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Letter from the Executive Board

Dear Delegates,

It is our pleasure to welcome you to the Historic Economic Crisis Committee 2019. We hope you are as excited to be a part of this committee as we are excited to have you here.

This committee is one for the analytical and technically oriented mind. This committee is one meant to challenge your critical thinking and logical reasoning. We, as the Executive Board, have tried our level best to put together a comprehensive background guide that should give you a head start for your research. However, we request you to not reiterate the background guide as we are aware of the contents of the same. Each area under this agenda has focal points that have been specifically designed to highlight the lacunae in the present issue. We appreciate focused deliberation on these points, as we firmly believe that is the path this committee should tread in terms of the fruitful debate. As in every committee, comprehensive and unique solutions after the exhaustive debate is the end goal. Your speeches must hold conviction, data, and dynamism. Elaborate and dramatic speeches with no factual basis shall hold no vitality in this committee. Every speech made by an individual delegate is expected to be in furtherance of the agenda.

That being said, we urge delegates to be unabashed and vocal of their viewpoints in committee. We recognize that a committee experience can be fairly daunting and hence, the primary goal of this bench henceforth will remain maximum participation from all delegates present. While recognizing your ability as debaters and MUN-ners in your own right, we assure you that the experience here at CJCMUN is going to be unlike any other. This bench will look favorably upon viewpoints with a well-researched backing and a comprehensive basis. Plagiarism is an issue that this board takes very seriously.

Please ensure that all your submissions to this board are original and well-cited. Diplomacy in committee interaction is key, and violation of decorum will not be tolerated. At the end of the conference, we are not looking for a domineered committee, but a committee that attempts to work together to solve the problem at hand. As the Executive Board, we will do everything possible to ensure that this committee experience is memorable and presents itself as a learning experience for all of you to grow as delegates. In the words of Benazir Bhutto, “You can chain a man but not an idea, and all change needs is an idea.” We’ve given you the problem, is it upon you to find the idea, and maybe we can make change together. We look forward to meeting all of you in Committee. Happy researching!

Do note that this guide is nothing more than a general blueprint of the topics you will be discussing at the conference. The Dais strongly urges you to go beyond the parameters discussed in the guide. While confidence is certainly key, it does not make up for an underwhelming lack of preparation and such lapses will be noted.

That being said Srijan and I look forward to meeting all of you at the conference in the hope that 3 great days of debate await us all. Please feel free to contact either Srijan or me in case of queries or doubts. All the best and looking forward to the conference!

2 | CJCMUN 2019 (HECC)

Regards,

Dais

Chair: Naman Vankdri ([email protected])

Vice Chair: Srijan Vasireddy ([email protected])

VENUE

The Red Lion Inn , 71 S Main St, Cohasset, MA 02025, United States of America

FREEZE DATES

3 – 5 May 1930


mailto:[email protected]

mailto:[email protected]

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THE CONFERENCE The Historic Economic Crisis Committee is a platform which brings together the most powerful nations of World Politics. It is a battleground in which wars are fought, both ideological and political. The current political scenario in the world is charged and unpredictable after the war of 1914, things are bound to get more heated up.

The Historic Economic Crisis Committee is a committee that ensures that debate is not bound by tedious rules of procedure that impede the flow of thoughts but instead focuses on the arguments made and the ideas put forth. It facilitates no holds barred interactions and exciting discussions that are free from procedural barriers.

We would like to suggest the drafting a framework regarding the creation of an international finance regulatory body, post-war restructuring programs, setting up world reserve currency and loopholes regarding international transactions and investments.

MANDATE The Historic Economic Crisis Committee is an emergency ad-hoc committee. All solutions proposed and agreed to, will be sent to the League of Nations as suggestions which are not binding unless ratified by certain members of the committee. However, it is of great importance that all plenipotentiaries ensure that their best interests are reflected in the final proposal of the committee. There are no explicit or implied restrictions on the

committee’s functioning and any proposal deemed fit can be put forth. This Committee has the power to set up new bodies, further create ad-hoc council’s and call up special commissions.

For the purpose of this committee the director will also serve as the Secretary General of League of Nations and the Assistant director shall also serve in the capacity of Deputy- Secretary General.

POSITION PAPERS Writing a position paper is an opportunity to showcase your understanding of the topic and highlight ideas that should be brought up in committee. There are a number of goals you should aim to achieve through your position paper: organize your country’s viewpoint on the issue, formally inform the dais and other members of your committee about your country’s position and present a creative and well-informed solution to the issue. In order to do this, position papers can comprise three clearly distinct sections:

statement of the problem,

your nation’s history in relation to the issue,

Possible solutions that your nation would support.

