The Great Depression Explained

the Great Depression was a time where the world economy shrank significantly it was a time of massive unemployment bankruptcies and human suffering it reached from the poorest regions of Africa and Asia to the richest regions of Europe and the Americas and in this video we will look at all these regions unlike many other sources which cover Europe or the USA this video will cover every continent but before we can look at the Great Depression we have to look at the world before the Great Depression in this world the United Kingdom was the world's sole superpower where a UK championed a worldwide economic policy based on free trade where countries could buy and sell to other countries without a lot of trade restrictions poorer regions sawed crops and raw materials to industrialized countries they in turn used their factories to turn those resources into manufactured goods and finally those manufactured goods were sold all across the globe as a result those countries who had industrialized were able to produce more goods for lower prices than ever before creating a global interconnected trade network linking almost every part of the world together the USA had one of the most comfortable positions in this world it was one of the first to industrialize at a secure position and had a large population meaning it could build factories stay out of destructive wars and had a lot of people to work in those factories and so what did that large group of people with relatively well-paying jobs in that safe country do with all the wealth they had earned well they bought a lot of new stuff made in those factories but not just new stuff they also bought companies shares there are two main reasons people did this the first is that a company pays you a small amount of the profit per share that you own secondly if the company makes a lot of profit then the price of those shares go up and you can sell your shares for a profit in fact this became so popular that people would often take out bank loans to buy shares with the expectation that they could also sell their shares for a profit with that profit they would repay their bank loan and have money left over for themselves but then in 1929 the stock market plummeted in price the value of company shares dropped by 40 percent in just one month this meant that if you had invested your money in shares then all of a sudden you had a lot less money if you sold those shares and if you took out a loan to buy their shares you could no longer repay your loan by selling shares and this happened to a lot of people in the USA at first this wasn't too big of a problem in the USA after all the stock market is just a part of the economy but it is the effect this had on people suspending that is important because if you had lost a lot of money then you probably aren't going to go out and buy a lot of new things instead people are more likely to repay their loans or save some money before buying new things but the question becomes why is it so bad that people are buying less stuff well when a business sells something they use part of their money to pay salaries for employees buy supplies from suppliers pay back mortgages from banks etc so if you work in a shop at a bank or in a factory that means that businesses are buying their products and services less often this means that also these businesses now no longer earn enough money to keep operating normally so they need to cut costs such as firing employees producing less stuff or simply going bankrupt this in turn means that there are fewer people and businesses spending money causing more bankruptcies and more people losing their jobs with each problem adding on top of the previous problem making things increasingly worse this isn't so bad if you are rich but for everybody else this means that you might lose your job are unable to provide food and housing for you and your family and you can no longer live the life you're used to or because your business or your boss's business no longer sells enough stuff to pay for your salary and this is why people buying less stuff is bad for an economy but there's more because people who still have jobs decide that instead of spending money on new things like a car they will instead save that money just in case they get fired - and when a business owner sees that other businesses go bankrupt they will also spend less money just in case they might need it to avoid bankruptcy themselves and if you own a business which sells to other businesses such as office buildings or factory machines then your company now has a lot fewer clients not because you did something wrong but because your clients decided to be more cautious with their money as a result even more businesses go bankrupt and more people get fired eventually resulting in an unemployment rate of about 25% in the USA similar to other nations at the time but the problems don't end here as more and more businesses went bankrupt and people got fired they were unable to repay their loans and mortgages this resulted in a lot of banks going bankrupt if you had your savings in that Bank then that money was gone and as people became afraid of losing their savings they decided to take out all their money out of the bank but the USA at the time mostly had small banks who didn't have a lot of money in the vaults so when people heard about banks going bankrupt they decided to take money out of their own bank just in case many banks quickly ran out of money to give to people and as a result went bankrupt as well causing an ever-increasing ripple effect and s banks when trapped there were fewer loans and mortgages being sold to people this in turn meant that if you worked in a business that relied on them for example construction then your business was in danger as there were fewer people building and buying houses as there were now fewer mortgages