Definition, dates, and global scope

Summary

The Great Depression was a severe worldwide economic downturn lasting from 1929 to 1939, beginning with the Wall Street Crash of 1929 in the United States and spreading globally. It was marked by very high unemployment and poverty, sharp declines in industrial production and international trade, and widespread failures of banks and businesses. The crisis affected both wealthy and poor countries, with major drops in personal income, prices (deflation), tax revenues, and profits, and unemployment rising dramatically in many places. Globally, the downturn’s transmission was strongly shaped by international trade, capital flows, and confidence, with each country’s internal economic conditions influencing how severely it was hit and how quickly it recovered. Protectionist policies—especially the U.S. Smoot–Hawley Tariff Act and retaliatory measures—contributed to a collapse in world trade. The gold standard also acted as a key transmission mechanism: countries that stayed on it were pushed toward deflation when gold outflows occurred, which prolonged and deepened recessions, while countries that left the gold standard earlier were generally able to depreciate their currencies and regain more flexibility in monetary policy.

Key Points

• 1

  Timeframe and trigger: 1929–1939, starting with the Wall Street Crash of 1929 in the United States.

• 2

  Global scope: worldwide declines in employment, output, trade, and widespread bank/business failures.

• 3

  International transmission: trade and capital movement shocks from the U.S. spread the crisis, but national weaknesses/strengths affected severity and recovery.

• 4

  Protectionism worsened the downturn: Smoot–Hawley and retaliatory tariffs reduced international trade and intensified the depression.

• 5

  Gold standard amplified and prolonged the crisis by forcing deflation through gold outflows; leaving the gold standard earlier generally supported earlier recovery.