NATIONAL LAW INSTITUTE UNIVERSITY,

BHOPAL

In the partial fulfilment for the requirement of the project on the subject of Economics of
B.A., L.L.B (Hons.), Second
Trimester

Submittted on November 2018

AN ANALYSIS OF THE GREAT DEPRESSION OF

1929

Submitted to: Submitted by:

Mr. Rajesh Gautam Hrishikesh Prakash Jaiswal
(Assistant Professor of Economics) (2018BALLB126)

Page 1 of 25
 PREFACE

I feel great pleasure in presenting the project under study. I hope that the readers
will find the project interesting and that the project in its present from shall
be well received by all. The project contains a detailed study of The Great
Depression of 1929

Every effort is made to keep the project error free. I would

gratefully acknowledge any suggestions to improve the project to make it more
useful.

ACKNOWLEDGEMENTS
 On completion of this Project it is my present privilege to acknowledge my
profound gratitude and indebtedness towards many people for their valuable
suggestions and constructive criticism. Their precious guidance and
unrelenting support kept me on the right track throughout the project. I
gratefully acknowledge my deepest sense of gratitude to:

Prof. (Dr.) V Vijayakumar , Director, National Law Institute University,

Bhopal for providing us with the infrastructure and the means to make this
project;

Our Economics teacher, Mr. Rajesh Gautam, who provided me this

wonderful opportunity and guided me throughout the project work.

I would also like to thank my batch mates and seniors for their constant help and
guidance which helped me in completing this project.

I’m also thankful to the library and computer staffs of the University for helping us
find and select books from the University library.

Finally, I’m thankful to my family members and friends for the affection
and encouragement with which doing this project became a pleasure.

HRISHIKESH JAISWAL

(2018BALLB126)

TABLE OF CONTENTS

1. INTRODUCTION.................................................................................. 5
2. RESEARCH METHODOLOGY …………………………………………………7

3. START OF THE
DEPRESSION..................................................................................9

4. CAUSES............................................................................................10

5. TURNING POINT AND

RECOVERY.............................................................................................13

6. Analysis Comparison Unemployment Rate between The Great Depression

(1929) & the Recent Global Meltdown………………………………………..22

7. EFFECTS OF GREAT DEPRESSION..........................................................27

8. CONCLUSION ..............................................................................................30

9. BIBLIOGRAPHY……………………………………………………….31
 INTRODUCTION

In economics, a depression is a sustained, long-term downturn in economic activity in

one or more economies. It is a more severe economic downturn than a recession, which
is a slowdown in economic activity over the course of a normal business cycle.

A depression is an unusual and extreme form of recession. Depressions are

characterized by their length, by abnormally large increases in unemployment, falls
in the availability of credit (often due to some form of banking or financial crisis),
shrinking output as buyers dry up and suppliers cut back on production and
investment, large number of bankruptcies including sovereign debt defaults,
significantly reduced amounts of trade and commerce (especially international
trade), as well as highly volatile relative currency value fluctuations (often due to
currency devaluations). Price deflation, financial crises and bank failures are also
common elements of a depression that do not normally occur during a recession.

The Great Depression was a severe worldwide economic depression that took place
mostly during the 1930s, beginning in the United States. The timing of the Great
Depression varied across nations; in most countries it started in 1929 and lasted until the
late-1930s. It was the longest, deepest, and most widespread depression of the 20th
century In the 21st century, the Great Depression is commonly used as an example of
how intensely the world's economy can decline [ CITATION ByN00 \l 16393 ]

The Great Depression started in the United States after a major fall in stock prices that
began around September 4, 1929, and became worldwide news with the stock market
crash of October 29, 1929 (known as Black Tuesday). Between 1929 and 1932,
worldwide gross domestic product (GDP) fell by an estimated 15%. By comparison,
worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.
[4]
Some economies started to recover by the mid-1930s. However, in many countries the
negative effects of the Great Depression lasted until the beginning of World War II. 1

The Great Depression had devastating effects in countries both rich and poor. Personal
income, tax revenue, profits and prices dropped, while international trade plunged by
more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as
high as 33%

Cities around the world were hit hard, especially those dependent on heavy industry.
Construction was virtually halted in many countries. Farming communities and rural
1 The Great Crash, 1929
Book by John Kenneth Galbraith page 12-14
areas suffered as crop prices fell by about 60% Facing plummeting demand with few
alternative sources of jobs, areas dependent on primary sector industries such as mining

RESEARCH METHODOLOGY
OBJECTIVES

 To analyze the causes of The Great Depression on 1929

 To study the effects of The Great Depression on 1929
 To understand the recovery from the recession

HYPOTHESIS

The great depression of 1929 had affected United States of America the most.

