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goods seemed to create a cycle of higher employment |
and incomes, rising consumption demand, more investment, andyet more employment and incomes. |
In 1923, the US resumed exporting capital to the rest of the world |
and became the largest overseas lender. US imports and capitalexports also boosted European recovery and world trade and |
income growth over the next six years. |
All this, however, proved too good to last. By 1929 the world |
would be plunged into a depression such as it had never |
experienced before. |
3.4 The Great Depression |
The Great Depression began around 1929 and lasted till the mid-1930s. During this period most parts of the world experienced |
catastrophic declines in production, employment, incomes andtrade. The exact timing and impact of the depression varied |
across countries. But in general, agricultural regions and communities |
were the worst affected. This was because the fallin agricultural prices was greater and more prolonged than that |
in the prices of industrial goods. |
The depression was caused by a combination of several factors. We |
have already seen how fragile the post-war world economy was. |
First: agricultural overproduction remained a problem. This was |
made worse by falling agricultural prices. As prices slumped andagricultural incomes 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, pushingdown prices even further. Farm produce rotted for a lack of buyers. |
Second: in the mid-1920s, many countries financed their investments |
through loans from the US. While it was often extremely easy toraise loans in the US when the going was good, US overseas lenders |
panicked at the first sign of trouble. In the first half of 1928, USMany years later, Dorothea Lange, the |
photographer who shot this picture, recollectedthe moment of her encounter with thehungry mother: |
‘I saw and approached the hungry and desperate |
mother, as if drawn by a magnet … I did not askher name or her history. She told me her age,that she was thirty-two. She said that they(i.e., she and her seven children) had been livingon frozen vegetables from the surrounding fields,and birds that the children killed … There shesat … with her children huddled around her,and seemed to know that my pictures mighthelp her, and so she helped me …’ |
From: |
Popular Photography , February 1960.Box 3 |
Fig. 22 – Migrant agricultural worker’s family, |
homeless and hungry, during the Great |
Depression, 1936. Courtesy: Library of Congress, |
Prints and Photographs Division. |
India and the Contemporary World |
96overseas loans amounted to over $ 1 billion. A year later it was one |
quarter of that amount. Countries that depended crucially on USloans now faced an acute crisis. |
The withdrawal of US loans affected much of the rest of the world, |
though in different ways. In Europe it led to the failure of somemajor banks and the collapse of currencies such as the British pound |
sterling. In Latin America and elsewhere it intensified the slump |
in agricultural and raw material prices. The US attempt to protectits economy in the depression by doubling import duties also dealt |
another severe blow to world trade. |
The US was also the industrial country most severely affected by |
the depression. With the fall in prices and the prospect of a |
depression, US banks had also slashed domestic lending and |
called back loans. Farms could not sell their harvests, householdswere ruined, and businesses collapsed. Faced with falling |
incomes, many households in the US could not repay what they had |
borrowed, and were forced to give up their homes, cars and otherconsumer durables. The consumerist prosperity of the 1920s now |
disappeared in a puff of dust. As unemployment soared, people |
trudged long distances looking for any work they could find.Ultimately, the US banking system itself collapsed. Unable to |
recover investments, collect loans and repay depositors, thousands |
of banks went bankrupt and were forced to close. The numbersare phenomenal: by 1933 over 4,000 banks had closed and |
between 1929 and 1932 about 110, 000 companies had collapsed. |
By 1935, a modest economic recovery was under way in most |
industrial countries. But the Great Depression’s wider effects on |
society, politics and international relations, and on peoples’ minds, |
proved more enduring. |
3.5 India and the Great Depression |
If we look at the impact of the depression on India we realisehow integrated the global economy had become by the earlytwentieth century. The tremors of a crisis in one part of the world |
were quickly relayed to other parts, affecting lives, economies and |
societies worldwide. |
In the nineteenth century, as you have seen, colonial India had become |
an exporter of agricultural goods and importer of manufactures. |
The depression immediately affected Indian trade. India’s exportsFig. 23 – People lining up for unemployment |
benefits, US, photograph by Dorothea Lange, |
1938. Courtesy: Library of Congress, Prints and |
Photographs Division.When an unemployment census showed10 million people out of work, the localgovernment in many US states began makingsmall allowances to the unemployed. These longqueues came to symbolise the poverty andunemployment of the depression years . |
97 |
The Making of a Global Worldgrow more jute, brothers, with the hope of greater cash. |
Costs and debts of jute will make your hopes get dashed. |
When you have spent all your money and got the crop off the ground,… traders, sitting at home, will pay only Rs 5 a maund.and imports nearly halved between 1928 and 1934. As international |
prices crashed, prices in India also plunged. Between 1928 and 1934,wheat prices in India fell by 50 per cent. |
Peasants and farmers suffered more than urban dwellers. Though |
agricultural prices fell sharply, the colonial government refused toreduce revenue demands. Peasants producing for the world market |
were the worst hit. |
Consider the jute producers of Bengal. They grew raw jute that was |
processed in factories for export in the form of gunny bags. But |
as gunny exports collapsed, the price of raw jute crashed more than |
60 per cent. Peasants who borrowed in the hope of better times orto increase output in the hope of higher incomes faced ever lower |
prices, and fell deeper and deeper into debt. Thus the Bengal jute |
growers’ lament: |
Across India, peasants’ indebtedness increased. They used up their |
savings, mortgaged lands, and sold whatever jewellery and preciousmetals they had to meet their expenses. In these depression years, |
India became an exporter of precious metals, notably gold. |
The famous economist John Maynard Keynes thought that Indiangold exports promoted global economic recovery. They certainly |
helped speed up Britain’s recovery, but did little for the Indian peasant. |
Rural India was thus seething with unrest when Mahatma Gandhilaunched the civil disobedience movement at the height of the |
depression in 1931. |
The depression proved less grim for urban India. Because of falling |
prices, those with fixed incomes – say town-dwelling landowners |
who received rents and middle-class salaried employees – now found |
themselves better off. Everything cost less. Industrial investment alsogrew as the government extended tariff protection to industries, |
under the pressure of nationalist opinion.Who profits from jute cultivation according to the |
jute growers’ lament? Explain.DiscussIndia and the Contemporary World |
984 Rebuilding a World Economy: The Post-war Era |
The Second World War broke out a mere two decades after the |
end of the First World War. It was fought between the Axis powers(mainly Nazi Germany, Japan and Italy) and the Allies (Britain,France, the Soviet Union and the US). It was a war waged for sixyears on many fronts, in many places, over land, on sea, in the air. |
Once again death and destruction was enormous. At least 60 million |
people, or about 3 per cent of the world’s 1939 population, arebelieved to have been killed, directly or indirectly, as a result of thewar. Millions more were injured. |
Unlike in earlier wars, most of these deaths took place outside the |
battlefields. Many more civilians than soldiers died from war-relatedcauses. Vast parts of Europe and Asia were devastated, and severalcities were destroyed by aerial bombardment or relentlessartillery attacks. The war caused an immense amount of economicdevastation and social disruption. Reconstruction promised tobe long and difficult. |
Two crucial influences shaped post-war |