Throughout, it is crucial that you cite all of your sources. Citations are the primary tool you have for making sure you give due credit for an idea or fact that does not just come from your own


thinking. Any time you include information or thoughts you found online, in a book, or in another source, you need to have a citation. This is especially true for any quotations. There are many online resources that can help you format these citations effectively and correctly. Always err on the side of too many citations instead of too few. Remember that these position papers are a representation of a nation’s position and not a statement of personal opinion. Therefore, they should be written formally and in the third person. For example, a paper written from the perspective of Italy should read, “Italy believes that…” Position papers should be 1000 words, single-spaced in size 12 font, with one-inch margins along with 1.5 line spacing. At the top of the paper, please indicate your names, the institution you attend, and the nation you are representing. These position papers should not be seen as a burden but as an opportunity to flesh out ideas effectively in order to come in truly prepared for the committee. Therefore, they should not simply be a rewording of the background guide but should show some genuine and original thoughts and ideas. Do not be afraid to get creative; without taking some risks, no progress will be ever made.

WHAT IS THE GREAT DEPRESSION? The Great Depression, a worldwide economic pandemic that began in 1929 and lasted till concerning 1939. it had been the longest and most severe depression ever full-fledged by the industrialized Western world, sparking basic changes in

economic establishments, economics policy, and theory. though it originated within the us, the good Depression caused forceful declines in output, severe state, and acute deflation in virtually each country of the globe. Its social and cultural effects were no less staggering, particularly within the us, wherever the good Depression depicted the harshest adversity sweet-faced by Americans since the warfare.

ECONOMIC HISTORY OF THE GREAT DEPRESSION

The effect and severity of the Great Depression varied considerably across countries. period was notably long and severe within the USA and Europe; it had been milder in Japan and far of Latin America. maybe not astonishingly, the worst depression ever full-fledged by the globe economy stemmed from a plethora of causes. Declines in shopper demand, monetary panics, and misguided government policies caused economic output to fall within the us, whereas the gold normal, that connected nearly all the countries of the globe during a network of mounted currency exchange rates, compete a key role in sending the yank downswing to alternative countries. The recovery from the Great Depression was spurred mostly by the abandonment of the gold normal and also the succeeding financial enlargement. The economic impact of the Great Depression was monumental, as well as each extreme human suffering and profound changes in policy.


TIMING AND SEVERITY

The Great Depression began within the us as a standard recession within the summer of 1929. The downswing became markedly worse, however, in late 1929 and continued till early 1933. Real output and costs fell sharply. Between the height and also the trough of the downswing, industrial production within the us declined 44% and real gross domestic product (GDP) fell 30% The wholesale index declined 33% such declines within the indicant square measure brought up as deflation). though there's some dialogue concerning the dependableness of the statistics, it's wide in agreement that the percent exceeded 20% at its highest purpose. The severity of the good Depression within the us becomes particularly clear once it's compared with America’s next worst recession, the good Recession of 2007–09, throughout that the country’s real gross domestic product declined simply 4.3% and also the percent peaked at but 10%

The Depression affected nearly each country of the globe. However, the dates and magnitude of the downswing varied considerably across countries. Many kingdoms didn't slip into severe depression, however, till early 1930, and its peak-to-trough decline in industrial production was roughly common fraction that of the us. France conjointly full-fledged a comparatively short downswing within the early Thirties. The French recovery in 1932 and 1933, however, was passing. French industrial production and costs each fell considerably between 1933 and 1936. Germany’s economy slipped into a downswing early in 1928 then stabilized

before turning down once more within the third quarter of 1929. The decline in German industrial production was roughly adequate to for a variety of nations in Latin America fell into depression in late 1928 and early 1929, slightly before the U.S. decline in output. whereas some less-developed countries full-fledged severe depressions, others, like Argentina and Brazil, full-fledged relatively gentle downturns. Japan conjointly full-fledged a gentle depression, that began comparatively late and over comparatively early.

Peak-to-trough decline in industrial production in varied countries (annual data).