being sold by banks making the Great Depression even greater as businesses went bankrupt savings vanished and employees got fired people started buying fewer products and discussed another problem while people were buying fewer products companies were still producing a lot of products this is because businesses had to keep paying the investors their mortgages and other fixed expenses they simply couldn't significantly reduce their production and so with businesses producing more things than there were people to buy them the prices went down because imagine you are a customer and ten different businesses sell the same product well you're likely to buy the cheapest option so any business with higher prices either had to reduce that prices or else lose all their customers and this happened to a wide range of products cotton for example dropped in priced by two-thirds at first this might seem like a good thing lower prices means people can buy more stuff but let me ask you something if you wanted to buy a new computer a new car or fancy new clothes and you would see that it would reduce in price every month what would you do well for most the answer is wait until the price gets even lower and so a lot of people delayed purchasing expensive products meaning businesses were selling even less causing more businesses to go bankrupt and more people to lose their income the Great Depression wasn't just one problem it was a collection of all of these problems combined interconnected with one another causing an economic downturn that would eventually be known as the Great Depression but why did they call it the Great Depression well every three months there is a report on how well the economy is doing in very simple terms this is measured by adding up all the things that were produced in those three months if two of those reports in a row show that fewer products were produced than the previous three months then it's called a recession it doesn't matter if it's one dollar or one trillion dollars as long as it is less when a recession is particularly bad it's called a depression but this depression was so great they called it the Great Depression because economists are just as bad at naming things as historians are as someone who makes history videos but graduated with four degrees in Business and Economics it probably comes to you as no surprise that my girlfriend was the one who came up with my youtube name so what did the USA do to solve these issues well first they raise tariffs meaning that if you wanted to buy something from another country then you would have to pay an extra tax on top of the regular price the US government hoped that by making foreign goods more expensive that people would buy more products from US businesses what happened instead was that other countries raise their own tariffs against the USA meaning that US companies lost a lot of foreign customers meaning that even more businesses went bankrupt this policy like almost every other time clearly backfired and would be turned back throughout the 1930s next the USA wanted to stop prices from dropping even further the way it did this was by getting rid of something called the gold standard this is a policy where you can always take your local currency to the government and get cold in return for your money this system allowed people to easily tell how much the currency was worth because you could always see how much gold you could get for each currency this made it easy to exchange currencies because you could always check the gold prices of the respective currencies for how much you could exchange one currency into another but it also had one major drawback because if people can exchange your currency for gold then you always need to have a certain amount of gold in your vaults for people to exchange if you were to print more money then more people would come to exchange more money for gold meaning you need even more gold in your vaults meaning that you couldn't just print more money because you would run out of gold so the USA decided to get off the gold standard and print a lot of money by printing more money you make everything more expensive as people now want more dollars for their products as there are now more dollars in general but products were getting less expensive at the same time so the US government printed just enough money so that the extra money would raise the prices just as much as other forces were lowering prices and so by printing extra money the USA managed to stop prices from dropping even further it then spent that extra money that it was printing on building new infrastructure parks schools and other public works this helped improve the economy because better educated people and more connected people make doing business easier at the same time the USA raised taxes in order to give financial aid to people in need such as the unemployed disabled the elderly something that wasn't common at the time lastly to solve the banking crisis the USA did three things firstly banks had to keep more money in their vaults in case of a bank run secondly the government announced bank holidays where the banks would be closed this way people couldn't take money out of the bank for a while so the bank wouldn't go bankrupt thirdly they sent teams to banks to determine whether they were safe or not and would only be allowed to reopen when the government gave them a seal of approval while in hindsight the seal of approval wasn't worth a lot it did make people think that the bank was safe this meant fewer people took money out of the bank which meant fewer banks ran out of money therefore disbelief that banks were safer was what made banks actually safer by 1933 the damage of the Great Depression had run its course through the USA but thanks to all these actions economic growth in other parts of the world and various other minor policies the USA's economy