The Global Effects of the Great Depression

The Great Depression was a worldwide economic downturn, which started in 1929 in the USA and continued until 1939 (Romer, 2003). The Great Depression was the most severe and the longest depression ever happened  on the globe. Its effects were experienced in all countries of the world, with the industrialized Western countries suffering the most. In Britain, one of the effects of the Great Depression was immediate decline of the demand of its exports. During this period, Britain was one of the largest exporters of manufactured goods. It had a large market for its products in countries, which it was colonizing at that time. Consequently, Britain lost most of its overseas customers, resulting in the closure of many of its factories, such as textiles, coal and steel. Closure of many of its factories led to increased rate of unemployment. Studies indicate that by the end of the year 1930, Britain’s unemployment level had doubled from 1 million to 2.5 million. The collapse of its export market was accompanied by the declined national income. The government was unable to assist the jobless due to the lack of revenue, a situation that rendered many Britons poor (Romer, 2003).

In the US, the Great Depression caused rapid decline of the real output and prices of many goods and services. The decline in the real output was caused by reduction of industrial production. According to Romer (2003), industrial production of the United States fell by 47 percent. Romer (2003) also states that the wholesale price index declined by 33 percent. This has led to a situation referred to as “deflation”: rapid decline of price for various goods and services. The Great Depression also caused the unemployment level to increase. This was a subsequent result of declined industrial production. Many of the factories, which provided employment to many Americans, were closed. The unemployment rate hit a 20 percent mark, the highest level of unemployment ever experienced in the United States (Romer, 2003).

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