TOPICS TO BE STUDIED

 Beginning of the turmoil

 Causes
 Effects of the depression
 Recovery
 Comparison between 2007 Depression and The Great Depression
 Start of the Great Depression

Historians most often attribute the start of the Great Depression to the sudden
and total collapse of US stock market prices on October 29, 1929, known as Tuesday.
However, some dispute this conclusion, and see the stock crash as a symptom, rather
than a cause of the Great Depression. Even after the Wall Street Crash of 1929, optimism
persisted for some time; John D. Rockefeller said that "These are days when many are
discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has
always returned and will again." The stock market turned upward in early 1930,
returning to early 1929 levels by April, though still almost 30% below the peak of
September 1929. Together, government and business actually spent more in the first half
of 1930 than in the corresponding period of the previous year. But consumers, many of
whom had suffered severe losses in the stock market the previous year, cut back their
expenditures by ten percent, and a severe drought ravaged the agricultural heartland of
the USA beginning in the summer of 1930.2

2 A Short History of the Great Depression, The Journal of Economic Abstracts, Vol. 2, No. 2 (Mar.,
1964), pp. 188-192
 By mid-1930, interest rates had dropped to low levels, but expected deflation and
the reluctance of people to add new debt by borrowing, meant that consumer spending
and investment were depressed. In May 1930, automobile sales had declined to below
the levels of 1928. Prices in general began to decline, but wages held steady in 1930; but
then a deflationary spiral started in 1931. Conditions were worse in farming areas, where
commodity prices plunged, and in mining and logging areas, where unemployment was
high and there were few other jobs. The decline in the US economy was the factor that
pulled down most other countries at first, and then internal weaknesses or strengths in
each country made conditions worse or better. Frantic attempts to shore up the
economies of individual nations through protectionist policies, such as the 1930 U.S.
Smoot–Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the
collapse in global trade. By late in 1930, a steady decline set in which reached bottom by
March 1933.3

Causes

There were multiple causes for the first downturn in 1929, including the
structural weaknesses and specific events that turned it into a major depression and the
way in which the downturn spread from country to country. In relation to the 1929
downturn, historians emphasize structural factors like massive bank failures and the
stock market crash, while economists point to monetary factors such as actions by the
US Federal Reserve that contracted the money supply, and Britain's decision to return to
the Gold Standard at pre-World War I parities (US$4.86:£1).

Recessions and business cycles are thought to be a normal part of living in a

world of inexact balances between supply and demand. What turns a usually mild and
short recession or "ordinary" business cycle into an actual depression is a subject of
debate and concern. Scholars have not agreed on the exact causes and their relative
importance. The search for causes is closely connected to the question of how to avoid a
future depression, and so the political and policy viewpoints of scholars are mixed into
the analysis of historic events eight decades ago. The even larger question is whether it
was largely a failure on the part of free markets or largely a failure on the part of
government efforts to regulate interest rates, curtail widespread bank failures, and
control the money supply. Those who believe in a large role for the state in the economy

3 The Forgotten man by Amity Shales , page 24-25

believe it was mostly a failure of the free markets and those who believe in free markets
believe it was mostly a failure of government that compounded the problem.4

Current theories may be broadly classified into three main points of view. First,
there are structural theories, most importantly Keynesian economics, but also including
those who point to the breakdown of international trade, and Institutional economists
who point to under consumption and overinvestment (economic bubble), malfeasance by
bankers and industrialists, or incompetence by government officials. The consensus
viewpoint is that there was a large-scale loss of confidence that led to a sudden reduction
in consumption and investment spending. Once panic and deflation set in, many people
believed they could make more money by keeping clear of the markets as prices dropped
lower and a given amount of money bought ever more goods, exacerbating the drop in
demand.

