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World History 2

<OpenstaxParagraph>
	When the economic collapse that came to be known as the Great Depression began in the <OpenstaxTerm>United States</OpenstaxTerm> in 1929, it ended the postwar boom and sent the entire world’s economy reeling. No economic depression is caused by one element alone. One contributing factor, however, was economic instability that the rising <OpenstaxTerm>stock market</OpenstaxTerm> in the United States had camouflaged.
</OpenstaxParagraph>
<OpenstaxParagraph>
	The stock market had set new highs seemingly every year of the 1920s. Some of the increase in stock prices and the resulting valuations of companies’ worth made perfect sense at the time. Companies were in fact selling new products, and more of them. Electric ovens, washing machines, and radios were all highly desirable new consumer items. However, by the late 1920s, the stock market was beset by a wave of pure speculation, that is, the buying and selling of shares based solely on bets that stock prices would go even higher, though unsupported by increased product sales. This guesswork drove stock prices up until they became dangerously overvalued.
</OpenstaxParagraph>
<OpenstaxParagraph>
	Stock prices began to drop sharply in the fall of 1929 and eventually crashed, bringing <OpenstaxTerm>bank failure</OpenstaxTerm>s in their wake as banks’ investments in stocks lost value. The lack of banking regulations meant that if a bank went bankrupt, those who had placed their money on deposit there lost all their savings. Ironically, when customers began to withdraw their funds because they feared a bank would fail, they often inadvertently triggered that failure, since banks hold only a small percentage of their money as cash in their vaults and invest the rest. Not only did these failures hurt depositors in the banks; they left many communities without the means to obtain loans for businesses or farms, which further compromised the economic health of an area.
</OpenstaxParagraph>
<OpenstaxParagraph>
	Contributing to the Depression was the buying of consumer items on <OpenstaxTerm>credit</OpenstaxTerm>. When the Depression came, households struggling with job losses put their remaining income into keeping a roof over their heads and food on the table. Their defaults on their credit payments starved the stores, which then had to lay off more workers to stay afloat. Meanwhile U.S. industry had grown significantly and was producing consumer goods at an unprecedented rate. With consumers both at home and abroad unable to purchase, however, the twin problems of <OpenstaxTerm>overproduction</OpenstaxTerm> and <OpenstaxTerm>underconsumption</OpenstaxTerm> ground the economy to a halt. Contributing to this financial catastrophe was the <OpenstaxTerm>unequal distribution of wealth</OpenstaxTerm>. When the Depression began, the majority of American families (80 percent) had no savings at all, so a job loss quickly led to homelessness and hunger (<a href="#fig-00015">Figure 12.11</a>).
</OpenstaxParagraph>
<OpenstaxFigure id="fig-00015" src="https://openstax.org/apps/archive/20240226.174525/resources/1315ac914982a37458389321fe0a62cc91bf87d1" alt="Men are lined up outside a building that has a sign that reads “Free Cup Coffee and Doughnuts for the Unemployed.”" mediaType="image/jpg" width="1100" height="895" />
<OpenstaxFigureText width="1100">
	<strong>Figure 12.11</strong> This photo shows unemployed men waiting for food outside a soup kitchen in Illinois in 1931. (credit: “Unemployed men queued outside a depression soup kitchen opened in Chicago by Al Capone” by U.S. National Archives and Records Administration/Wikimedia Commons, Public Domain)
</OpenstaxFigureText>
<OpenstaxParagraph>
	The <OpenstaxTerm>Smoot-Hawley Tariff Act</OpenstaxTerm> of 1930 was an example of the <OpenstaxTerm>isolationist</OpenstaxTerm> and <OpenstaxTerm>protectionist</OpenstaxTerm> policies the U.S. government followed in the 1920s. An increased tariff of nearly 40 percent had already been enacted in 1922. Smoot-Hawley raised tariff rates another 20 percent on more than twenty thousand kinds of imported goods, supposedly to protect American farmers and industries from foreign competition. These extreme rates caused other countries to institute their own retaliatory high tariff rates on U.S. goods. Therefore, the industrial might of the United States was stymied because its residents were unable to purchase goods due to job losses and lack of income, and its businesses were unable to recoup any of their monies by selling goods overseas. Smoot-Hawley was the highest tariff the U.S. government has ever enacted. It helped stifle world trade, which decreased 30 percent by the early 1930s.
</OpenstaxParagraph>
<OpenstaxParagraph>
	One of the key aspects of the Great Depression was the way it encumbered foreign trade around the globe. Worldwide <OpenstaxTerm>gross domestic product (GDP)</OpenstaxTerm>—the value of all the goods and services a country produces in one year—decreased by 15 percent between 1929 and 1932. With trade plummeting, many U.S. banks began recalling loans made to foreign businesses and countries, which caused crises in other places.
</OpenstaxParagraph>

