(24 Oct. 1929)
In the USA, the introduction of new technologies of production, such as the assembly line, and the return of war loans led to an overall increase in the standard of living, as well as a dramatic increase in the inequality of income distribution. A relatively small proportion of the population could afford new items of consumer culture, which resulted in unsustainable overproduction and overconfidence in the economy. This led to careless investments and an exaggeration of share values, and the resulting speculative ‘bubble’ was fuelled by a policy of low interest rates pursued by the Federal Reserve System.
The bubble burst on Black Thursday, when panic gripped investors who rushed to sell their shares. The value of industrial shares halved in only two months, though the slide continued until July 1932, when their value was around 15 per cent of their peak in 1929. This triggered the Great Depression, in which US unemployment rose from 1.5 million in 1929 to over twelve million (around 25 per cent) in July 1932. The effects of the crash spread very quickly throughout the world. The rest of the world was heavily dependent on the USA, which produced over 40 per cent of all industrial goods. Moreover, US investors sought to make up for the capital shortage through the immediate withdrawal of US investments and loans abroad. The resulting financial and economic collapse was felt deeply throughout Europe and around the world. It dramatically accelerated a worldwide economic slump that contributed materially to the advent of Nazism and Fascism in much of Europe during the 1930s.
Subjects: Contemporary History (Post 1945).