Second, there are the monetarists, who believe that the Great Depression started
as an ordinary recession, but that significant policy mistakes by monetary authorities
(especially the Federal Reserve), caused a shrinking of the money supply which greatly
exacerbated the economic situation, causing a recession to descend into the Great
Depression. Related to this explanation are those who point to debt deflation causing
those who borrow to owe ever more in real terms.

Keynesian British economist John Maynard Keynes argued in General

Theory of Employment Interest and Money that lower aggregate expenditures in the
economy contributed to a massive decline in income and to employment that was well
below the average. In such a situation, the economy reached equilibrium at low levels of
economic activity and high unemployment. Keynes basic idea was simple: to keep
people fully employed, governments have to run deficits when the economy is slowing,
as the private sector would not invest enough to keep production at the normal level and
bring the economy out of recession. Keynesian economists called on governments
during times of economic crisis to pick up the slack by increasing government spending
and/or cutting taxes.

As the Depression wore on, Roosevelt tried public works, farm subsidies, and
other devices to restart the economy, but never completely gave up trying to balance the
budget. According to the Keynesians, this improved the economy, but Roosevelt never
spent enough to bring the economy out of recession until the start of World War II.

4 The Children of Great Depression by Russel freedman

 New classical approach Recent work from a neoclassical perspective
focuses on the decline in productivity that caused the initial decline in output and a
prolonged recovery due to policies that affected the labour market. This work, collected
by Kehoe and Prescott, decomposes the economic decline into a decline in the labour
force, capital stock, and the productivity with which these inputs are used. This study
suggests that theories of the Great Depression have to explain an initial severe decline
but rapid recovery in productivity, relatively little change in the capital stock, and a
prolonged depression in the labour force. This analysis rejects theories that focus on the
role of savings and posit a decline in the capital stock.

Inequality of wealth and income Two economists of the 1920s, Waddill

Catchings and William Trufant Foster, popularized a theory that influenced many policy
makers, including Herbert Hoover, Henry A. Wallace, Paul Douglas, and Marriner
Eccles. It held the economy produced more than it consumed, because the consumers did
not have enough income. Thus the unequal distribution of wealth throughout the 1920s
caused the Great Depression. 5

According to this view, the root cause of the Great Depression was a global
overinvestment in heavy industry capacity compared to wages and earnings from
independent businesses, such as farms. The solution was the government must pump
money into consumers' pockets. That is, it must redistribute purchasing power, maintain
the industrial base, but reinflate prices and wages to force as much of the inflationary
increase in purchasing power into consumer spending. The economy was overbuilt, and
new factories were not needed. Foster and Catchings recommended federal and state
governments start large construction projects, a program followed by Hoover and
Roosevelt.6

5 The Great Crash 1929 by John Kenneth

6 Causes of the Great Depression by Mikayla Bell in Ms. GordonHumanities 2/611/20/12

 Turning point and recovery

Various countries around the world started to recover from the Great Depression
at different times. In most countries of the world recovery from the Great Depression
began in 1933. In the United States recovery began in the spring of 1933. However, the
U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of
about 15% in 1940, albeit down from the high of 25% in 1933.

There is no consensus among economists regarding the motive force for the U.S.
economic expansion that continued through most of the Roosevelt years. According to
Christina Romer, the money supply growth caused by huge international gold inflows
was a crucial source of the recovery of the United States economy, and that the economy
showed little sign of self-correction. The gold inflows were partly due to devaluation of
the U.S. dollar and partly due to deterioration of the political situation in Europe. In their
book, A Monetary History of the United States, Milton Friedman and Anna J. Schwartz
also attributed the recovery to monetary factors, and contended that it was much slowed
by poor management of money by the Federal Reserve System. Current Chairman of the
Federal Reserve Ben Bernanke agrees that monetary factors played important roles both
in the worldwide economic decline and eventual recovery. Bernanke also sees a strong
role for institutional factors, particularly the rebuilding and restructuring of the financial
system and points out that the Depression needs to be examined in international
perspective. Economists Harold L. Cole and Lee E. Ohanian, believe that the economy
should have returned to normal after four years of depression except for continued
depressing influences, and point the finger to the lack of downward flexibility in prices
and wages, encouraged by Roosevelt Administration policies such as the National
Industrial Recovery Act. Some economists have called attention to the expectations of
reflation and rising nominal interest rates that Roosevelt's words and actions portended.
 Year
Chart:-I The overall courses of the Depression in the United Stated, as reflected in per
capita GDP shown in the constant year 2000 year dollars, plus some of the key events of
the period.

