The Global Great Depression, 1929-1939

The Great Depression was, by far, the worst economic contraction of the twentieth century, and some of the most important ideas about both fiscal and monetary policy in the second half of the century were developed in response to it. The economic collapse, which started with a sudden stock market crash in the United States, had quickly assumed worldwide proportions. A combination of deflation, massive unemployment, dramatic declines in industrial production, numerous banking panics, and catastrophic increases in poverty and homelessness led many to doubt the system of capitalism itself. Old remedies and new cures had been applied with varying degrees of success in different countries, but ongoing diatribes over World War I reparations and debts obstructed any form of meaningful cooperation in the international arena. Nations turned inward, and while world trade collapsed, more than one sought salvation at the extremes of the political spectrum.