United States did three things: first, banks had to keep more money in their vaults in case of a bank run; Second, the government announced bank holidays in which banks would be closed, this way people would not be able to withdraw money from the bank. for a while so that the bank would not go bankrupt, thirdly, they sent teams to the banks to determine whether they were safe or not and would only be allowed to reopen when the government gave them a seal of approval, while in retrospect, the seal of approval was "It wasn't worth much, it made people think the bank was safe, this meant fewer people took money out of the bank, which meant fewer banks ran out of money, hence the disbelief that banks were safer was what made banks actually safer in 1933, the damage of the The Great Depression had run its course in the US, but thanks to all these actions, economic growth in other parts of the world and several other minor policies the US economy was growing once again, but simply because the economy was growing again did not mean it was back to 1929 levels, it would take until 1942 for the US economy to return to what it was. which was before the Great Depression.

The next region to talk about is Latin America because their economies were closely linked to that of the United States, while each country did. Of course, they have unique circumstances, there were many similarities between them, for example, Latin America mainly produced so-called primary goods, these were goods that can be harvested without a manufacturing process, such as coffee beans, copper, oil, meat and much more. Furthermore, these goods would mainly insult Europe and the United States who turned them into manufactured products, but when the crisis hit there were many fewer customers in Europe and the United States and just as happened in the United States, Latin America produced more goods than there were people to buy them and That's why the prices of Latin American products often fell by fifty to sixty-six percent between 1928 and 1932, so the large agricultural population could no longer earn enough money for their products, causing unemployment and poverty will increaseall of Latin America.

The only exception to this was Venezuelan oil, which became profitable throughout the crisis, the problem worsened when the United States and later European countries increased tariffs on foreign products, which meant that even fewer people wanted to buy Latin American products. and, although the colonies did not have to deal with the tariffs of the European overlords, the tariffs were still

great

ly affected, since they often also traded it with other nations, so Latin America's problem was threefold: its products They were becoming cheaper, trade was being restricted and their customers were becoming poorer, with exports being the main engine of the economy.

Latin America was affected. It was very hard because of the Great Depression and so, what did Latino governments do to solve these problems? They implemented three policies first, they try to control prices, as we saw with the US, if more is produced than there are people to buy it, prices go down. so they wanted to produce as much as people could buy and nothing more, but this would take time, so the government decided that they would determine the prices of the products and any surplus would simply be destroyed during the 1930s, in Brazil alone, approximately 60 million of coffee bags.

They burned about two years of global coffee consumption at that time as a tea drinker. I consider this a win-win for everyone. The second policy was to get off the gold standard and print more money just as we saw happen in the US. US, but unlike the US, this was done to make exports cheaper, for example, let's say I'm a cotton farmer. I sell a kilogram of cotton for 10 historical scope credits and one US dollar is worth one historical scope credit, so one kilogram of cotton is sold. for 10 US dollars, our beloved supreme leader Avery Prince gets more money and the value of historical scope credits is halved, so now an American one.

The dollar is worth two historical reach credits, so if I now sell a kilogram of cotton for 10 credits, then it would only cost $5, so anyone who buys my cotton with a different currency can buy it for less money by simply printing more historical reach credits. historical scope and Latin letters. The United States did the same so that European and American customers could buy Latin products at lower prices and Latin America could export more products again and don't worry, this is the only math in the entire video and lastly, Latin America invested in new types of industries.

Due to all the trade restrictions and poverty, Latin American citizens could no longer buy the products they wanted to the point where there were strikes, riots and even failed revolts due to poor living conditions, so the government decided that in order to maintain to the people. They were happy to need those products, but without the ability to import them they decided that they would simply start manufacturing their own products, but with blackjack and prostitutes, and they were smart to give loans to factories that could turn local products into manufactured goods so that the producers of cotton.

They built clothing factories, sugar cane producers built sugar refineries, etc. These policies were later expanded to include other industries such as chemicals, pharmaceuticals, and a wide range of manufactured products. This strategy was particularly successful in Brazil, where in 1938 almost 85% of all manufactured products sold were produced. In Brazil itself, these policies were so effective that Latin America emerged from the Great Depression faster than most other regions of the world. What these policies were designed to keep the ruling elites in power, they actually helped improve the lives of ordinary people. The economies of Europe and the United States were recovering again.

