Great Depression


World War I

It was 1918 and the War had finally ended. So what was the next step? Basically Europe was ruined, all the destruction and deaths had left a big hole in Europe’s economy. So in came USA. They were thriving despite it all, so they seized the opportunity and decided to help everybody for restoration. The Central powers were forced to pay all damages and again USA came to the rescue. This excessive loans would eventually cause Great Depression.

The Federal Reserve

The Federal Reserve System, which the Congress established in 1913, is the nation’s central bank, authorized to issue the Federal Reserve notes that create the money supply. It indirectly sets interest rates because it loans money, at a base rate, to commercial banks. In 1928 and 1929, interest rates were raised to try to curb Wall Street speculation (otherwise known as a “bubble”). And this brought on a recession.

The Huge Crack

After nearly a decade of optimism and prosperity, the United States was thrown into despair on Black Tuesday, October 29, 1929, the day the stock market crashed and considered as the beginning of the Great Depression. As stock prices plummeted with no hope of recovery, panic struck. Masses and masses of people tried to sell their stock, but no one was buying. The stock market, which had appeared to be the surest way to become rich, quickly became the path to bankruptcy.

And yet, the Stock Market Crash was just the beginning. Since many banks had also invested large portions of their clients’ savings in the stock market, these banks were forced to close when the stock market crashed. Seeing a few banks close caused another panic across the country. Afraid they would lose their own savings, people rushed to banks that were still open to withdraw their money. This massive withdrawal of cash caused additional banks to close. Since there was no way for a bank’s clients to recover any of their savings once the bank had closed, those who didn’t reach the bank in time also became bankrupt.

Businesses and industry were also affected. Having lost much of their own capital in either the Stock Market Crash or the bank closures, many businesses started cutting back their workers’ hours or wages. Consumers began to spend a lot less money, refraining from purchasing such things as luxury goods. This lack of consumer spending caused additional businesses to cut back wages or, more drastically, to lay off some of their workers. Some businesses couldn’t stay open even with these cuts and soon closed their doors, leaving all their workers unemployed.

The Great Depression in Russia

During the Great Depression, the Soviet Union was undergoing an economic revolution. Joseph Stalin implemented the first five year plan in 1928 – this was a massive undertaking, creating huge infrastructure projects, like hydro-electric dams, ship canals, opening up new mines and creating vast iron and steel works and huge industrial complexes. In agriculture, collectivization was getting stronger. This nationalized the land that the peasants worked on, their livestock and any machinery that they owned. It also meant they got paid with wages, rather than being paid out of the money made selling their crops. Millions died in Ukraine in the 1930s as a direct result of collectivization.

The great depression had an effect on the Soviet economy: they needed machinery and the technical staff to install, maintain and operate them. Many Americans and Germans came to the USSR as technical consultants because they couldn’t get jobs in Depression era USA or Europe. Soviet economic growth in this period was remarkable. So while the rest of the World was struggling, the Soviet Union was prospering. Although slave labour was used, and working conditions were terrible for millions of workers.

But in the end it came to this: USSR was rejected and ignored by Capitalist countries due to the many anti-communist policies. Therefore, any support from them was inexistent and so the Great Depression didn’t affected much Russia. In fact, due to the crisis the rest of the world was facing, it made them get stronger. Also the aggressive policies established by Stalin, made industrialization easier. Why? Because the people had to choose between making progress and industrialization possible, or die in the hands of the army because of opposition to Stalin’s policies. So in one way or another, their lives depended on working hard for their nation. After all, Stalin had killed 15 million people at the time, what would mean another life less?

“Under the leadership of the great Stalin – Forward to communism”

“Great Depression.” Wikipedia. Wikimedia Foundation, 04 Mar. 2013. 02 Apr. 2013.

“The Great Depression.” A&E Television Networks. 03 Apr. 2013.

“Five-Year Plans for the National Economy of the Soviet Union.” Wikipedia. Wikimedia Foundation, 04 Mar. 2013. 03 Apr. 2013.

“Collectivization and Industrialization.” Revelations From The Russian Archives. 03 Apr. 2013.


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