was growing once again but simply because the economy was growing again didn't mean that it was back to 1929 levels again it would take until 1942 for the US economy to get back to what it was before the Great Depression the next region to talk about is Latin America because it's economies were closely linked to that of the USA while each country did of course have unique circumstances there were a lot of similarities between them for example Latin America mostly produced so-called primary goods these were goods that can be harvested without a manufacturing process such as coffee beans copper oil meat and much more these goods would insult mostly to Europe and the USA who turned them into manufactured products but when the crisis hit there were a lot fewer customers in Europe and the USA and just as happened in the USA latin america produced more goods than there were people to buy them and so the prices of Latin American goods often dropped by fifty to sixty six percent between 1928 and 1932 and so the large farming population could no longer earn enough money for their produce causing unemployment and poverty to rise across Latin America the only exception to this was Venezuelan oil which were made profitable throughout the crisis then the problem got worse when the USA and later European countries raised tariffs on foreign goods meaning even fewer people wanted to buy Latin American goods and while the colonies didn't have to deal with tariffs from the European overlords the tariffs still hit hard as they often trade it with other nations as well and so the Latin American problem was three fault their goods were getting cheaper that trade was being restricted and their customers were getting poorer with exports being the main driver of the economy Latin America was hit hard by the Great Depression and so what did the Latin governments do to solve these issues well they implemented three policies first they try to get prices under control as we saw with the USA if you produce more than there are people to buy it the prices drop so they wanted to produce as much as people could buy and no more but this would take time so the government decided that it would determine the prices of products and any surplus would simply be destroyed during the 1930s in Brazil alone roughly 60 million bags of coffee were burned about two years worth of the world's coffee consumption at the time as a tea drinker I count this as a win-win the second policy was to get off the gold standard and print more money just like we saw happening in the USA but unlike the USA this was done to make the exports cheaper for example let's say I am a cotton farmer I sell one kilogram of cotton for 10 history scope credits and one US dollar is worth one history scope credit so one kilogram of cotton sells for 10 US dollars then our dear supreme leader Avery Prince more money and the value of history scope credits drops by half so now one u.s. dollar is worth two history scope credits so if I now sell one kilogram of cotton for 10 credits then it would only cost $5 so anyone buying my cotton with a different currency can buy my cotton for less money simply by printing more history scope credits and Latin America did the same so that European and US customers could buy Latin goods for lower prices and Latin America could export more goods again and don't worry this is the only math in the entire video and lastly Latin America invested in new types of industries you see due to all the trade restrictions and poverty Latin American citizens couldn't buy the products they wanted any more to the point where there were strikes riots and even failed revolts over the poor living conditions so the government's decided that in order to keep the people happy they would need those goods but without the ability to import these goods they decided they would simply start making their own products but with blackjack and hookers and they were smart about this giving loans to factories that could turn local goods into manufactured goods so cotton producers built clothing factories sugarcane producers built sugar refineries etc these policies were later expanded to include various other industries such as chemicals pharmaceuticals and a wide range of manufactured goods this strategy was particularly successful in Brazil where by 1938 almost 85% of all manufactured goods sold were produced in Brazil itself these policies were so effective that Latin America dragged itself out of the Great Depression faster than most other regions in the world what these policies were designed to keep the ruling elites in power they actually helped improve the lives of average people and when the economies of Europe and the USA were recovering again Latin America began exporting again like it used to except this time instead of relying on basic goods it now sold a wide variety of goods and when World War Two rolled around latin america adhered to the thirty-fourth rule of acquisition war is good for business selling a wide variety of consumer goods to those countries focusing on building military goods benefiting economically from the war without partaking in the war [Music] [Applause] [Music] next up Europe Europe was one of the richest regions in the world being the first to industrialize and holding colonies across the globe it had just fought World War one killing around 10 million people destroying homes and infrastructure and redrawing European borders Europe in the 1920s focused on recovering from this war new countries such as Yugoslavia Poland or Hungary had to completely restructure how their countries functioned Poland for example used to be part of Germany Russia and the austro-hungarian Empire now that they were independent they needed a new administration a new system of infrastructure and everything else that involves running a country but Europe had one big problem before the