|
|
|
|
Long Depression
|
| |
|
| |
The Long Depression was a depression that affected much of the world and was contemporary with the Second Industrial Revolution. At the time it was regarded as the Great Depression, remaining so until the Great Depression of the 1930s. It was most notable in Western Europe and North America, at least in part because reliable data from the period is most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost much of its large industrial lead over the economies of Continental Europe.
The depression started in the United States following the Panic of 1873.
Discussion
Ask a question about 'Long Depression' Start a new discussion about 'Long Depression' Answer questions from other users |
Encyclopedia
The Long Depression was a depression that affected much of the world and was contemporary with the Second Industrial Revolution. At the time it was regarded as the Great Depression, remaining so until the Great Depression of the 1930s. It was most notable in Western Europe and North America, at least in part because reliable data from the period is most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost much of its large industrial lead over the economies of Continental Europe.
The depression started in the United States following the Panic of 1873. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest recession identified by the NBER. The depression has been dated from 1873 until as late as 1897.
The global economy grew at an impressive rate from that year to the start of World War I.
Some commentators suggest that the depression actually lasted into the 1890s, and was a price depression, not a production depression. According to some economic historians, this was not really a depression if production and GDP grew throughout the period (see table below). The confusion comes from the fact that prices were falling because of greater industrial productivity and the presence of sound money (gold and silver). There is no clear agreement among historians and economists.
Causes of the crisis
The causes of the Depression are debated, mainly because it was not a production depression; it was only a price depression. The most immediate cause, and the date that is often used as the start of the Depression, was the collapse of the Vienna Stock Exchange on May 9, 1873. Others have argued the depression was rooted in the 1870 Franco-Prussian War that hurt the French economy and, under the Treaty of Frankfurt (1871), forced that country to make large war reparations payments to Germany. The primary cause of the price depression in the United States was the tight monetary policy that the U.S. followed to get back to the gold standard after the Civil War. The U.S. was taking money out of circulation to achieve this goal, therefore, there was less available money to facilitate trade. Because of the monetary policy described above the price of silver started to fall causing considerable losses of asset values.
In America the speculative nature of financing due to both the greenback which was specie issued to pay for the US Civil War and rampant fraud in the
building of the Union Pacific Railway up to 1869 culminated in the Credit Mobilier panic. Railway overbuilding and weak markets collapsed the bubble in
1873. Both the Union Pacific and the Northern Pacific lines were center in the collapse; another railway bubble was the UK railway mania.
Because of the Panic of 1873, governments depegged their currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The Coinage Act of 1873 in America was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were Americans who advocated the continuance of government-issued fiat money (United States Notes) to avoid deflation and promote trade. The western US states were outraged--Nevada, Colorado, and Idaho were huge silver producers with productive mines and for a few years mining abated. The resumption of the US government buying silver was enacted in 1890 with the Sherman Silver Purchase Act.
Monetarists believe that the 1873 depression was caused by shortages of gold that undermined the gold standard, and that the 1848 California Gold Rush, 1886 Witwatersrand Gold Rush in South Africa and the 1898-99 Klondike Gold Rush helped alleviate such crises. Other analyses have pointed to developmental surges (see Kondratiev wave), theorizing that the Second Industrial Revolution was causing large shifts in the economies of many states, imposing transition costs, which may also have played a role in causing the depression.
Reactions to the crisis
Like the Great Depression, the Long Depression saw many nations of the world resort to protectionism to shore up faltering industries. Influenced by List's nationalist argument for industrial protection, Bismarck abandoned the German free trade policy in 1879, enacting tariffs over the objections of his National Liberal Party allies. France, which had adopted free trade during the Second Empire (1852-1870), also abandoned it, while Benjamin Harrison won the 1888 US presidential election on a protectionist ticket. Only the United Kingdom retained the low tariffs enacted in the 1846 repeal of the Corn Laws.
Besides tariff policy, governments of the time were not closely involved in managing the economy. According to the tenets of classic liberalism, it was generally believed that it was not the government's role to intervene in the economy, and thus little was done.
The Long Depression also contributed to the revival of colonialism leading to the New Imperialism period, symbolized by the scramble for Africa, as the western powers sought new markets for their goods. According to Hannah Arendt's The Origins of Totalitarianism (1951), the "unlimited expansion of power" followed the "unlimited expansion of capital".
In the United States, beginning in 1878-1879, the rebuilding, extending, and refinancing of the western railways, commensurate with the wholesale giveaway of water, timber, fish, minerals, in what had previously been Indian territory, characterized a rising market. This of course led to the expansion of markets and industry, together with the robber barons of railroad owners which culminated in the genteel 1880s and 1890s. The Gilded Age was the outcome for the few rich.
The cycle repeated itself with another huge market crash in 1893.
GNP for selected European Great Powers
- at market prices, in 1960 US dollars and prices; in billions
(Paul Kennedy, The Rise and Fall of the Great Powers, Fontana Press, 1989, p 219)
See also
External links
|
| |
|
|