Gold standard Economic studies have indicated that just as the downturn was
spread worldwide by the rigidities of the Gold Standard, it was suspending gold
convertibility (or devaluing the currency in gold terms) that did most to make recovery
possible. What policies countries followed after casting off the gold standard, and what
results followed varied widely.7

Every major currency left the gold standard during the Great Depression. Great
Britain was the first to do so. Facing speculative attacks on the pound and depleting gold
reserves, in September 1931 the Bank of England ceased exchanging pound notes for
gold and the pound was floated on foreign exchange markets. Great Britain, Japan, and
the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy
and the United States, remained on the gold standard into 1932 or 1933, while a few
countries in the so-called "gold bloc", led by France and including Poland, Belgium and
Switzerland, stayed on the standard until 1935–1936. According to later analysis, the
7 Managerial Economics by Karam Pal & Surendra Kumar page 96-99
earliness with which a country left the gold standard reliably predicted its economic
recovery. For example, Great Britain and Scandinavia, which left the gold standard in
1931, recovered much earlier than France and Belgium, which remained on gold much
longer. Countries such as China, which had a silver standard, almost avoided the
depression entirely. The connection between leaving the gold standard as a strong
predictor of that country's severity of its depression and the length of time of its recovery
has been shown to be consistent for dozens of countries, including developing countries.
This partly explains why the experience and length of the depression differed between
national economies8

World War II and recovery The common view among economic historians is
that the Great Depression ended with the advent of World War II. Many economists
believe that government spending on the war caused or at least accelerated recovery
from the Great Depression. However, some consider that it did not play a great role in
the recovery, although it did help in reducing unemployment. The massive rearmament
policies leading up to World War II helped stimulate the economies of Europe in 1937–
39. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of
manpower following the outbreak of war in 1939 finally ended unemployment.
America's late entry into the war in 1941 finally eliminated the last effects from the
Great Depression and brought the unemployment rate down below 10%. In the United
States, massive war spending doubled economic growth rates, either masking the effects
of the Depression or essentially ending the Depression. Businessmen ignored the
mounting national debt and heavy new taxes, redoubling their efforts for greater output
to take advantage of generous government contracts.9

Effects of the Great Depression

8Dutt & Sundaram 2006 Indian Economy Delhi: S.Chand Page 2-4

9 Sarkhel. Jaydeb 2007 Macroeconomic Theory Kolkata: Book Syndicate Private Limited.Page 111-112
 The Great Depression of 1929 devastated the U.S. economy. Half of all banks
failed. Unemployment rose to 25 percent and homelessness increased. Housing
prices plummeted 30 percent, international trade collapsed by 60 percent,
and prices fell 10 percent per year. It took 25 years for the stock market to
recover.

But there were some beneficial effects. The New Deal programs installed
safeguards to make it less likely that the Depression could happen again.

Economy

The economy shrank 50 percent in the first five years of the depression. In 1929,
economic output was $105 billion, as measured by gross domestic
product. That's the equivalent of $1.057 trillion today.

The economy began shrinking in August. By the end of the year, 650 banks had
failed. In 1930, the economy shrank another 8.5 percent, according to the Bureau
of Economic Analysis. GDP fell 6.4 percent in 1931 and 12.9 percent in 1932.

By 1933, the country had suffered at least four years of economic contraction. It
only produced $57 billion, half what it produced in 1929. That was partly
because of deflation. The Consumer Price Index fell 27 percent between
November 1929 to March 1933, according to the Bureau of Labor Statistics.
Falling prices sent many firms into bankruptcy. The BLS also reported that the
unemployment rate peaked at 24.9 percent in 1933.

New Deal spending boosted GDP growth by 10.8 percent in 1934. It grew
another 8.9 percent in 1935, a whopping 12.9 percent in 1936, and 5.1 percent in
1937.

