History The Great Depression Questions Medium
The Great Depression had a profound impact on global economic relationships and trade. It led to a significant decline in international trade and a breakdown of the global economic system.
Firstly, the collapse of the American stock market in 1929 triggered a chain reaction that spread throughout the world. Many countries heavily relied on American investments and loans, and when the stock market crashed, these investments became worthless, causing a severe financial crisis. This crisis resulted in a sharp decline in international trade as countries implemented protectionist measures to safeguard their own economies.
Secondly, the Great Depression led to a decrease in global demand for goods and services. As people lost their jobs and incomes, they had less purchasing power, leading to a decrease in consumer spending. This decline in demand further exacerbated the economic downturn and reduced international trade.
Furthermore, countries resorted to competitive devaluations of their currencies to boost their exports and protect their domestic industries. This led to a currency war, where countries engaged in a race to devalue their currencies, making their exports cheaper and more competitive. However, this also resulted in a decrease in overall global trade and strained economic relationships between nations.
The Great Depression also saw the rise of protectionist policies, such as high tariffs and trade barriers, as countries tried to protect their domestic industries from foreign competition. These protectionist measures further restricted international trade and hindered economic cooperation between nations.
Overall, the Great Depression had a devastating impact on global economic relationships and trade. It led to a decline in international trade, a breakdown of the global economic system, and strained economic relationships between nations. The effects of the Great Depression were felt worldwide and took years to recover from.