12.3.1 Economic Collapse

1 Understanding the Past

1.1 Developing a Global Perspective

1.1.1 World History as Preparation for Life After College

1.1.2 World History and Global Citizenship

1.1.3 Features of This Textbook

1.2 Primary Sources

1.2.1 Learning to Evaluate Documents and Images

1.2.2 Documentary Sources: Competing Narratives

1.2.3 Textual Sources: The Importance of Language

1.2.4 Hidden in History

1.3 Causation and Interpretation in History

1.3.1 Levels of Causation

1.3.2 Interpretation in History

2 Exchange in East Asia and the Indian Ocean

2.1 India and International Connections

2.1.1 The Mughal Empire

2.1.2 The Sultanate of Gujarat

2.1.3 The Rise of the Maratha Empire

2.1.4 European Colonialism

2.2 The Malacca Sultanate

2.2.1 The Rise of the Malacca Sultanate

2.2.2 European Malacca

2.3 Exchange in East Asia

2.3.1 Japan

2.3.2 China’s Dynastic Exchanges

2.3.3 Korea and Its Neighbors

3 Early Modern Africa and the Wider World

3.1 The Roots of African Trade

3.1.1 Saharan Trade Routes

3.1.2 The Spread of Islam

3.1.3 The Mali Empire

3.2 The Songhai Empire

3.2.1 The Rise of Imperial Songhai

3.2.2 The Reign of Askia the Great

3.2.3 The Decline of Songhai

3.3 The Swahili Coast

3.3.1 The Rise of the Swahili City-States

3.3.2 Slavery on the Swahili Coast

3.3.3 The Contest for the Swahili Coast

3.4 The Trans-Saharan Slave Trade

3.4.1 The Role of Kanem-Bornu

3.4.2 The Arrival of Europeans

3.4.3 The Later Trans-Saharan Slave Trade

4 The Islamic World

4.1 A Connected Islamic World

4.1.1 Politics and Religion in the Ummah

4.1.2 Islamic Trade Networks

4.1.3 Technology in the Islamic World

4.2 The Ottoman Empire

4.2.1 Culture and Society

4.2.2 Expansion, Revolutions, and Reform

4.2.3 Science and Technology

4.3 The Safavid Empire

4.3.1 The Rise of the Safavid Empire

4.3.2 Establishing Shi‘ism as the State Religion

4.3.3 Safavid Government and Culture

5 Foundations of the Atlantic World

5.1 The Protestant Reformation

5.1.1 The Origins of the Protestant Reformation

5.1.2 Calvinists, Anabaptists, and Anglicans

5.1.3 The Catholic Reformation and the Wars of Religion

5.2 Crossing the Atlantic

5.2.1 The Rise of Maritime Nations

5.2.2 The Columbian Exchange

5.3 The Mercantilist Economy

5.3.1 The Rise of Mercantilism

5.3.2 Mercantilism and the Expansion of Empire

5.3.3 Mercantilism and Its Critics

5.4 The Atlantic Slave Trade

5.4.1 Slavery and the Triangular Trade

5.4.2 African and North American Slavery

5.4.3 The Economics of Slavery

6 Colonization and Economic Expansion

6.1 European Colonization in the Americas

6.1.1 Spain’s Encomienda System

6.1.2 English Settlements in North America

6.1.3 French and Dutch Settlements

6.2 The Rise of a Global Economy

6.2.1 The Seven Years’ War

6.2.2 British Influence in India

6.2.3 China’s Dominance in Trade

6.2.4 Colonial Resistance and Revolution

6.3 Capitalism and the First Industrial Revolution

6.3.1 From Mercantilism to Capitalism

6.3.2 Mechanization

6.3.3 Marxism

7 Revolutions in Europe and North America

7.1 The Enlightenment

7.1.1 The Authority of Reason

7.1.2 Natural Rights

7.1.3 Social Contract Theory

7.2 The Exchange of Ideas in the Public Sphere

7.2.1 Public Debate and Dissent

7.2.2 The Republic of Letters

7.2.3 Academies, Universities, and Intellectuals

7.3 Revolutions: America, France, and Haiti

7.3.1 The American Revolution

7.3.2 The French Revolution

7.3.3 The Haitian Revolution