The Coronavirus crisis could have “the worst economic consequences since the Great Depression“of 1929 was the grim forecast made on Thursday by the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva.
The biggest economic trauma
In the 1930s, the Great Depression had caused an international economic and financial crisis, causing bankruptcy and mass unemployment across all industrialized countries for 10 long years. An unprecedented economic depression that had started October 24, 1929, a day that will go down in history books as “Black Thursday”.
Wall Street Crash
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On October 24, 1929, on the New York Stock Exchange, 13 million shares were put on the market. Without buyers, prices plummet. In total, between seven and nine billion dollars of the time vanished in a single day. Thousands of investors find themselves ruined. Panic is spreading. The stock market collapsed 30% in October and 50% in November.
This collapse in the stock markets followed in particular the explosion of a speculative bubble which pushed millions of Americans to buy stocks by means of investment funds which collapsed one after the other.
The “Black Thursday”, which marks the end of this speculative period, has repercussions on all financial centers, starting with London. The conflagration hit Europe hard, with US banks demanding immediate repayment of loans made for post-war reconstruction.
Recession and mass unemployment
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What started out as a stock market crash quickly turns into a tremendously intense international crisis, the most severe in capitalist economics.
In the spring of 1930, recession took hold in the United States, leading to a fall in production, bankruptcies and massive unemployment. That year, 35,000 people took part in a hunger demonstration on the streets of New York.
Industrial production halved from 1929 to 1932 and the unemployment rate jumped from 3.1% to 24%. In March 1933, half of the country’s working population was unemployed, or fifteen million people.
In the countryside, the situation is deteriorating, in particular because of the drought and the “Dust Bowl”, a series of dust storms that causes an ecological and agricultural disaster. To escape poverty, many Americans crisscross the states in search of odd jobs and good schemes. They are called: vagabonds, “hobos” in English. The musician, Woody Gutherie, an emblematic figure of these itinerant workers, became a spokesperson for the working class feelings of the time. In his song “I Ain’t got no home anymore”, he portrays the hardships of life during the Great Depression.
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Europe hit hard
The Great Depression will hit all western economies. In France, the number of unemployed will drop from 12,000 at the end of 1930 to almost 175,000 six years later.
This economic crisis will also have political repercussions with in particular the election in 1933 of Adolf Hitler in Germany, whose expansionist and nationalist policy will be at the origin of the outbreak of the Second World War.
The New Deal
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In 1933, the new democratic president Franklin D. Roosevelt proposes a “New Deal”, a “New Deal” of national wealth, intended to fight against the collapse of the income of the farmers, the fall of the prices and the industrial production, and unemployment.
The plan has a twofold objective: first to remedy the crisis by boosting consumption and investment, then, in the longer term, to reform the American economic system.
Congress passed between March and June 1933 a series of laws which moved the United States away from liberalism and brought it into state interventionism.
The stimulus by demand policies advocated by the British economist John Maynard Keynes are bearing fruit and the “New Deal” stimulates the American economy from 1935. But in 1939, there were still 9 million unemployed in the country.
It was not until the end of the Second World War in 1945 that the international economy returned to the path of sustainable growth.
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