Country Decline

United States 46.8%

United Kingdom 16.2%

Germany 41.8%

France 31.3%

Italy 33.0%

Japan 8.5%

Canada 42.4%

Belgium 30.6%

The Netherlands 37.4%

Sweden 10.3%

Denmark 16.5%

Poland 46.6%

Czechoslovakia 40.4%

Argentina 17.0%

Brazil 7.0%


Dates of the Great Depression in various countries (year and quarter)

Country Depression began Recovery began

United States 1929:3 1933:2

United Kingdom 1930:1 1932:4

Germany 1928:1 1932:3

France 1930:2 1932:3

Italy 1929:3 1933:1

Japan 1930:1 1932:3

Canada 1929:2 1933:2

Belgium 1929:3 1932:4

The Netherlands 1929:4 1933:2

Sweden 1930:2 1932:3

Switzerland 1929:4 1933:1

Denmark 1930:4 1933:2

Poland 1929:1 1933:2

Czechoslovakia 1929:4 1933:2

Argentina 1929:2 1932:1

Brazil 1928:3 1931:4

India 1929:4 1931:4

South Africa 1930:1 1933:1

The general worth deflation evident within the US was additionally gift in alternative countries. nearly each industrial country endured decline in wholesale costs of 30 % or a lot of between 1929 and 1933. thanks to the larger flexibility of the Japanese worth structure, deflation in Japan was remarkably speedy in 1930 and 1931.

This speedy deflation might have helped to stay the decline in Japanese production comparatively gentle. the costs of primary commodities listed in world markets declined even a lot of dramatically throughout this era. as an example, the costs of occasional, cotton, silk, and rubber were reduced by roughly 0.5% simply between Sept 1929 and Dec 1930. As a result, the terms of trade declined sharply for producers of primary commodities.

The U.S. recovery began within the spring of 1933. Output grew apace within the mid-1930s: real gross domestic product rose at a mean rate of nine % annually between 1933 and 1937. Output had fallen therefore deeply within the early years of the Thirties, however, that it remained well below its long trend path throughout this era. In 1937–38 the us suffered another severe downswing, however once mid-1938 the yank economy grew even earlier than within the mid-1930s. The country’s output finally came to its long trend path in 1942.

Recovery within the remainder of the planet varied greatly. country economy stopped declining shortly once nice UK abandoned the gold commonplace in Sept 1931, though real recovery didn't begin till the tip of 1932. The economies of variety of Spanish American countries began to strengthen in late 1931 and early 1932. FRG and Japan each began to recover within the fall of 1932. Canada and plenty of smaller European countries began to revive at concerning an equivalent time because the us, early in 1933. On the opposite hand, France, that toughened severe depression later


than most countries, didn't firmly enter the recovery section till 1938.

A FEW STATISTICS OF THE GREAT DEPRESSION About fifteen million Americans were out of work and virtually 0.5 the United States' banks had failing by 1933.

Americans didn't imagine that the good Depression would happen once the market crashed since ninetieth of households owned no stocks in 1929.

Even those within the us World Health Organization unbroken their jobs watched their incomes shrink by a 3rd.

CAUSES OF THE DECLINE The fundamental explanation for the Great Depression within the US was a decline in defrayal (sometimes named as combination demand), that diode to a decline in production as makers Associate in Nursing merchandisers noticed an unintended rise in inventories. The sources of the contraction in defrayal within the us varied over the course of period, however they cumulated during a monumental decline in combination demand. The massive decline was transmitted to the remainder of the planet mostly through the gold commonplace. However, a spread of alternative factors additionally influenced the downswing in varied countries.

STOCK MARKET CRASH The initial decline in U.S. output within the summer of 1929 is wide believed to possess stemmed from tight U.S. financial policy aimed toward limiting securities market speculation. The Nineteen Twenties had been a prosperous decade, however not Associate in Nursing exceptional boom period; costs had remained nearly constant throughout the last decade, and there had been gentle recessions in each 1924 and 1927. The one obvious space of excess was the securities market. Stock costs had up over fourfold from the low in 1921 to the height in 1929. In 1928 and 1929, the FRS had raised interest rates in hopes of speed the speedy rise available costs. These higher interest rates depressed interest-sensitive defrayal in areas like construction and automobile purchases, that successively reduced production. Some economists believe that a boom in housing construction within the mid-1920s diode to Associate in Nursing excess provide of housing and a very massive drop by construction in 1928 and 1929.