Unfortunately, the government cut back on New Deal spending in 1938, and the
depression returned. The economy shrank 3.3 percent. But preparations for
World War II sent growth up 8 percent in 1939 and 8.8 percent in 1940. The next
year, Japan bombed Pearl Harbor, and the United States entered World War II.

The New Deal and spending for World War II shifted the economy from a
pure free market to a mixed economy. It depended much more on government
spending for its success. The timeline of the Great Depression shows this was a
gradual, though necessary, process.10

Political
10 Economic and political weekly/the great depression
The Depression affected politics by badly shaking confidence in
unfettered capitalism. That type of laissez-faire economics is what Herbert
Hoover advocated, and it failed badly.

As a result, people voted for Franklin Roosevelt. His Keynesian

economicspromised that government spending would end the
Depression. The New Deal worked. In 1934, the economy grew 10.8 percent in
1934 and unemployment declined.

But FDR became concerned about adding to the $5 trillion U.S. debt. He cut
back government spending in 1938, and the Depression resumed. No one wants
to make that mistake again. Politicians rely instead on deficit spending, tax
cuts and other forms of expansionary fiscal policy. That's created a dangerously
high U.S. debt.

The Depression ended in 1939 as government spending ramped up for World

War II. That's led to the mistaken belief that military spending is good for the
economy. But it doesn't even rank as one of the four best real-world ways to
create jobs

Social

The Dust Bowl drought destroyed farming in the Midwest. It lasted 10 years, too
long for most farmers to hold out. To make things worse, prices for agricultural
products dropped to their lowest level since the Civil War. As farmers left in
search of work, they became homeless. Almost 6,000 shanty towns, called
Hoovervilles, sprang up in the 1930s.

Wages for those who still had jobs fell 42 percent. Average family incomes
dropped 40 percent from $2,300 in 1929 to $1,500 in 1933. That's like having
income fall from $32,181 to $20,988 in 2016 dollars. As a result,
the number of children sent to orphanages increased by 50 percent. Roughly
250,000 older children left home to find work.

In 1933, Prohibition was repealed. That allowed the government to collect taxes
on sales of now-legal alcohol. FDR used the money to help pay for the New
Deal.

The depression was so severe and lasted so long that many people thought it was
the end of the American Dream. Instead, it changed that dream to include a right
 to material benefits. The American Dream as envisioned by the Founding Fathers
guaranteed the right to pursue one's own vision of happiness.

Unemployment

At the beginning of the Great Depression, in the last year of the Roaring
Twenties, unemployment was 3.2 percent. That's less than the natural rate of
unemployment. By 1930, it had more than doubled to 8.7 percent. It skyrocketed
to 15.9 percent in 1931 and 23.6 percent in 1932. By 1933, unemployment was
24.9 percent. Almost 15 million people were out of work. That was the highest
unemployment during the Depression and since then.

New Deal programs helped reduce unemployment to 21.7 percent in 1934, 20.1
percent in 1935, 16.9 percent in 1936 and 14.3 percent in 1937. But less robust
government spending in 1938 sent unemployment back up to 19.0 percent. It
remained above 10 percent until 1941, according to a review of
the unemployment rate by year.11

Banking

During the Depression, half of the nation's banks failed. In the first 10 months of
1930 alone, 744 failed. That was 1,000 percent more than the annual rate in the
1920s. By 1933, 4,000 banks had failed. As a result, depositors lost $140 billion.

People were stunned to find out that banks had used their deposits to invest in the
stock market. They rushed to take their money out of the bank. These bank
“runs” forced even good banks out of business. Fortunately, that rarely happens
anymore. Depositors are protected by the Federal Deposit Insurance Corporation.
FDR created that program during the New Deal.

Stock Market

The stock market lost 90 percent of its value between 1929 and 1932. It didn't
recover for 25 years. That's because people lost all confidence in Wall
Street markets. Businesses, banks and individual investors were wiped out. Even
people who hadn't invested lost money. Their banks invested the money from
their savings accounts. 12

Trade

11 What was the Great Depression by Janet b

12 Bombay Stock Exchange journal1953 page 13-18
As countries' economies worsened, they erected trade barriers to protect local
industries. In 1930, Congress passed the Smoot-Hawley tariffs, hoping to protect
U.S. jobs.

