From:             sis@execpc.com
Date sent:        Thu, 16 May 1996 08:15:14 -0600
To:               lovkraft@hvision.nl
Subject:          essay uploading for password

Sorry I could not do it the other way.  Here it is cut and pasted in e-mail
with the description you asked for.  I await my password . . .

Thanks!

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<br><A HREF="X.TXT">X.TXT </A>
<br><i>Uploader </i>: Murray H.
<br><i>Email </i>:n/a
<br><i>Language </i>: English
<br><i>Subject </i>:  Economics (MSWord?)
<br><i>Title </i>: A comparison of the Great Depression of 1922 and its
effects between the United States and the rest of the
world
<br><i>Grade </i>: 3.5
<br><i>System </i>: Undergraduate college
<br><i>Age </i>: 19
<br><i>Country </i>:USA
<br><i>Comments </i>: This paper compares the US with the rest of the world
economy during the Depression, giving reasoning as to why other countries
either had, or didn't have, the same economic problems.  An 'A; document, I
feel, with a lot of specific refences and argument support complete with
footnotes.
<br><i>Where I got Evil House of Cheat Address </i>: The one stop term
paper shop site
<br><i>Date </i>: 5/15/96
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A comparison of the Great Depression of 1922 and its
effects between the United States and the rest of the
world


        The introduction of the discussion will focus on the origins of the
Great Depression and the escalating events that led to it.  This will
provide adequate foundations to bring up questions and attempt to answer
them in an objective fashion as to why and how the Depression affected
different industrialized countries in different ways.
        The core of the debate will consist of detailed comparable analyses
of the consequences of the Depression with an emphasis on the economic
aspects.
        The conclusion will provide a brief overview of the ways used by
the different governments to get out of that dark episode of world economic
history.

        When studying the Great Depression and it's effects, it is not
unusual for historians to choose World War I as a starting point for their
investigation.  The reason for that is the importance of the repercussions
the conflict had on the economies of all the countries that were involved
in it.
        First of all, the War made it impossible for Europe to maintain
previous levels of production.  For example, before the War, France, the
U.K. and Germany accounted for about 60 percent1 of the world's exports of
manufactured goods, a share of the market which they could not sustain
during the conflict.  Consequently, Europe took many of its markets to the
U.S. and Japan.  The stunted growth of the European economies meant a lower
demand for raw materials, which in turn lowered the demand for European
exports.
        In agriculture, things didn't look any better, as it was the sector
which employed the most people.  At the end of World War I, Europe was
forced to import food from the U.S..  Moreover, these transactions were
conducted on a credit basis since Europe could not afford to pay for its
purchase at that time.
        Clearly, the U.S. was going from being a traditional debtor of
Europe before World War I to becoming its creditor:  America had financed
the war and it was issuing loans for its reconstruction.  However, the
attitudes in the U.S. were evolving in an unusual direction:  an increasing
number of American financiers were starting to literally seek ut potential
borrowers which led to competition among U.S. banks and the spreading of
unsound lending.2  The main object was to "do the most business", even at
the expense of essential caution.
        What seemed like a beginning of recovery from the Great War, was in
fact an immense accumulation of debts, which made the international
economic order vulnerable to depression.  Analyzing these events with the
insight we have today, they seem even more unbelievably audacious given the
high instability of the borrowing nation.  (i.e., Europe)
        The triggering event was the crash of the Wall Street stock market
in October of 1929.  The stock market collapsed after steady declines in
production, prices and incomes over three previous months which forced the
speculators to revise their expectations.  Anxiety soon gave place to panic
which led to the crash.  However, the depression affected the different
industrialized countries in various ways and degrees of intensity.
        The depression was of especially great magnitude in the U.S.
because there were not any welfare benefits for laid off workers.  In the
period between 1929 and 1933, money income fell by 53 percent (real income
fell by 36 percent.)3  As a consequence, demand fell significantly, which
in turn led to lower production and more layoffs-- up to a high of 25
percent rate of unemployment in 1933.
        Despite the severity of the situation, the Federal Reserve did not
pursue a monetary expansion on policy which would have stimulated the
economy through lower interest rates and increased the stock of money in
circulation.  This inaction is often attributed to the fact that market
interest rates in 1930-1931 fell to very low levels, much lower than in the
earlier recessions (of 1924 and 1927), and therefore, the Federal Reserve
Board wrongfully saw no need to pursue an expansionary monetary policy.4
An indicator of that inaction is that open market operations did not
provide sufficient money reserves for a banking system faced with
depositors anxious for liquidity (monetary expansion would have filled that
need).  If the Federal Reserve had provided additional funds to the banking
sector after 1930, bank failure would not have been so numerous and the
decrease in the attack of ???? would have been (at least) slowed down.
        Still, it would not be accurate to make the Federal Reserve
responsible for all these problems.  Other factors contributed to the
precipitation of what began as a cyclical recession into what we now know
as the Great Depression.  One of those is the Hawley Smoot tariff of 1930
which in essence made America more protectionist than ever, sending import
duties to record highs.  Evidently, retaliation from other countries was
quick to come.  The new tariff act accelerated the downfall of American
trade volume, which was probably the last thing the U.S. needed at that
stage.  President Hoover had always been in favor of protective tariffs
which he considered a strictly domestic issue and he supported the Howley
Smoot Act.  Therefore, he clearly failed to see the implications of such a
move.
        Soon, the Depression was spreading to the rest of the world,
especially to Europe.  There, the single country that was most affected was
Germany whose very weak economy could not cope with the slow disappearance
of American capital.  Let us mention that Germany was still paying
reparations (for World War I), which made its situation even more delicate.
Germany was forced to borrow from Great Britain and France which could not
compensate for the decline in U.S. lending.5  The trap in which Germany
found itself was quite disconcerting:  she had to pursue deficienary
policies to gain the confidence of investors in order to attract foreign
funds.  At the same time, devaluaton posed a major problem.  It increased
the burden of the external debt (through the exchange rate mechanism) which
was payable in foreign currencies.