By the autumn of 1929, U.S. stock costs had reached levels that would not be even by cheap anticipations of future earnings. As a result, once a spread of minor events diode to gradual worth declines in October 1929, investors lost confidence and the securities market bubble burst. Panic merchandising began on “Black weekday,” day, 1929. several stocks had been purchased on margin—that is, exploitation loans secured by solely a tiny low fraction of the stocks’ worth. As a result, the worth


declines forced some investors to liquidate their holdings, so exasperating the autumn in costs. Between their peak in Sept and their low in November, U.S. stock costs (measured by the Cowles Index) declined 33%. as a result of the decline was therefore dramatic, this event is usually named because the nice Crash of 1929.

The securities market crash reduced yank combination demand well. shopper purchases of consumer durables and business investment fell sharply once the crash. a probable rationalization is that the money crisis generated wide uncertainty concerning future financial gain, that successively diode shoppers and corporations to place off purchases of consumer durables. though the loss of wealth caused by the decline available costs was comparatively tiny, the crash may additionally have depressed defrayal by creating folks feel poorer. As a result of the forceful decline in shopper and business defrayal, real output within the us, that had been declining slowly up to the current purpose, fell apace in late 1929 and throughout 1930. Thus, whereas the good Crash of the securities market and also the Great Depression are two quite separate events, the decline available costs was one issue conducive to declines in production and employment within the USA.

BANKING PANICS AND MONETARY CONTRACTION The next blow to combination demand occurred within the fall of 1930, once the primary of 4 waves of banking panics

gripped the U.S.A. A banking panic arises once several depositors at the same time lose confidence within the financial condition of banks and demand that their bank deposits be paid to them in money. Banks, which usually hold solely a fraction of deposits as money reserves, should liquidate loans to boost the specified money. This method of hasty liquidation will cause even a antecedently solvent bank to fail. The

U.S. tough widespread banking panics within the fall of 1930, the spring of 1931, the autumn of 1931, and also the fall of 1932. the ultimate wave of panics continued through the winter of 1933 and culminated with the national “bank holiday” declared by President Franklin D. Roosevelt on March half dozen, 1933. The legal holiday closed all banks, and that they were allowable to open solely once being deemed solvent by government inspectors. The panics took a severe toll on the industry. By 1933, fifth of the banks flourishing at the beginning of 1930 had begun failing.

By their nature, banking panics are for the most part irrational, mystifying events, however several the factors tributary to the matter will be explained. Economic historians believe that substantial will increase in farm debt within the Nineteen Twenties, along with U.S. policies that had inspired little, general banks, created Associate in Nursing surroundings within which such panics might ignite and unfold. The serious farm debt stemmed partially from the high costs of agricultural merchandise throughout warfare I, that had spurred intensive borrowing by farmers wish to extend production by investment in land and machinery. The


decline in farm trade goods costs following the war created it troublesome for farmers to stay up with their loan payments.

The Fed did very little to undertake to stem the banking panics. Economists economist J. Schwartz opined , within the classic study,” A financial History of the U.S”, 1867–1960 (1963), argued that the death in 1928 of Benjamin sturdy, World Health Organization had been the governor of the Fed Bank of recent royal family since 1914, was a major reason for this inaction. sturdy had been a forceful leader World Health Organization understood the flexibility of the financial organization to limit panics. His death left an influence vacuum at the Fed and allowed leaders with less wise views to dam effective intervention. The panics caused a dramatic rise within the quantity of currency folks wanted to carry relative to their bank deposits. This rise within the currency-to-deposit magnitude relation was a key reason why the cash provide within the u. s. declined 31% between 1929 and 1933. additionally, to permitting the panics to scale back the U.S. finances, the Fed conjointly deliberately shrunken the cash provide and raised interest rates in Gregorian calendar month 1931, once Great Britain was forced off the gold normal and investors feared that the u. s. would devalue yet.

Scholars believe that such declines within the finances caused by Fed choices had a severely contractionary result on output. a straightforward image provides maybe the clearest proof of the key role financial collapse compete within the depression within the U.S. The figure shows the cash provide and

real output over the amount 1900 to 1945. In standard times, like the Nineteen Twenties, each the cash provide, and output tend to grow steady. however, within the early Thirties each plummeted. The decline within the finances depressed defrayal in a very range of the way. maybe most vital, attributable to actual value declines and also the speedy decline within the finances, customers and business people came to expect deflation; that's, they expected wages and costs to be lower within the future. As a result, although nominal interest rates were terribly low, folks failed to need to borrow, as a result of they feared that future wages and profits would be inadequate to hide their loan payments. This hesitancy successively LED to severe reductions in each client defrayal and business investment. The panics for sure exacerbated the decline in defrayal by generating pessimism and loss of confidence. what is more, the failure of such a lot of banks noncontinuous disposition, thereby reducing the funds on the market to finance investment.