Latin America began exporting again like it used to, except this time, instead of relying on commodities, it now sold a wide variety of products and when World War II came, Latin America joined the thirty-fourth. The procurement war rule is good for businesses that sell a wide variety of consumer goods to those countries that focus on building military goods and benefit economically from war without participating in the next war. Europe Europe was one of the richest regions in the world and was the first to industrialize and maintain colonies around the world had just fought World War I killing about 10 million people destroying homes and infrastructure and redrawing European borders Europe in the 1920s focused on recovering from this war new countries like Yugoslavia Poland or Hungary had to completely restructure how their countries worked Poland for example used to be part of Germany, Russia and the Austro-Hungarian Empire now that they were independent they needed a new administration, a new infrastructure system and everything else that comes with running a country, but Europe had a big problem before Europe's heavy industry was its strong point, making ships, steel trains and much more, but while countries like Japan and The United States had been building itself, Europe spent four years exploiting itself, and in the 1920s Japan and the United States improved those same products. and cheaper and in addition to making goods worse and more expensive, Europe also produced more than people were willing to buy, which means that prices fell just like in the Americas, which means that European companies made less money , except that in Europe this already happened before the Great Depression.

Europe also did not fare very well politically because of war losses, such as Germany having to pay war reparations to France and Britain and having to repay the US for all the money they borrowed during the First War. World to make things worse due to war losses. They were also not allowed to do much business together, so if one was Austrian and did business with neighboring Hungary, then they needed to find new customers, causing their infrastructure to lose much of its value by the late 1920s. European economies were already slowing down and then the Great Depression hit and Europe faced many of the same problems that the United States had, just as American stock prices lost a lot of their value, companies went bankrupt, people were able to fight back. and many products fell in price, besides that, Europe also faced a banking crisis, but unlike the US, European countries had a few big banks per country, if just one of those banks failed in a country, millions of people and businesses would lose all their savings, making the Great Depression even worse, but there are significant differences.

Also, for example, in Eastern Europe, seventy percent of the population worked in agriculture when prices fell, farmers could no longer make enough money selling their crops, and poverty increased, causing the same problems we saw in America. America, so what did European nations do to solve these problems first? To solve the banking crisis, many governments simply took over the bank, thus assuring anyone that as long as the government had money, the bank would have money, these banks would later become a private company again, again avoiding a banking crisis like the one that faced the United States in second place.

With the Great Depression and American investors no longer wanting to invest in Europe, European nations decided to show investors how good European governments are at paying off public debt by raising taxes and reducing spending in a policy called austerity. by having more money to pay the debt they expected. Investors would return to investing in Europe, instead companies that sold products and services to European governments lost those governments as their customers caused more bankruptcies and unemployment and did little to win back American investors. These policies were particularly popular in Balkan countries like Yugoslavia, which used to be this part of Europe, by the way, if you want to watch an in-depth video about the breakup of Yugoslavia, you can do so by voting in a poll in the description to avoid job losses. .

European nations implemented tariffs just like the US in the hope that domestic companies would not have to compete as much with foreign companies, but like the US, this simply meant that companies lost foreign customers. , but unlike the US, most European nations had much smaller populations than the US and were more dependent on foreign countries for trade, so if, for example, your company bought coal French and German iron to make steel, then now you will have to pay much more money for coal and iron, and when you sell your steel you will have to sell it at a higher price, as always.

Some nations saw the folly of this approach and decided to join in. The Benelux countries eliminated tariffs on each other in the OSI agreement. Interestingly, the disagreement eventually evolved and became the model for the early European Union. The Nordic countries along with a few other nations did anything similar with the low agreement of the 1930s and over time other small European trading blocs were established, but eventually Europe began to recover with the United Kingdom leading the way in which nations European nations reduced tariffs in the hope that other nations would do the same. of the gold standards printed a lot of money and then spent that money on public works programs, the poor and the unemployed similar to the US, many countries followed the example of the UK and once they did, their economy began to recover as well, but some countries did. a different route Germany printed so much money that the money effectively lost all its value and took strict control over its economy by controlling import prices and when it elected a man with a Charlie Chaplin mustache to power it took even more control over the economy and invested a lot of money. resources in their military industry In the late 1930s, many European countries increased investments in their militaries, which helped boost industrial production and also dragged Europe into another world war.

