Origins of the Great Depression
The collapse of the US stock exchange on 29 October 1929 is widely regarded as being the start of the Great Depression that caused economic pain world wide.
However, as Tony Simpson suggests in his book "The Slump", the Depression and the riots emerged out of a disillusion that began in the wake of the economic aftermath of World War I. The social and cultural historian expresses in his book the belief that much of what happened in the Depression was a continuity of events that had taken place more that forty years earlier and was part of a larger historical trend. In the years preceding the Great Depression major economies experienced growth that appeared to promise a prosperous future. In reality, the international economy was growing increasingly weak. Very few people saw the signs of an impending failure, and those who did were scorned. "There appeared to be no reason whatsoever to fear an abrupt economic collapse" |
The 1920s, or the "Roaring Twenties" as they became known, were filled with prosperity and this created widespread confidence in the future economic condition.
There had been a boom in the demand for both farm products and manufactured goods during the war because of the need to accommodate the vast armies fighting in Europe. During the 1920s this demand began to decline, however production continued to rise. This resulted in a surplus of most goods, leading price levels to fall and unemployment started to rise rapidly.
People reduced consumption and businesses began to fail. Export receipts almost halved between 1928 and 1931. |
"The New Zealand economy is like a tiny cork bobbing in a vast river of international commerce and trade" New Zealand was exposed to the Great Depression through Britain, which we were dependant on for exporting our goods and services. They purchased over three-quarters of our exports.
However, following the end of World War I they began to increase their own farm production, and therefore demand for New Zealand goods fell. It became even more difficult for New Zealand to sell its exports when other countries began imposing tariffs, which is a tax on imported goods. The New York stock exchange crash in 1929 didn't cause, but rather exposed and aggravated these factors that would contribute to the period of economic depression that was to come. |