The Gold Standard

Some economists believe that the Fed allowed or caused the large declines within the finances partially to preserve the gold normal. beneath the gold normal, every country set the worth of its currency in terms of gold and took financial actions to defend the mounted value. it's attainable that had the Fed distended the cash provide greatly in response to the banking panics, foreigners would have lost confidence within the United States’ commitment to


the gold normal. this might have LED to massive gold outflows, and also the u. s. might are forced to devalue. Likewise, had the Fed not tightened the cash provide within the fall of 1931, it's attainable that there would are a speculative attack on the dollar and also the U.S would be forced to abandon the gold normal beside nice Great Britain.

While there's dialogue regarding the role the gold normal compete in limiting U.S. financial policy, there's no doubt that it had been a key think about the transmission of America’s economic decline to the remainder of the globe. beneath the gold normal, imbalances in trade or quality flows gave rise to international gold flows. for instance, within the mid-1920s intense international demand for assets like stocks and bonds brought massive inflows of gold to the U.S. Likewise, a choice by France once warfare I to come back to the gold normal with Associate in Nursing undervalued monetary unit LED to trade surpluses and substantial gold inflows. Britain selected to come back to the gold customary when the war of 1914 was at the prewar parity. time period inflation, however, implicit that the pound was overvalued, and this overvaluation LED to trade deficits and substantial gold outflows when 1925. To stem the gold outflow, the Bank of European country raised interest rates well. High interest rates depressed British disbursement and LED to high state in nice Great Britain throughout the last half of the Nineteen Twenties.

Once the U.S. economy began to contract severely, the tendency for gold

to emanate of alternative countries and toward the us intense. This passed as a result of deflation within the us created product notably fascinating to foreigners, whereas low financial gain among Americans reduced their demand for foreign merchandise. To counteract the ensuing tendency toward associate trade surplus and foreign gold outflows, central banks throughout the planet raised interest rates. Maintaining the international gold customary, in essence, needed a vast financial contraction throughout the planet to match the one occurring within the us. The result was a decline in output and costs in countries throughout the planet that just about matched the downswing within the us.

Financial crises and banking panics occurred in an exceedingly range of nations besides the us. In could 1931 payment difficulties at the Creditanstalt, Austria’s largest bank, depart a string of economic crises that swallowed abundant of Europe and were a key think about forcing Great Britain to abandon the gold customary. Among the countries hardest hit by bank failures and volatile monetary markets were Oesterreich, Germany, and Magyarorszag. These widespread banking crises may are the results of poor regulation and alternative native factors or of straightforward contagion from one country to a different. additionally, the gold customary, by forcing countries to deflate in conjunction with the us, reduced the worth of banks’ collateral and created them additional prone to runs. As within the USA, banking panics and alternative monetary market disruptions more


depressed output and costs in an exceedingly range of nations.

International credit and trade

Some economists stress the importance of credit supply. Foreign disposal to European nation and geographical area had enlarged greatly within the mid-1920s, but U.S. disposal abroad fell in 1928 and 1929 owing to high interest rates and therefore the booming securities market within the us. This reduction in foreign disposal could have LED to more credit contractions and declines in output in recipient countries. In Germany, that intimate with very fast inflation (hyperinflation) within the early Nineteen Twenties, financial authorities could have hesitated to undertake expansionary policy to counteract the economic retardation as a result of the disturbed it would lead to light inflation. the results of reduced foreign disposal could make a case for why the economies of European nation, Argentina, and Brazil turned down before the nice Depression began within the us.

The 1930 enactment of the Smoot-Hawley tariff within the us and therefore the worldwide rise in advocate trade policies created alternative complications. The Smoot-Hawley tariff was meant to spice up farm incomes by reducing foreign competition in agricultural merchandise. however alternative countries followed suit, each in revenge and in an endeavor to force a correction of trade imbalances. students currently believe that these policies could have reduced trade somewhat however

weren't a major reason behind the Great Depression among the massive industrial producers. advocate policies, however, could have contributed to the acute decline within the world value of raw materials, that caused severe balance-of-payments issues for primary-commodity-producing countries in continent, Asia, and geographical area and LED to contractionary financial and financial policies.