Europe would not fully recover from the Great Depression until after World War II with the Soviet Union. and US development projects such as the Marshall Plan. If you want me to talk more about the Marshall Plan, you can vote for it in the poll in the description, but there was one country that stood in stark contrast to the rest of Europe. and that was the Soviet Union, it was the only socialist state in the world at the time and it was busy industrializing in exchange for millions of lives. The USSR did not have much international trade and as a result was largely unaffected by the Great Depression, but it is important to note that while the USSR's economy did not suffer much due to the isolation policy, it also did not receive any. of the benefits of international trade, meaning that the USSR remained poorer than most Western countries at the worst times in its life. the Great Depression is now Africa's time and Africa is the place where we place emotional depression in the Great Depression in 1929 Africa had been completely colonized except Ethiopia and Liberia, while the African colonies were governed differently according to each colony, still There are many similarities between them.

In general, the African people had to pay a tax to that colonial government. This tax used to be the same for every person in that colony and had to be paid in the currency of the European lords, so the British colonies paid in pounds sterling. The French colonies in French. francs, etc. To pay this tax, Africans would work for a European company in Africa or dedicate a portion of the land to farming, then sell those crops in exchange for European currency and then give that currency to their colonial government as a tax. Those Europeans then built some ports and companies paid an export tax before shipping those products back to Europe, but as we saw in Latin America, when the Great Depression hit, the prices of agricultural products fell as a result, the Africans could no longer pay their taxes.

This forced many Africans to abandon their lands and work for low wages in European mines and plantations or simply disappear into the slums of African towns and cities. The already rampant poverty became even worse and as these colonies were owned by European countries, it meant that bad European policies also affected these colonies, so when European nations implemented tariffs, that also meant tariffs for African colonies owned by European nations, so pasta makersItalians had to pay an additional tax on African wheat produced in the French colonies, as elsewhere. a lower price and fewer people wanted to buy it so what did African governments do to solve these problems?

Some African colonies decided to raise taxes on Africans so that governments would have enough money, causing even more poverty when people could no longer pay those taxes to other Africans. The colonies decided that if they couldn't make enough profits by exporting goods, they would simply start producing many more of those goods to offset their belt. In the Congo, for example, a vast system of plantations was created that produced a wide range of agricultural products and this caused the plantation owners to make large profits at the expense of local Africans who worked the fields for low wages to pay the taxes.

Europeans benefiting from African poverty was a trend throughout Africa, so the colonies that were doing better were Egypt, for example, it depended on the export of cotton, so the Egyptian government got rid of the relatively early gold standard to make Egyptian cotton cheaper for foreigners and invested in the textile industry to produce more profitable fabrics. This made Egypt the first African region to seriously industrialize, bringing wealth to urban areas but leaving the rural population living in poverty, increasing wealth inequality in Egypt, another relatively independent colony was South Africa which exported resources natural resources like diamonds and gold and because most countries were still using the gold standard governments wanted to buy a lot of gold so South Africa exported a lot of gold even when countries left the gold standard people still wanted to buy gold because he hoped that countries would return to the gold standard once the crisis was over, as they had done many times in In the past, many Caucasians in South Africa benefited from the gold trade, while once again native Africans worked hard in mines in exchange for a lot, independent African states were not faring much better.

Liberia, for example, had taken out a loan to invest in a rubber plantation to sell. rubber to the US when the crisis hit and the price of rubber fell, as did exports. Liberia had to default on its debt and to make matters worse, it was discovered that some of that rubber was produced using slave labor and its largest trading partner, the US, officially disapproved of the idea and stopped trading with the African nation. . This crisis was only resolved after he renegotiated his debt payment and promised to end slave labor in general. Africa suffered rampant poverty during the Great Depression and only recovered when European overlords got rid of gold. standards that made African products more affordable this meant that the colonies ruled by the United Kingdom recovered faster than, for example, the French colonies because the United Kingdom abandoned the gold standard long before France this increase in African poverty It sparked uprisings in local populations that were often brutally repressed.

Sell, while not the only reason for independence, the Great Depression would continue to fuel independence movements for decades to come if you want to cover the topic of African decolonization in depth. and you can do so by voting in the poll in the description now. Let's go to a land in Australia and New Zealand whose economies were closely linked to that of the United Kingdom and mainly exported agricultural products. When the British entered the Great Depression, Australia and New Zealand lost most of their customers, so they did what they Europe did: raise tariffs and cut spending, which turned out as badly as in Europe;

What got them out of the Great Depression was the UK's economic recovery and they are negotiating a deal giving preferential treatment to Australian and New Zealand dishes. Next is Asia, this continent was a mix of independent nations and Western or Japanese colonies, other than Japan most of Asia only had a little bit of industrialization and was mostly rural. In general, Richard in Africa were much poorer than Western nations, being richer, the colonials needed to pay more taxes, not only did they pay a tax per person as in Africa, but also a tax for the land they owned, the Great Depression really shouldn't have been This was a big problem for most people in Asia or Africa because most people depended on growing their own food, but instead they had to pay these taxes, set aside a portion of their land and grew cash crops to pay their taxes when the Great Depression hit.

