Question

A Global Depression

The collapse of the American economy sent shock waves around the world. Worried American bankers demanded repayment of their overseas loans, and American investors withdrew their money from Europe. The American market for European goods dropped sharply as the U.S. Congress placed high tariffs on imported goods so that American dollars would stay in the United States and pay for American goods. This policy backfired. Conditions worsened for the United States. Many countries that depended on exporting goods to the United States also suffered. Moreover, when the United States raised tariffs, it set off a chain reaction. Other nations imposed their own higher tariffs. World trade dropped by 65 percent. This contributed further to the economic downturn. Unemployment rates soared.


Effects Throughout the World

Because of war debts and dependence on American loans and investments, Germany and Austria were particularly hard hit. In 1931, Austria’s largest bank failed. In Asia, both farmers and urban workers suffered as the value of exports fell by half between 1929 and 1931. The crash was felt heavily in Latin America as well. As European and U.S. demand for such Latin American products as sugar, beef, and copper dropped, prices collapsed.

After reading the text above, what do you think was the most significant impact of the Great Depression on the rest of the world? Explain why you made this choice.

Answer 1

The most significant impact of the Great Depression on the rest of the world was the drastic decrease in world trade. The collapse of the American economy led to a sharp decline in the American market for European goods, and the U.S. Congress imposed high tariffs on imported goods. This protectionist policy was intended to keep American dollars in the United States and pay for American goods, but it backfired, as other nations responded by imposing their own higher tariffs. This caused world trade to drop by 65 percent, which contributed significantly to the economic downturn and led to high unemployment rates.

The decrease in world trade had a ripple effect, causing many countries that depended on exporting goods to the United States to suffer. Germany and Austria were particularly hard hit, given their war debts and dependence on American loans and investments. In Asia, both farmers and urban workers suffered as the value of exports fell by half between 1929 and 1931. Similarly, in Latin America, as European and U.S. demand for products such as sugar, beef, and copper dropped, prices collapsed.

Overall, the decrease in world trade had a significant impact on the global economy during the Great Depression, as it led to high unemployment rates, a decline in economic growth, and widespread economic hardship.