SOURCES OF RECOVERY Given the key roles of monetary contraction and the gold standard in causing the Great Depression, it is not surprising that currency devaluations and monetary expansion were the leading sources of recovery throughout the world. There is a notable correlation between the times at which countries abandoned the gold standard (or devalued their currencies substantially) and when they experienced renewed growth in their output. For example, Britain, which was forced off the gold standard in September 1931, recovered relatively early, while the United States, which did not effectively devalue its currency until 1933, recovered substantially later. Similarly, the Latin American countries of Argentina and Brazil, which began to devalue in 1929, experienced relatively mild downturns and had largely recovered by 1935. In contrast, the “Gold Bloc” countries of Belgium and France, which were particularly wedded to the gold standard and slow to devalue, still had industrial


production in 1935 well below that of 1929.

CAUSES OF THE GREAT DEPRESSION what brought about the worst economic downturn in modern history?

Devaluation, however, did not increase output directly. Rather, it allowed countries to expand their money supplies without concern about gold movements and exchange rates. Countries that took greater advantage of this freedom saw greater recovery. The monetary expansion that began in the United States in early 1933 was particularly dramatic. The American money supply increased nearly 42 percent between 1933 and 1937. This monetary expansion stemmed largely from a substantial gold inflow to the United States, caused in part by the rising political tensions in Europe that preceded World War II. Monetary expansion stimulated spending by lowering interest rates and making credit more widely available. It also created expectations of inflation, rather than deflation, thereby giving potential borrowers greater confidence that their wages and profits would be sufficient to cover their loan payments if they chose to borrow. One sign that monetary expansion stimulated recovery in the United States by encouraging borrowing was that consumer and business spending on interest-sensitive items such as cars, trucks, and machinery rose well before consumer spending on services.

Fiscal policy played a relatively small role in stimulating recovery in the United

States. Indeed, the Revenue Act of 1932 increased American tax rates greatly in an attempt to balance the federal budget, and by doing so it dealt another contractionary blow to the economy by further discouraging spending. Franklin D. Roosevelt’s New Deal, initiated in early 1933, did include a number of new federal programs aimed at generating recovery. For example, the Works Progress Administration (WPA) hired the unemployed to work on government building projects, and the Tennessee Valley Authority (TVA) constructed dams and power plants in a particularly depressed area. However, the actual increases in government spending and the government budget deficit were small relative to the size of the economy. This is especially apparent when state government budget deficits are included, because those deficits actually declined at the same time that the federal deficit rose. As a result, the new spending programs initiated by the New Deal had little direct expansionary effect on the economy. Whether they may nevertheless have had positive effects on consumer and business sentiment remains an open question.

Some New Deal programs may have hindered recovery. The National Industrial Recovery Act of 1933, for example, set up the National Recovery Administration (NRA), which encouraged firms in each industry to adopt a code of behavior. These codes discouraged price competition between firms, set minimum wages in each industry, and sometimes limited production. Likewise, the Agricultural Adjustment Act of 1933 created the Agricultural Adjustment Administration


(AAA), which set voluntary guidelines and gave incentive payments to farmers to restrict production in hopes of raising agricultural prices. Modern research suggests that such anticompetitive practices and wage and price guidelines led to inflation in the early recovery period in the United States and discouraged reemployment and production.

Recovery in the United States was stopped short by another distinct recession that began in May 1937 and lasted until June 1938. One source of the 1937–38 recession was a decision by the Federal Reserve to greatly increase reserve requirements. This move, which was prompted by fears that the economy might be developing speculative excess, caused the money supply to cease its rapid growth and to actually fall again. Fiscal contraction and a decrease in inventory investment due to labour unrest are also thought to have contributed to the downturn. That the United States experienced a second, very severe contraction before it had completely recovered from the enormous decline of the early 1930s is the main reason that the United States remained depressed for virtually the entire decade.

World War II played only a modest role in the recovery of the U.S. economy. Despite the recession of 1937–38, real GDP in the United States was well above its pre-Depression level by 1939, and by 1941 it had recovered to within about 10 percent of its long-run trend path. Therefore, in a fundamental sense, the United States had largely recovered before military spending accelerated noticeably. At the same time, the U.S.

economy was still somewhat below trend at the start of the war, and the unemployment rate averaged just under 10 percent in 1941. The government budget deficit grew rapidly in 1941 and 1942 because of the military buildup, and the Federal Reserve responded to the threat and later the reality of war by increasing the money supply greatly over the same period. This expansionary fiscal and monetary policy, together with widespread conscription beginning in 1942, quickly returned the economy to its trend path and reduced the unemployment rate to below its pre-Depression level. So, while the war was not the main impetus for the recovery in the United States, it played a role in completing the return to full employment.

