Summary
Highlights
The world was still recovering from the First World War in 1929, with European nations weakened and the United States emerging as the leading political and economic power. Despite economic recovery and global trade, weaknesses in the US economy led to the most severe economic crisis to date. On October 24, 1929, a panic hit the New York Stock Exchange (Wall Street), leading to the sale of over 12 million shares, the collapse of their value, and the ruin of over 1.5 million Americans. This marked the end of a decade of economic growth and the illusion of endless stock market gains, leading to widespread bank failures and increased caution in lending, which in turn caused production declines and business closures. President Hoover's protectionist policies, aimed at reducing imports and repatriating capital, inadvertently halted international trade and spread the crisis globally.
The US crisis quickly spread internationally. German and Austrian banks, already fragile from WWI, lost US capital and some, like Kreditanstalt and Dab Bank, failed, bringing down industrial and commercial sectors. Many countries, including the UK, France, and the US, devalued their currencies to boost exports. While moderately effective, this led to the collapse of the international banking system and the gold standard, giving states control over their currencies but causing record inflation in some regions.
Beyond economics, the 1929 crash triggered a severe social crisis. Massive business closures led to record unemployment rates; in the US, unemployment surged from 3.1% in 1929 to over 25% in 1933 (12.6 million jobless), and Germany saw 44% unemployment. Rural areas also suffered as falling consumption due to increasing poverty caused agricultural prices to plummet. Hundreds of thousands of indebted farmers, unable to repay creditors, migrated to cities, swelling the ranks of the poor. Latin American countries, dependent on agricultural exports to the US, faced closed markets and growing unsold inventories, sometimes resorting to extreme measures like dumping coffee into the sea. Homeless camps and hunger riots erupted worldwide, including in the US, France, and Australia, protesting poverty and governmental inaction.
Protectionist measures yielded mixed results. In 1932, Franklin Delano Roosevelt was elected US President and launched the New Deal in 1933. This policy increased government intervention in the economy through stricter bank regulation, agricultural subsidies, public works programs to create jobs, and unemployment aid. The New Deal also benefited the working class by establishing a social protection system and a minimum wage. While it improved the economic situation and restored pre-crisis production levels, unemployment remained high, with 9 million jobless in 1939. Ultimately, World War II revitalized the US economy and brought lasting prosperity.
In France, the crisis, hitting hard in 1931, fueled the rise of the extreme right. To counter this, left-wing parties (PCF, SFIO, radical party) formed the Popular Front, led by Léon Blum. They won the May 1936 elections. This victory sparked hope and led to widespread strikes, culminating in the Matignon Agreements on June 7, 1936. These reforms included trade union freedom, wage increases, a reduced work week from 48 to 40 hours, and two weeks of paid vacation—a first for France. The state also adopted economic interventionism, reforming the Banque de France and nationalizing key industries like armament, aeronautics, and railways, leading to the creation of SNCF in 1937. However, the Popular Front was short-lived, facing opposition from businesses and rising international tensions, leading to Blum's resignation in 1937.
While the US and French experiences helped alleviate difficulties, other states turned to more radical solutions. Germany, ravaged by the crisis and with the Weimar Republic failing to find solutions, experienced hyperinflation. Public discontent grew, fostering a desire for a strong leader. Industrialists supported the Nazi Party, whose leader, Adolf Hitler, became Chancellor in January 1933 after winning 33% of the vote. He implemented protectionist and autarkic policies, initiating war preparations to secure 'living space' for the German people. In Latin America, the crisis led to military coups, such as in Argentina, where José Félix Uriburu took power in 1930. Industrialization policies were pursued to reduce external dependence and overcome the crisis.
The 1929 crisis shattered the illusion of endless growth. Although originating in the US, its consequences spread globally, encompassing economic, social (mass unemployment), and political upheaval (decline of democracy in many countries). This event was a key factor in the rising international tensions of the 1930s, ultimately leading to World War II in 1939.