The great depression was the foulest economic recession in the history of the developed world.Great depression started in the US a lasted from 1929 to 1939 after the stock market crash which wiped out millions of investors. The stock market indicated the beginning of the great depression. Notably, it was not the only cause but there other many root causes. A fragile banking system, auxiliary collapse in already low farm price and industrial overproduction    Within that period the global gross domestic product fell by an estimated 15%. Although it originated in the US, the great depression caused sharp declines in productivity, severe unemployment, and deflation in almost every country. The cause of depression was the reckless speculation at the stock market in New York where everyone from the tycoons poured their savings.Due to this, the stock market underwent rapid expansion.Factories slowed down production, employees retrenched, and for those who were lucky to maintain the jobs, their wages cut down. Nervous investors started selling overpriced shares like in the case  of October 24, 1929 shares worth 12.9 million traded that day known as “Black Thursday.” Five days late another 16 million shares  traded  on “black Tuesday.” By 1930 investors started questioning the solvency of their banks hence demanded their deposits in the form of cash. This act made banks to liquidate the loans to supplement the cash reserves, but as the world war, 2 starts the depression finishes. The resulted to substantial effects like banks closing down, many Americans fell into debt, repossessions rose rapidly, unemployment crawled in, and by 1931 the unemployed were at 6 million, the number of homeless people became more common After the new president Roosevelt was elected, she immediately started addressing the county’s distresses. It is at this time she announced a ‘ bank holiday.’


On the surface, world war 2 appears to mark the end of the great depression as a result of massive overspending on ammunition and all instruments of war. The government purchased military guns, tanks, ships and planes used during the world war 2. In return, this lends to the rise in the gross domestic product (GDP). The government adopted British economist John Maynard Keynesian who through his Keynesian model argued that in the general concept of employment, interest, and money that lower aggregate overall expenditures in the economy contributed low GDP. In such a situation Keynes argued that the economy reached equilibrium during low ranks of economic activity. It was simple; the government has to improve levels of employment by all means. The government has to run deficit s when the economy is slowing down since the private sector could not be able to bring the country out of the depression. Keynesian Economists called on the the government to increase its spending or cutting taxes. Since world war 2 was fast approaching, the government increased its spending on war materials which saw US start recovering from the depression. The GDP rose


Another plan adopted by the government was to send young people to war while women stayed at home. As a statistical residue of carrying more than 12 million young Americans to fight in world war 2, many lost their lives reducing the number of youths. A similar number grind in defense-related jobs leading to the decline in the name of unemployed people. When unemployment decreases, the country’s GDP automatically goes up, also another factor from world war two that partially accelerated recovery from the great depression.


Also, there were non- speed factors. The resource-rich countries started dripping labor abroad as foreign labor markets tightened. Therefore, firms that made things that combatant  Europeans needed dramatically improved in their confidence. The US decision to support Britain and France against Germany and other Axis powers during the world war 2 got the US contracts to manufacture ammunitions hence the defense manufacturing geared up and as a result provided more private sector jobs. It was evident. The factories resumed full production which increased the country’s gross domestic product( GDP)


A few of the Economists argue that great depression was not ended by world war 2. Instead, the  FDR deal signed by Roosevelt did. The US first depression recovery started as early as 1933, But there is a typical view between economies that Roosevelts new deal strategies either caused or fast-tracked the process of remarkable depression recovery although his plans were not aggressive enough to ultimately save the economy from the great depression. We cannot ignore the fact that Roosevelts policies played a role in returning the Economy to normal, compared to the former president who did nothing about it because the government believed it was the role of citizens to fight the depression.



Rothbard, Murray Newton. America’s great depression. Ludwig von Mises Institute, 1972.

Romer, Christina D. “What ended the great depression?.” The Journal of Economic History 52, no. 4 (1992): 757-784.