Other countries retaliated. That created trading blocs based on national alliances
and trade currencies. World trade plummeted 65 percent as measured in dollars
and 25 percent in the total number of units. By 1939, it was still below its level in
1929. Here's world trade for the first five years of the Depression.

o 1929: $5.3 billion

o 1930: $4.9 billion

o 1931: $3.3 billion

o 1932: $2.1 billion

o 1933: $1.8 billion

Deflation

Prices fell 30 percent between 1930 and 1932. Deflation helped consumers,
whose income had fallen. It hurt farmers, businesses, and homeowners. Their
mortgage payments hadn't fallen 30 percent. As a result, many defaulted. They
lost everything and became migrants looking for work wherever they could find
it.

Here are the price changes during the depression years.

o 1929 0.6%

o 1930 -6.4%

o 1931 -9.3%

o 1932 -10.3%

o 1933 0.8%

o 1934 1.5%

o 1935 3.0%

o 1936 1.4%
 o 1937 2.9%

o 1938 -2.8%

o 1939 0.0%

o 1940 0.7%

o 1941 9.9%

Long Term Impact

The success of the New Deal and military spending created an expectation
among the American people that the government would save them from any
severe financial or economic crises. During the Great Depression, people relied
on themselves and each other to pull through. The New Deal signaled that they
could rely on the federal government instead.

FDR modified the gold standard to protect the dollar's value. That set a
precedence for President Richard Nixon to end it completely in 1973.

The New Deal public works programs built many of today's landmarks. Iconic
buildings include the Chrysler building, Rockefeller Center and Dealey Plaza in
Dallas. Bridges include San Francisco's Golden Gate Bridge, New York's
Triborough Bridge, and the Florida Keys' Overseas Highway.

La Guardia Airport, the Lincoln Tunnel, and Hoover Dam were built during the
Depression. Also, three entire towns were constructed: Greendale, Wisconsin;
Greenhills, Ohio; and Greenbelt, Maryland.13

Analysis
Comparison Unemployment Rate between

13 Dancing in the dark by morris dicks

 The Great Depression (1929) & the Recent Global
Meltdown

1940; 14.6

U
N
E
M
P
L
O
Y 1930; 8.7
M 1980; 7.1
E
N 2010; 5.9
T 1950; 5.31960; 5.5 1990; 5.6
1920; 5.2 1970; 4.9
R
A 2000; 4
T
E

YEAR
14

Chart:-II A linear graph of the unemployment rate from 1920 to 2010

The Great Depression is started from the late 1929s. In 1920s the unemployment
rate was 5.2%. For the Great Depression, the unemployment rate was increased in 1930
& the rate was 8.7%. The unemployment rate of 1950 is less than the unemployment
rate of 1930. It is explained that the Great Depression is almost. Then all developed
country faced this depression. All developed country was taken to overcome this
depression almost 30 years. The main dark phrase of the Great Depression was 1940
because the peak of unemployment rate is the highest (14.6%). The unemployment rate
of 1950 is 5.3%. The unemployment rate of 1960 and 1970 are respectively 5.5% and
4.9%.We can easily say from the above the chart that in 1980s a small depression is
spread in business world because the unemployment rate is 7.1%. The unemployment
rate of 1990 is decreased from the unemployment rate of 1980. In 2000 the
unemployment rate is the lowest (4%) from the all previous years. After 2000, the
unemployment rate is also increased. The unemployment rate of Recent Global
Meltdown (2010) is 5.9% less than the Great Depression (1930). It is clear that the effect
of the Recent Global Meltdown is less than the effect of the Great Depression. The
difference of the unemployment of the Recent Global Meltdown is 2.8% from the Great
Depression (1930).15

14 Economics graph.com/great depression

15 Smiley, Gene. Rethinking the Great Depression. Stamford: Cengage Learning, 2009
 Investment in Different Sector (government, household and private
corporate) from 1920 to 2010