war Europe's heavy industry was its strong points making ships steel trains and much more but while countries such as Japan and the USA had been building themselves up Europe spent four years blowing itself up and by the 1920s Japan and the USA made those same goods both better and cheaper and on top of making worse and more expensive goods Europe also produced more than people were willing to buy meaning prices went down just like in the Americas meaning European businesses earned less money except in Europe this already happened before the Great Depression Europe also wasn't doing too well politically the losses of the war such as Germany had to pay war reparations to France and Britain and they had to repay the USA for all the money they borrowed during World War one to make matters worse for the losses of the war they also weren't allowed to do too much business together so if you were Austrian and did business with next-door Hungary then you now needed to find new customers making their infrastructure lose a lot of its value by the late 1920s Europe's economies were already slowing down and then the Great Depression hit and Europe faced many of the same issues the USA had just as the USA stock prices lost a large part of their value businesses went bankrupt people could fight and many products dropped in price on top of that Europe also faced a banking crisis but unlike the USA European countries had a few large banks per country if just one of those banks went bankrupt in one country then millions of people and businesses would lose all their savings making the Great Depression even greater but there are significant differences too for example in Eastern Europe seventy percent of the population worked in agriculture when prices dropped farmers could no longer earn enough money selling their crops and poverty rose causing the same issues we saw in Latin America so what did European nations do to solve these issues first to solve the banking crisis many governments simply took ownership of the bank themselves thereby assuring anyone that as long as the government had money the bank had money these banks would later be turned back into a private company again preventing a banking crisis like the USA faced secondly with the Great Depression and US investors no longer wanted to invest in Europe so European nations decided to show investors how good European governments are at repaying government debt by increasing taxes and reducing spending in a policy called austerity by having more money to repay debt they hoped investors would invest in Europe again instead businesses which sold products and services to European governments lost those government's as their clients causing more bankruptcies and unemployment while doing very little to bring back US investors these policies were particularly popular in Balkan countries such as Yugoslavia which used to be this part of Europe by the way if you want to see an in-depth video about the breakup of Yugoslavia then you can do so by voting in a poll in the description to prevent job losses European nations implemented tariffs just like the USA in the hopes that domestic companies wouldn't have to compete with foreign companies as much but just as with the USA this simply meant that companies lost foreign customers but unlike the USA most European nations had much smaller populations than the USA and relied more on foreign countries for trade so if for example your company bought French coal and German iron to make steel then you now need to pay a lot more money for coal and for the iron and when you sell your steel you have to sell it at a higher price thus as always tariffs had customers the most some nations saw the folly in this approach and decided to band together the Benelux countries remove tariffs between each other in the OSI agreement interestingly enough disagreement eventually evolved and became the template for the early European Union the Nordic countries along with a few other nations did something similar with the 1930s low agreement and various other small European trading bloc's were established over time but eventually Europe did start to recover with the United Kingdom leading the way European nations reduce tariffs hoping other nations would do the same it got rid of the gold standards printed a bunch of money and then spent that money on public work programs the poor and the unemployed similar to the USA many countries followed the example of the UK and once they did their economy started to recover as well but some countries went a different route Germany printed so much money that the money became effectively worthless and took strict control over its economy controlling prices import and when it elected a man with a Charlie Chaplin mustache into power it took even more control over the economy and invested a lot of resources in its military industry by the late 1930s many European countries increased investments in their militaries while this did help to boost industrial output it also dragged Europe into another world war Europe wouldn't fully recover from the Great Depression until after World War Two with Soviet and US development projects such as for example the Marshall Plan if you would like me to talk more about the Marshall Plan then you can vote for it in the poll in the description but there was one country that stood in stark contrast to the rest of Europe and that was the Soviet Union it was the only socialist state in the world at the time and was busy industrializing in exchange for millions of lives the USSR did not have a lot of international trade and as a result was mostly unaffected by the Great Depression but it is important to note that while the ussr's economy didn't suffer much due to the policy of isolation it also didn't receive any of the benefits from international trade meaning the USSR was still poorer than most Western