What was the Great Depression?
The Great Depression (1929–1939) was the worst economic crisis in modern history. Triggered by the U.S. stock market crash of October 1929, it spread globally, causing mass unemployment, bank failures, and severe deflation. It discredited laissez-faire capitalism, empowered extremist political movements including fascism, and fundamentally changed the role of government in managing economies.
The Great Depression was the deepest, longest, and most widespread economic downturn of the 20th century. It began in the United States and spread to virtually every country on earth, demonstrating how interconnected the global economy had become — and how catastrophically it could fail.
The crash of the New York Stock Exchange in October 1929 was the dramatic trigger, but the underlying causes ran deeper. The 1920s had seen speculative excess — stocks were bought on margin with borrowed money, real estate prices were inflated, and consumer credit expanded recklessly. American banks had extended massive loans to European nations struggling to repay war debts and reparations. Agricultural prices had been depressed throughout the decade. When the speculative bubble burst, the entire edifice of credit and confidence collapsed.
The numbers were staggering. U.S. industrial production fell by nearly 47% between 1929 and 1932. Unemployment reached 25% in the United States, and higher in Germany. Over 9,000 American banks failed, wiping out the savings of millions. International trade contracted by roughly 65% as countries erected tariff barriers in desperate attempts to protect domestic industries — measures that only deepened the crisis. Deflation spiraled as falling prices increased the real burden of debt, triggering more bankruptcies and more unemployment.
The political consequences were profound and varied. In the United States, Franklin Roosevelt's New Deal represented a fundamental expansion of government's role in the economy — Social Security, banking regulation, public works programs, and labor protections that created the modern welfare state. In Germany, mass unemployment and economic desperation empowered Adolf Hitler and the Nazi Party, who promised national renewal and scapegoated Jews and communists. In Japan, economic hardship strengthened militarists who advocated imperial expansion in Asia.
The Great Depression shattered the orthodox economic consensus that markets were self-correcting and that governments should maintain balanced budgets during downturns. John Maynard Keynes argued that government spending was necessary to compensate for inadequate private demand — ideas that became the foundation of postwar economic policy. The Depression demonstrated, at immense human cost, that unregulated capitalism could produce suffering on a scale that threatened civilization itself.