Chart:-III The dramatic changes that have taken place in India's investment.
The share of investment in GDP, which used to hover around 25%, has gone all
the way up to 40% of GDP. Under normal circumstances, this bodes well, for high
investment presages high GDP growth. But there is a problem. Investment, and
particularly private corporate investment, is highly unstable in all market economies.
Fluctuations of investment are a key source of business cycle fluctuations.16
The three components of investment -- government, household and private
corporate -- are expressed as percent of GDP. We see that for the first time in India's
history, in recent years, private corporate investment has exceeded that by the
government. Government investment is based on the budgetary process, and does not
change much from year to year. Household investment is also relatively stable. Private
corporate investment moves around substantially, based on the optimism of the private
sector about India's future. [ibid]
Private corporate investment was at around 5% when Narasimha Rao and
Manmohan Singh unleashed the reforms of the early 1990s. This gave a rise in
investment to 10%. Then the business cycle downturn came about, and it fell back to
5%. After this, the reforms of the Vajpayee government from 1999 to 2002 were able to
reignite confidence, and private corporate investment went back up to 16% of GDP. The
numerical values seen in the investment pipeline today are simply enormous. The extent

16 The Effects of the Great Depression Marcus Dior LylesSummer Course page 44-45
to which it is translated into actual investment spending is of essence to the new logic of
Indian business cycle fluctuations.17
If the recent upsurge of private corporate investment reverses itself, we could see
a drop from 16% of GDP to 6% of GDP. Each percentage point of GDP, today, is Rs.50,
000 crore, so we are discussing massive numbers. A ten percentage point decline of
private corporate investment is a decline in investment demand of Rs.500, 000 crore.18
Production and Import of Capital Goods from 1920 to 2008

Chart:-IV Production and Import of Capital Goods from 1920 to 2008

The above chart shows that the production and import rate is fall down in 1920 &
1930. The production rate and import rate are slowly grown up till 1970s.In .1980s; all
industry faced a short depression. After 2000, all business falls in the recession. It is still
running.
In 1929, all level employees of the industry faced problem for the depression. All
developed country faced the same problem because they are depended on US. But in the
recent global meltdown has fallen the effects on the top level managers.19

17 The Children of Great Depression by Russel freedman

18 By Nick Taylor, the author of “American-Made” (2008), a history of the Works Progress
Administration

19 America’s Great Depression page 47

 CONCLUSION

The Great Depression was steeper and more protracted in the United States than in other
industrialized countries. The unemployment rate rose higher and remained higher longer
than in any other western country. As it deepened, the Depression had far-reaching
political consequences. The Depression vastly expanded the scope and scale of the
federal government and created the modern welfare state. It gave rise to a philosophy
that the federal government should provide a safety net for the elderly, the jobless, the
disabled, and the poor, and that the federal government was responsible for ensuring the
health of the nation's economy and the welfare of its citizens.

The stock market crash of October 1929 brought the economic prosperity of the 1920s to
a symbolic end. For the next ten years, the United States was mired in a deep economic
depression. By 1933, unemployment had soared to 25 percent, up from 3.2 percent in
1929. Industrial production declined by 50 percent, international trade plunged 30
percent, and investment fell 98 percent.It can be concluded that the Great Depression
affected America the most.

BIBLIOGRAPHY

WEBSITES

 UsaEconomics.com
 apaari.org
 ifpri.org
 wikipedia.org
 Ecoeur.ck
 Economic and Political Weekly

BOOKS:

 Managerial Economics by Karam Pal & Surendra Kumar.

  The Grapes Of Wrath by John Steinbeck
 The Forgotten man by Amity Shales
 The Children of Great Depression by Russel freedman
 The Great Crash 1929 by John Kenneth
 Dancing in the dark by morris dicks
 Bombay Stock Exchange journal1953

PAPERS:

 A Short History of the Great Depression, by John spencer The Journal of

Economic Abstracts, Vol. 2, No. 2 (Mar., 1964), pp. 188-192

 By Nick Taylor, the author of “American-Made” (2008), a history of the Works

Progress Administration
 Causes of the Great Depression by Mikayla Bell in Ms. GordonHumanities
2/611/20/12
 Robins, Lionel. The Great Depression. Auburn: Ludwig von Mises Institute,

2010.
 Smiley, Gene. Rethinking the Great Depression. Stamford: Cengage Learning,

2009