countries were at the worst points of the Great Depression [Music] now it's time for Africa and Africa is the place where we put emotional depression in the Great Depression by 1929 Africa had been completely colonized except for Ethiopia and Liberia while the African colonies were ruled differently per colony there are still many similarities between them in general the African people had to pay a tax to that colonial government this tax was usually the same amount for every person in that colony and had to be paid in the currency of the European overlords so British colonies paid in British Pound French colonies in French francs etc in order to pay this tax Africans either worked for a European company in Africa or devoted a portion of the land to grow in crops they then sold that crops in exchange for European currency to then give that currency to their colonial government as a tax those Europeans then built a few ports and companies paid an export tax before sending those goods back to Europe but as we saw with Latin America when the Great Depression hit in the prices of agricultural products dropped as a result the Africans could no longer pay their taxes this forced many Africans to either leave their land and work for a low wage on European mines and plantations or to simply disappear into the slums of African towns and cities the already rampant poverty grew even worse and because these colonies were owned by European countries it meant that bad European policies affected these colonies too so when European nations implemented tariffs that also meant tariffs for African colonies owned by European nations so Italian pasta makers had to pay an extra tax for African wheat produced in French colonies just like everywhere else African crops sold for a lower price and fewer people wanted to buy it so what did African governments do to solve these issues some African colonies decided to raise taxes on Africans so that governments would have enough money causing even more poverty when people could no longer pay that taxes other African colonies decided that if they couldn't earn enough profit from exporting goods that they would simply start producing a lot more of those goods to make up for it belt in Congo for example created a vast system of plantations producing a wide range of agricultural products and this made the plantation owners a lot of profit at the expense of local Africans working the fields for low wages in order to pay the taxes Europeans profiting off of African poverty was a trend throughout Africa so the colonies which were doing the best we're the ones with the most independence Egypt for example relied on exporting cotton so the Egyptian government got rid of the gold standard relatively early to make Egyptian cotton cheaper for foreigners and invested in the textile industry to produce more profitable cloth this made Egypt the first African region to seriously industrialize which brought wealth to the urban areas but left rural people living in poverty does increasing wealth inequality in Egypt another relatively independent colony was South Africa which exported natural resources such as diamonds and gold and because most countries were still on the gold standard governments wanted to buy a lot of gold so South Africa exported a lot of gold even when countries left the gold standard people still wanted to buy gold because they expected countries to go back to the gold standard once the crisis was over as countries had done many times in the past many Caucasians in South Africa benefited from the gold trade while once again native Africans toiled the mines for very in return the independent African states weren't doing much better Liberia for example had taken out a loan to invest in a rubber plantation to sell rubber to the USA when the crisis occurred and the price of robber dropped so too did exports Liberia had to default on its debt and to make matters worse it was discovered that some of that rubber was produced using slave labor and its largest trade partner the USA officially disapproved of the idea and stopped trading with the African nation this crisis was only resolved after renegotiating its debt repayment and promising to end the slave labor overall Africa suffered rampant poverty during the Great Depression and only recovered when the European overlords got rid of the gold standards making African products more affordable this meant that colonies ruled by the United Kingdom recovered faster than for example French colonies because the UK abandoned the gold standard a lot earlier than France this increase in African poverty sparked uprisings in local populations which were put down often brutally sell while not the only reason for independence the Great Depression would go on to fuel independence movements for decades to come if you would like me to cover the topic of African decolonization in depth and you can do so by voting in the poll in the description now let's go to a land down under with Australia and New Zealand whose economies were closely linked to that of the UK exporting mostly agricultural products when the British got into the Great Depression Australia and New Zealand lost most of the customers so they did what Europe did by raising tariffs and cutting spending which went just as poorly as in Europe the thing that cut them out of the Great Depression was the economic recovery of the UK and negotiating a deal giving Australian and New Zealand dish products preferential treatment next is Asia this continent was a mix of independent nations and Western or Japanese colonies aside from Japan most of Asia only had a little bit of industrialization and was mostly rural what they were generally Richard in Africa they were far poorer than Western nations being more wealthy the Colonials needed to pay more taxes they not only paid a tax per person like in Africa but also a tax