1929: The crisis and the Great Depression Lecture Series ENDING IN NINE... FIVE SPECIAL DATES IN THE CONTEMPORARY ERA

1929: The crisis and the Great Depression

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Gabriel Tortella

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  1. Gabriel TortellaGabriel Tortella

    Catedrático emérito en la Universidad de Alcalá. Premio de Economía Rey Juan Carlos 1994, fue presidente de la Asociación Internacional de Historia Económica, de la Asociación Española de Historia Económica y del Consejo Académico de la Asociación Europea de Historia Bancaria; es miembro de la Academia Europaea (Londres), sección de Humanidades y de la Academia Europea de Ciencias y Artes (Viena y Madrid). Autor de numerosos libros y artículos, entre sus obras recientes figuran Los orígenes del siglo XXI, La revolución del siglo XX y El desarrollo de la España contemporánea, y, como coautor, Educación, instituciones y empresa. Los determinantes del espíritu empresarial, La democracia ayer y hoy, Del monopolio al libre mercado. La historia de la industria petrolera española, La maldición divina. Ignorancia y atraso económico en perspectiva históricaThe State, the Financial System, and Economic Modernization y Different Paths to Modernity. A Nordic and Spanish Perspective.

The crisis of 1929 and the Great Depression that followed were the biggest economical catastrophe of the 20th century, and one of the largest ones ever remembered. It is inevitable when studying the 1929 crisis to establish comparisons with the current one; although there are without doubt a number of parallelisms, there are also clear differences. The first one would be the causes. The causes of great crisis are many and although all of them share the fact that economic evolution is cyclic, there are many differentiating factors. The size and severity of the 1929 crisis were due in great deal to the lack of knowledge of politicians and economists. They did not understand that the First World War and the social cataclysms that followed forbid simply going back to a pre-war economy, and specially the return to a system of international payments based in the gold standard. The current crisis is not due to the lack of knowledge, but to an excess of confidence by the monetary authorities.

Naturally, the knowledge on crisis that we have today, and which was lacking in 1929, is in great way due to the contribution of John M. Keynes and his invention that would later be called macroeconomy. 

The inexperience with which we faced the 1929 crisis explains the profundity of the Great Depression; the main consequences was a very strong contraction of the national income of the main countries (with the exceptions of Japan and the USSR) and of the international commerce, a cascade of bank failures, a large increase in unemployment, a disarticulation of the international payment system, and a strong rise of protectionism in its multiple forms. The political consequences were the triumph of totalitarianism, and on the long term, the beginning of the Second World War. It was the war, more than the economic policies, what put the Depression to an end. From all economic political programs implemented to fight the Depression, the most known is the New Deal of the North American president Franklin D. Roosevelt.