Rohan Srivastava

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1. Why is the great depression so important in the annals of the world economic history?
Great Depression, worldwide economic downturn that began in 1929 and lasted until about 1939. It
was the longest and most severe depression ever experienced by the industrialized Western world. The
Great depression effects were no less than the effects faced by Americans since the Civil War. The
downturn originated in the United States, the Great Depression caused drastic declines in output,
caused severe unemployment, and acute deflation in almost every part of the world. This depression is
so important in the annals of world economy because it changed the way how governments deal with
large economics problems, it is also important because of its duration, its timing and the effect it had
on the entire world. It led to a constructive debate on various economic policies. It led to Stock
Market and Banking Regulations, it increased the role of government in peoples lives to a much
higher level the depression was major and long in America and Europe and it was a little milder in
Japan. The Depression affected virtually every country of the world.
2. What lessons can be gleaned from the great depression?
The Great Depression of the late 1920s and 1930s led of high unemployment, debt, and a collapsed
stock market. It happened because of distortions created by government by giving excess credit and
the resulting speculation: economically unjustifiable investments based solely on the hope that another
speculator will pay and even higher price. The hardship that resulted has not been experienced by
Americans since.
It showed us the importance of having sounds market regulations and the need for politician will and
acumen. Government intervention should be done whenever required and government should not just
sit and relax. There is always a reasonable amount of government intention is required in such
scenarios. Operating fiscal policy in a sensible way to counteract the effects of a stock market crash, to
counteract the effects of a recession. It showed us the importance of having Social Security,
unemployment insurance or Medicaid as unemployment rate peaked at 25% in 1930.People had to
resort to waiting in bread lines, living from day to day.
Another major learning was that of Income Inequality. There was a huge problem in the late 1920s and
the early 1930s: The USA had an economy that produced much more goods/products that consumers
could purchase. Because the consumers didn't have enough disposable income to afford these

Rohan Srivastava
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Section B

goods/products. In the 20's, wages were not keeping up with the productivity of the average American
worker which means although Americans were working harder, their wages were falling flat.
3. What according to you are chances of another great depression affecting the world
economic order?
People learn from their past experiences. If we speak hypothetically, in an ideal world another
depression would not happen. All of the wide ranging issues that caused the Great Depression were
actions taken by people. Now a days human being follow prevention is better than cure. Stock
speculation and mass selling, limiting spending by families and businesses, government policy
decisions, income stratification were all in our collective power to control because they all involved
countless, individual decisions by everyone alive at the time .However, mankind is not yet equipped, and
may never be equipped, to create a society and an economy where bad things like the Great Depression
never happen. Events like the Great Depression accumulate over time. The buildup, trigger, and
expansion of the Great Depression is slow and due to a slew of factors each contributing in its own way.
Its hard to know if a problem will be as big as the Great Depression, until it's already as big as the Great
Depression.
Events like the Great Depression don't happen often enough to stay in our world, collective
consciousness and reasoning patterns. In the last 100 years, we can think of three events of its scale:
World War I, World War II, and the Great Depression. We haven't been involved in any of them and
neither have the vast majority of people still living. It's hard enough to make personal decisions about
what to do with my time and money over the next 12 months, let alone taking steps to ensure all of
mankind makes all of the small and large decisions needed, in aggregate, to prevent global events like
another Great Depression, twenty years in the future.
Unless we somehow manage to build an information system so advanced that we can understand and
control our collective decisions over periods of time significantly longer than a human lifespan, I suspect
we'll always have periods of boom and bust.