The role of fiscal expansion, and especially of military expenditure, in generating recovery varied substantially across countries. Great Britain, like the United States, did not use fiscal expansion to a noticeable extent early in its recovery. It did, however, increase military spending substantially after 1937. France raised taxes in the mid-1930s to defend the gold standard but then ran large budget deficits starting in 1936. The expansionary effect of these deficits, however, was counteracted somewhat by a legislated reduction in the French workweek from 46 to 40 hours—a change that raised costs and depressed production. Fiscal policy was used more successfully in Germany and Japan. The German budget deficit as a percent of domestic product increased little early in the recovery, but it grew substantially after 1934 as a result of spending on public works and


rearmament. In Japan, government expenditures, particularly military spending, rose from 31 to 38 percent of domestic product between 1932 and 1934, resulting in substantial budget deficits. This fiscal stimulus, combined with substantial monetary expansion and an undervalued yen, returned the Japanese economy to full employment relatively quickly.

ECONOMIC IMPACT The most devastating impact of the great Depression was human suffering. during a short amount of your time, world output and standards of living dropped sharply. the maximum amount as one-fourth of the labour force in industrial countries was unable to find work in the early Thirties. whereas conditions began to enhance by the mid-1930s, total recovery wasn't accomplished till the top of the last decade.

The Great Depression additionally the} policy response also modified the planet economy in crucial ways in which. Most clearly, it hastened, if not caused, the top of the international gold customary. though a system of mounted currency exchange rates was reinstated once war II below the Bretton Woods system, the economies of the planet ne'er embraced that system with the conviction and fervor that they had delivered to the gold customary. By 1973, mounted exchange rates had been abandoned in favor of floating rates.

Both labour unions and therefore the state swollen well throughout the Thirties. within the u. s., union

membership quite doubled between 1930 and 1940. This trend was stirred by each the severe state of the Thirties and therefore the passage of the National Labor Relations (Wagner) Act (1935), that inspired dialogue. The u. s. conjointly established social insurance and old-age and survivors’ insurance through the social insurance Act (1935), that was passed in response to the hardships of the Thirties. it's unsure whether or not these changes would have eventually occurred within the u. s. while not the nice Depression. several European countries had veteran important will increase in union membership and had established government pensions before the Thirties. each of those trends, however, accelerated in Europe throughout the nice Depression.

In several countries, government regulation of the economy, particularly of economic markets, exaggerated well within the Thirties. The u. s., for instance, established the Securities and Exchange Commission (SEC) in 1934 to manage new stock problems and exchange mercantilism practices. The Banking Act of 1933 (also referred to as the Glass-Steagall Act) established deposit insurance within the u. s. and prohibited banks from underwriting or dealing in securities. Deposit insurance, that failed to become common worldwide till once war II, effectively eliminated banking panics as associate degree intensifying consider recessions within the u. s. once 1933.

The Great Depression conjointly vie a vital role within the development of


economic science policies meant to temper economic downturns and upturns. The central role of reduced disbursal and financial contraction within the Depression junction rectifier British social scientist John Maynard economist to develop the ideas in his General Theory of Employment, Interest, and cash (1936). Keynes’s theory advised that will increase in government disbursal, tax cuts, and financial growth might be accustomed counteract depressions. This insight, combined with a growing accord that government ought to attempt to stabilize employment, has junction rectifier to more activist policy since the Thirties. Legislatures and central banks throughout the planet currently habitually commit to forestall or moderate recessions. whether or not such a amendment would have occurred while not the Great Depression is once more a for the most part incontestable question.

POLITICAL MOVEMENTS AND SOCIAL AMENDMENT After from the war of 1914, the Great Depression was the gravest crisis in American history. even as within the war, the U.S appeared—at least at the beginning of the 1930s—to be falling apart. except for all the turbulence and therefore the panic, the last word effects of the Great Depression were less revolutionary than consoling.

This was undeniably associate degree era of extraordinary political innovation, abundant of it expressed within the reforms enacted by Franklin D.

