A Comparison Of The Great Depression Of — страница 2

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levels, much lower than in theearlier recessions (of 1924 and 1927), and therefore, the Federal ReserveBoard wrongfully saw no need to pursue an expansionary monetary policy.4An indicator of that inaction is that open market operations did notprovide sufficient money reserves for a banking system faced withdepositors anxious for liquidity (monetary expansion would have filled thatneed). If the Federal Reserve had provided additional funds to the bankingsector after 1930, bank failure would not have been so numerous and thedecrease in the attack of ???? would have been (at least) slowed down. Still, it would not be accurate to make the Federal Reserveresponsible for all these problems. Other factors contributed to theprecipitation of what began as a cyclical recession into what we

now knowas the Great Depression. One of those is the Hawley Smoot tariff of 1930which in essence made America more protectionist than ever, sending importduties to record highs. Evidently, retaliation from other countries wasquick to come. The new tariff act accelerated the downfall of Americantrade volume, which was probably the last thing the U.S. needed at thatstage. President Hoover had always been in favor of protective tariffswhich he considered a strictly domestic issue and he supported the HowleySmoot Act. Therefore, he clearly failed to see the implications of such amove. Soon, the Depression was spreading to the rest of the world,especially to Europe. There, the single country that was most affected wasGermany whose very weak economy could not cope with the slow

disappearanceof American capital. Let us mention that Germany was still payingreparations (for World War I), which made its situation even more delicate. Germany was forced to borrow from Great Britain and France which could notcompensate for the decline in U.S. lending.5 The trap in which Germanyfound itself was quite disconcerting: she had to pursue deficienarypolicies to gain the confidence of investors in order to attract foreignfunds. At the same time, devaluaton posed a major problem. It increasedthe burden of the external debt (through the exchange rate mechanism) whichwas payable in foreign currencies. The United Kingdom represented another major force on the globaleconomic scene. The British economy was not hit immediately as violentlyas Germany’s. However, as the

repercussions of the world crisis becameincreasingly clear, Great Britain experienced a notable decline in itsexports which was even greater than the decrease in its imports. Those twofactors 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 theDepression. Many possible reasons are hypothesized to explain that fact,but the one that is most often heard is the undervaluation of the Frenchfranc. The French economy began to feel the effects of the

world crisis in1932. Around that time the Depression caught up with the French economythrough an important decrease in its exports (due impart to the sheardownsizing trend in the volume of world trade), combined to an increase inimports. The problems faced by France were also worsened by the fact thatit still was maintaining the gold standard long after all of the otherindustrialized countries–starting with Great Britain in 1931–had switchedto fleeting exchange rates. As for Japan, we can safely say that it is the one country amongtoday’s industrialized nations that got through the Great Depression withthe least damage to its economy.7 Now that we have illustrated how the world crisis affected variousnations in different ways, it seems only logical that they would

puttogether solutions that were adapted to their individual problems. In the United States, Hoover had failed to bring a solution to theDepression, and he was replaced by Roosevelt in 1932. The new presidentbrought with him the New Deal, which can be qualified as a collection ofprograms aimed at stimulating different sectors of the economy (like theAgricultural Adjustment Act and the National Industrial Recovery Act). Asit turned out, the New Deal was not a particularly successful economicinitiative, but it was definitely a political success, probably because itsgoal was to help the American people (even though the means used toaccomplish that were never very clear). What proved more effective atbringing economic solutions to what was really an economic problem was