In the October of 1929th the economics of the US experienced a deep economic crisis, lately it was recognized as the first-rate in the history. This crisis was named “the Great Depression” and quickly expanded on most of the world’s industrial countries (especially on European countries, which were involved in the financial liabilities with the US).
The origin of the crisis was the complete and unexpected ruin of the stock quotation on New York stock exchange (on the 25th October, 1929). The worth of stock reduced up to ninety percent and most of depositors became bankrupts. This period is characterized by the great rate of the suicides – many people did not want to humble their losses. The panic on the stock exchange was caused by the crisis of the overproduction. So there were lots of the commodities in the turnover and there were not enough customers to purchase these commodities. Banks restrained the crediting and thus economy lost the opportunities to develop and functionate in the usual order. Thousands of commercial and governmental organizations bankrupted and overall economy level was thrown away on the decades. All these resulted in the crisis of the transport, building, energy, trading, agriculture and other main branches of the economy. The rates of unemployment replenished with millions of people and mounted to the fourth part of the overall US population. People, who lost their houses, settled on the outskirts, constructing dwellings from the boxes. The warehouses were overcrowded, the prices infinitely decreased and manufacturers burned and destroyed their supply.
Despite of that most companies failed, large corporations and monopolies survived, merged smaller ones and multiplied their capital by the end of the period of the Great Depression. The government could not cope with the crisis and the new president Roosevelt decided to use several Keynesian tools – governmental regulation of the economics – in order to do this. Roosevelt’s “New Deal” emphasized the importance of regulation of the spheres of crediting and trading. The proper crediting stimulates the development of small and medium businesses, households and farming. Properly regulated trading will help to relieve from production surplus, load productive capacities and decrease unemployment rates. Both regulated crediting and trading will bring economy to the equilibrium – Roosevelt implied. There were accepted many significant laws and regulation acts in the United States of America in the following fields: banking and financial systems, rejection of the gold standard, insurance (endowment and social), manufacturing sphere (especially labour code, code of honest competition, wages etc), unemployment, agriculture, trade unions, provision of pensions, taxation, courts etc. Indeed, the “New Deal” snatched out the US economy from the Great Depression for a certain period of time, but it could not save the economy from the next crisis in the 1937. At that time the amount of adherents of Keynesian theory increased and Roosevelt had to adhere to the Keynesian policy too.
United States of America became able to completely overcome the Great Depression by the beginning of the World War II (1941), while other countries were still affected by its consequences.
Finally, I want to draw out the comprehensive conclusion: during the period of the Great Depression (1929 – 1941) the world’s economy was thrown away on the decades. It was characterized by the crisis of the stock exchange panic, low purchasing capacity, bankruptcy, complete malfunction of banking and financial systems, unemployment and hunger. But monopolies learned to survive and developed a lot during this period – it even can be said that US line of policy supported their survival and development. The United States of America overcame this period and despite of all negative effects gained much positive (especially rejection of the gold standard, development of social insurance, code of labour etc). The main reasons of the Great Depression are: overproduction, unbalanced distribution of the capital in the country, panic on the stock exchange etc. Roosevelt’s “New Deal” in alliance with the Keynesian economy regulation tools played the major role in the overcoming of the crisis – economy was regulated by the government but not to the prejudice of the private property.