An Economic Depression is a time period when the economy slows down and there is widespread unemployment, lack of investments, and scarce demand for consumer goods. It is primarily caused by worsening consumer confidence that leads to a decrease in demand, eventually resulting in companies going out of business. The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929-1939.

Throughout the 1920s, the economy of the United States expanded rapidly, and the nation’s total wealth more than doubled between 1920 and 1929, a period dubbed “the Roaring Twenties”. The stock market of the US was the scene of reckless speculation, where everyone from millionaire tycoons to cooks and janitors poured their savings into stocks.

As a result, the stock market underwent rapid expansion, reaching its peak in August 1929. By then production had already declined and unemployment had risen, leaving stock prices much higher than their actual value.

 

Additionally, wages at that time were low, consumer debt was proliferating, the agricultural sector of the economy was struggling has to drought and falling food prices, and banks had an excess of large loans that could not be liquidated.

During the summer of 1929, the American economy entered a mild recession as consumer spending slowed and unsold goods began to pile up, which in turn slowed factory production. The stock prices continued to rise, on October 24, 1929, as nervous investors began selling overpriced shares, the stock market got crashed. A record 12.9 million shares were traded that day, known as “Black Thursday”.

Five days later, on Oct 29 or “Black Tuesday” some 16 million shares were traded. Millions of shares ended up worthless, and a few more wiped out completely. Fixed currency exchange in the world helped spread economic woes from the US throughout the world.

Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid-off workers.

 

By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed and nearly half the country’s banks had failed. In almost every country of the world, there were massive job losses, deflation, and a drastic contraction in output. In short, the Great Depression was induced by a large negative shock to aggregate demand.

The Depression had an important impact on India’s freedom struggle. Due to the global crisis, there was a drastic fall in agricultural prices, the mainstay of India’s economy, and a severe credit contraction occurred as colonial policymakers refused to devalue the rupee.

In 1933, the country elected Franklin D. Roosevelt as President. Within 100 days he signed the New Deal into law, creating 43 new agencies throughout in lifetime. They were designed to create jobs, allow unionization, and provide unemployment insurance. Many of these programs still exist. This helped to end the Great Depression.

The 1929 economic crisis was triggered by stock market speculation, while the reason underlying the current crisis is the fact that we are face to face with a freeze in the economy due to the coronavirus epidemic.

There was a situation in both the 1929 and 2020 COVID crisis that had an adverse effect on workers. The further the coronavirus spreads and further the economy shrinks, its impact on unemployment becomes deeper.

The two crises are not only economic, but they rather stand out as a social and, in fact, as a political matter. If the coronavirus epidemic is prolonged, it appears the unemployment issue will be the most serious matter in the social and political domain.

The key difference today is that unlike other financial crises, health concerns trump economic ones.

 

The zero growth we project now for 2020 will mark the second-weakest year for the global economy in almost 50 years of comparable data, with only 2009 being worse.

Finally, the higher the toll of the virus, and the outbreak lasts, the more damage to the world economy.