        The United Kingdom represented another major force on the global
economic scene.  The British economy was not hit immediately as violently
as Germany's.  However, as the repercussions of the world crisis became
increasingly clear, Great Britain experienced a notable decline in its
exports which was even greater than the decrease in its imports.  Those two
factors contributed to generate a deficit in its balance of payments.
        Still, compared to most other industrialized countries, the U.K.
got through the Depression in better economic health.6

        In the case of France, things went a significantly different way.
First of all, out of the four biggest industrialized countries of the time
(U.S., Germany, U.K. and France), France was the last to be hit by the
Depression.  Many possible reasons are hypothesized to explain that fact,
but the one that is most often heard is the undervaluation of the French
franc.
        The French economy began to feel the effects of the world crisis in
1932.  Around that time the Depression caught up with the French economy
through an important decrease in its exports (due impart to the shear
downsizing trend in the volume of world trade), combined to an increase in
imports.  The problems faced by France were also worsened by the fact that
it still was maintaining the gold standard long after all of the other
industrialized countries--starting with Great Britain in 1931--had switched
to fleeting exchange rates.

        As for Japan, we can safely say that it is the one country among
today's industrialized nations that got through the Great Depression with
the least damage to its economy.7

        Now that we have illustrated how the world crisis affected various
nations in different ways, it seems only logical that they would put
together solutions that were adapted to their individual problems.

        In the United States, Hoover had failed to bring a solution to the
Depression, and he was replaced by Roosevelt in 1932.  The new president
brought with him the New Deal, which can be qualified as a collection of
programs aimed at stimulating different sectors of the economy (like the
Agricultural Adjustment Act and the National Industrial Recovery Act).  As
it turned out, the New Deal was not a particularly successful economic
initiative, but it was definitely a political success, probably because its
goal was to help the American people (even though the means used to
accomplish that were never very clear).  What proved more effective at
bringing economic solutions to what was really an economic problem was the
"Keynesian theory".  In 1938, Roosevelt, facing the semi-failure of his New
Deal, finally gave in to an increasing number of his close advisors who
were confident that Keynes' ideas would be more successful.8  The
underlying theory to Keynes' ideas was that recovery  could only come
through fiscal expansion--in other words, running a bigger budgetary
deficit.  The additional expenditures were pumped into the economy through
a variety of government actions--like major public works--in order to
stimulate demand by providing people with income.

        In Germany, the Nazis' victory at the 1933 elections was a major
accelerating factor on the road to recovery.  The Nazi program aimed first
and foremost at the reduction of unemployment and it did accomplish at
least that.  However, the realization of the plans was conditioned by an
omnipotent government which was best described by Peter Hayes' analogy
(1987):

"It is perhaps accurate to say that, to German industry, the emergent
economic system was stiff capitalism, but only in the same sense that for a
professional gambler poker remains poker, even when the house shuffles,
deals, determines the suite and the wild cards, and can change them at
will, even when there is a ceiling on winnings, which may be spent only as
the census permits and for the most part only on the promises."9

        One other essential vector that Nazis used toward recovery was
rearmament, starting in 1936.  Hitler used the defense industry to satisfy
two of his im???:  recreate a strong Germany while giving people work.

        The case of Great Britain is different.  We have mentioned earlier
how well (relatively to other nations) the U.K. got through the Depression
years.  Let us now attempt to explain why.  Three elements are often
mentioned in the British recovery:  the abandoning of the gold standard in
1931, the adoption of higher tariffs and the devaluation of the pound.
When the U.K. abandoned the gold standard, it gave itself a competitive
advantage via-a-vis those countries which did not.  The new tariff laws
helped by protecting domestic industries and the 30 percent devaluation of
the pound added to the competitive edge of the U.K by making British
products cheaper to the rest of the world.

        In the face of Depression, France reacted quite differently from
the other industrialized countries.  Confident in its strong economy until
1932, France did not abandon the gold standard until June 1937 and did not
devalue the franc until October 1936.  Those two factors made France rather
uncompetitive for most of the 1930's, given the actions taken by the U.S.,
the U.K., and Germany.  Those measures, in time, helped lift France out of
the Depression but the recovery there might have occurred a few years
earlier if the French had only signed their policies to that of the United
States and Great Britain in particular.10

        When it comes to Japan, two reasons are proposed to explain its
good economic performance through the Depression:  the fact that it had a
planned economy, and the early understanding of the advantages of
devaluating the yen.  Japan improved its competitive position that way and
it reacted very soon after the Depression hit.  As a result, the effects of
the crisis were greatly reduced from the start.

Footnotes

        1"The origins and nature of the Great Slump," Fearn.

        2"The origins and nature of the Great Slump," Fearn.

        3"Capitalism in Crisis,"edited by Garside.

        4"La Crise economique dans le monde el en France," Nogaro.

        5"The origins and nature of the Great Slump," Fearn.

        6"The Great Depression, 1929-1938," Saint Etienna.

        7"The Origins and Nature of the Great Slump," Fearn.

        8"Capitalism in Crisis,"edited by Garside.

        9"Capitalism in Crisis,"edited by Garside.

        10"Capitalism in Crisis,"edited by Garside.