for the land they owned the Great Depression actually shouldn't have been a big deal to most people in Asia or Africa for that matter because most people relied on growing their own food but instead they had to pay these taxes set aside a portion of their land and grow cash crops to pay their taxes then when the Great Depression hit those crops dropped in price and when the Asian population could no longer earn enough money to pay their taxes they were evicted from their homes this cost peasant uprisings unemployment and poverty in the region to make matters worse when European nations and after trade barriers Asian colonies and nations found it more difficult to trade with each other for example the Dutch East Indies sold refined sugar to India where it was turned into brown sugar this brown sugar was then sold to the local British Indian population but with trade barriers this became much harder meaning farmers producers and customers couldn't get as much as they had before the crisis and this happened for a wide range of products the colonies generally only started to recover once the European overlords abandoned the gold standards removed trade barriers and people elsewhere earned enough money again to once again by Asian crops but this wasn't the case everywhere British India for example had a unique position they were not on the gold standards they were on the silver standard meaning that instead of being able to exchange the currency for gold you could exchange it for silver this was very advantageous for British India because if rupees had a fixed value in silver than when the price of silver drops that also means the price of a rupee drops and this is what happened the price of silver dropped meaning the British Indian currency was now cheaper meaning its products were also cheaper which allowed British India to more easily sell its products making British India relatively well-off compared to many other regions in the world at the time independent nations were generally more well-off as well China for example was also on to silver standard making Chinese products a lot cheaper also China used this cheap currency to attract a lot of foreign investment in business and infrastructure China's economy started growing faster and faster during the Great Depression but this all came to an end when the price of silver went up again and Japan invaded China in 1931 given China its own personal Great Depression just a little bit later than the rest of the world Iran was another independent country who got much of its income from oil during the Great Depression the prices of oil dropped and Iran renegotiated a deal with the British to get a larger percentage of oil revenue the British were extracting from their country then it also built more oil drills to sell more oil these were finished in 1939 right in time to sell oil to nations involved in World War 2 many regions in the Middle East have did the same and started extracting more oil what this brought prosperity to those who own the oil drills the native populations rarely experienced any of this newfound prosperity during the Great Depression the last country we will discuss is the Empire of Japan because Japan during the Great Depression did everything right in fact Japan did things so well that today we still do what they did when the Great Depression hit Japan it hit it hard but unlike other countries Japan recovered very quickly the government appointed Takahashi korekiyo as finance minister and immediately went ahead to abandon the gold standard and print more money and devalued the Japanese yen rather than waiting several years like most other nations this made Japanese goods cheaper and fuelled growth then the Japanese government invested in new industries particularly heavy industry this way businesses could transition from older less profitable industries to newer more profitable industries they did this by promoting various leaders in those industries to lead the way so other companies would follow their successors thus preserving jobs which in turn meant that there were more customers to buy products which in turn meant that fewer businesses ran out of money and went bankrupt in fact many of the Japanese companies we know today became industrial giants due to this policy Takahashi Kara Keough was a pioneer in economics and from his writing at the time it is clear that he knew how economies functions and how his policies would shape those economies his policies are still used today nearly a century later to drag economies out of recessions he was killed when the Japanese army to control over the government and a guy named John Maynard Keynes wrote a book about getting out of the Great Depression which advised many of the same policies that Pan had implemented which is why we now call these types of policies Keynesian economics rather than for example Takahashi economics not only that governments took a more active role in the economy giving money to the poor the unemployed the disabled and many others in order to pay for all of that government's raised taxes on nearly every aspect of the economy the government we expect in rich countries today one which provides health care stabilizes the economy invests in new industry grants loans to small businesses that government was created in a time of great economic upheaval when people hit the lowest point they are open to the greatest change and lastly is Antarctica which was totally fine aside from those Lovecraftian ruins if you liked this video then please like subscribe and hit the notification bell if you want to talk more about this topic and come join the rest of us on the discord server link is in the description this was Avery from history scope thank you for watching

Channel: History Scope

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Length: 43min 11sec (2591 seconds)

Published: Tue Jun 30 2020