They hit those crops lowered in price and when the Asian population could no longer earn enough money to pay their taxes they were evicted from their homes this cost peasant uprisings unemployment and poverty in the region to make matters worse when European nations and after trade barriers Asian colonies and nations found it more difficult to trade with each other, for example the Dutch East Indies sold refined sugar to India where it was converted into brown sugar. This jaggery was then sold to the local British Indian population, but with trade barriers this became much more difficult. farmers, producers and customers could not get as much as before the crisis and this happened with a wide range of products;

The colonies generally only began to recover once European overlords abandoned the gold standard, removed trade barriers, and people elsewhere earned enough money again. again by Asian crops, but this was not the case everywhere, British India for example had a unique position, they were not on the gold standard, they were on the silver standard, meaning that instead of being able to exchange the currency for gold, it could be exchanged. In the case of silver, this was very advantageous for British India because if rupees had a fixed value in silver, when the price of silver goes down, that also means that the price of a rupee goes down and this is what happened , the price of silver fell, that is, the currency of British India. was now cheaper, meaning its goods were also cheaper, allowing British India to more easily sell its goods, making British India relatively well-off compared to many other regions of the world at the time. , independent nations were generally more well-off, as was China, for example.

The silver standard was also used, which made Chinese products much cheaper. Furthermore, China used this cheap currency to attract a large amount of foreign investment in business and infrastructure. China's economy began to grow faster and faster during the Great Depression, but this all came to an end when silver prices rose again and Japan invaded China in 1931, giving China its own Great Depression. Depression a little later than the rest of the world. Iran was another independent country that derived much of its revenue from oil during the Great Depression. Oil prices. fell and Iran renegotiated an agreement with the British to obtain a

great

er percentage of the oil revenues the British were extracting from their country.

Then he also built more oil drilling rigs to sell more oil. These were completed in 1939 just in time to sell oil to the nations involved in During World War II, many regions of the Middle East followed suit and began extracting more oil, bringing prosperity to those who owned the oil wells. Native populations rarely experienced any of this new prosperity during the Great Depression. The last country we will discuss is the Empire of Japan because Japan during the Great Depression did everything right, in fact Japan did things so well that today we still do what they did when the Great Depression hit Japan, it hit them hard, but Unlike other countries, Japan recovered very quickly, the government appointed Takahashi. korekiyo as finance minister and immediately abandoned the gold standard and printed more money and devalued the Japanese yen instead of waiting several years like most other nations, this made Japanese goods cheaper and boosted growth, then the Japanese government invested in new industries, particularly in heavy industry.

In this way, companies could transition from older, less profitable industries to newer, more profitable industries. They did this by promoting various leaders in those industries to lead the way for other companies to follow their successors, thus preserving jobs, which in turn meant there were more customers to buy from. products, which in turn meant fewer companies ran out of money and went bankrupt; In fact, many of the Japanese companies we know today became industrial giants because of this policy. Takahashi Kara Keough was a pioneer in economics and it is clear from his writings from that time. that he knew how economies worked and how his policies would shape those economies.

His policies are still used today, almost a century later, to pull economies out of recessions. he was killed when the Japanese army controlled the government and a guy named John Maynard Keynes wrote. a book on how to get out of the Great Depression that recommended many of the same policies that Pan had implemented, which is why we now call these types of policies Keynesian economics rather than, say, Takahashi economics, not only that governments assumed a more active role in the economy. Give money to the poor, the unemployed, the disabled and many others to pay for all the taxes increased by that government on almost every aspect of the economy.

The government we expect in rich countries today, one that provides health care, stabilizes the economy, invests in new industries. makes loans to small businesses, that government was created in a time of great economic upheaval when people hit the lowest point, they are open to the greatest change, and lastly there is Antarctica, which was totally fine, apart from those Lovecraftian ruins If you liked this video, give it a like. Subscribe and hit the notification bell if you want to talk more about this topic and join the rest of us on the Discord server. The link is in the description.

This was Avery from History Scope. Thanks for watching.