The Making of a Global World

This was a period during which most parts of the world experienced catastrophic decline in production, employment, income and trade. The state of Economic Depression set in the United States of America in 1929 and engulfed the entire world. Tins state of Economic Depression set in the United States of America (USA) in 1929. and engulfed the entire world. Hence, it is known as the Greet Depression.

Causes of Economic Depression :
(i) Conditions created by the War: There was an immense industrial expansion in view of the increased demands of goods related to army during the period of the First World War. After the war, the industries went through the same proliferation. However, the sharp decrease in demands for military and war products gave birth to the economic depression.
(ii) Overproduction in agriculture:
Agricultural overproduction was one another major factor responsible for the depression. This was made worse by falling agricultural prices. As prices slumped, and agricultural income declined, farmers tried to expand production, and bring a larger volume of produce to the market to maintain their overall income. This worsened the glut in the market, pushing down prices even further. The farm produce rotted for lack of buyers.
(iii) Shortage of loans : In the mid 1920s, many countries financed their investments through loans from the US. While it was often very easy to raise loans in the US during the boom period, but the US overseas lenders panicked at the first sign of trouble.
(iv) Multiple effect : The withdrawal of lenders from the market had a multiple effect. In Europe, it led to the failure of some major banks, and the collapse of currencies such as the British pound and the sterling.
In Latin America and elsewhere, it intensified the slump in agricultural and raw material prices. The US attempt to protect its economy in the depression by doubling import duties also dealt another severe blow to the world trade.