Roosevelt’s New Deal and his administration’s made an attempt to address the issues of financial condition, state, and therefore the disintegration of the economy. it absolutely was conjointly a time once a big variety of American citizens flirted with Marxist movements and concepts, additionally like the notion that the model for a lot of humane society might be found within the Soviet Union. Above all, it absolutely was a decade of cultural ferment, within which writers, artists, and intellectuals experimented with new, a lot of socially orienting varieties of literature, painting, theatre, music, and mass amusement.

QUESTIONS A RESOLUTION MUST ANSWER (Q.A.R.M.A)

What is the solution to this global pandemic?

Can this global community come into consensus into setting up international bodies (Regulatory/ Supervisory) to prevent such a crisis from recurring again?

What measures will nations in order to repay national debt created by the war of 1914? How

Will these measures be implemented by every individual nation?

How will countries reconstruct their economies if they receive funds? Which sectors will be given the most importance? Specify the types of development programmes.


How will individual nations choose their

methodology of the economy? And why?

How will the procedures, workings and functions of the International bodies that this committee may set up function?

What will the powers as well as the economic terms through which countries lend money from or to?

What will be the voting rights as well as powers and functions of member nations? (in case of any proposals of setting up new economic bodies by this committee)

Specify the international legitimacy of documents published by this body.

What will be the official reserve currency of the world and what will its measure vary?

with other currencies of the world?


GLOSSARY

1) Balance of Payments: A system of accounting which measures the transactions between one country and the rest of the world. It is divided into the Current account which measures inflows and outflows of income, mainly

from exports (income inflow), imports (income outflow), investment earnings

received or paid and transfers of money between individuals and

organizations. A sub-set of the account is the Balance of Trade which is the

difference between: exports of goods and services and imports of the same.

The expenditure of tourists whom come to Britain from abroad is an export

while UK tourist spending abroad is an import. When people refer to a surplus

or deficit in the Balance of Payments they are generally referring to the

Current Account. The Capital Account measures money inflows and

outflows associated with borrowing, lending and transactions in assets. If a

British person buys a foreign asset (e.g. a house) that produces an outflow on

the capital accounts. If a foreign bank lends money to British company that

produces an inflow. An important point to note is that the overall balance of

payments (current plus capital) must balance so that surpluses and deficits on

the current and capital account offset one another. For example, if Britain has

a current count deficit (buying more abroad than it sells) the gap has to be

covered by borrowing from abroad or selling assets to foreigners: these

actions produce an inflow of money (capital account surplus). A persistent

current account deficit can be a problem if it requires ever more borrowing or

selling off assets.

2) Consumer Price Index (CPI) A statistical measure of the average level of

prices in the UK and changes in that level over time. It involves tracking prices

of a “basket” of goods and services representative of the pattern of purchases

of households. A base year is set and the cost of the basket is given a value

of 100. If in the next year the price of the basket had risen by 5% then the

index value for that year would be 105 and so on. It is also called the

Harmonized Index of Consumer Prices (HICP). It replaced the Retail Price

Index (RPI) in most government uses after 2007 on the grounds that the CPI

was more in line with internationally agreed standards. Because the RPI and

CPI use different “baskets” they can produce divergent results in comparisons

over time.


3) Debt In relation to governments, the total amounts outstanding to people and

organizations from whom the government has borrowed. It is the sum of past

deficits less repayments of past borrowing. Some government borrowing has

to be repaid at fixed intervals and governments may have to borrow to

“refinance” loans which are repaid. If the new loans are more expensive

(higher interest rate) than the old loans then this can create problems but this

is not a current issue for the UK as only a small proportion of debt requires to

be refinanced at present and because interest rates are low.

4) Deficit : It term used to describe the amount by which government spending in a

period (e.g. a year) exceeds the amounts raised by taxes and other

government income. A deficit has to be covered by government borrowing.

Governments borrow money in various ways ranging from National Savings

accounts and to the sale of government bonds to financial institutions. At

present the UK government can borrow easily while paying lenders historically

low interest payments. Countries where investors perceive a risk that they

may not be repaid can find borrowing difficult and expensive.

Deflation A fall in the overall Price Level as measured by indicators such as

CPI or RPI.

5) Demand The quantity of goods or services which purchasers are willing to

buy at a given price. For example, if a hotel can sell 500 bed-nights a week at

£100 then the demand for bed-nights at that hotel at that price is 500 per

week. Demand is sometimes expressed in terms of the demand for the

product of a specific business, demand for a type of product (e.g. hotel rooms

in London) or in terms of demand for a group of products (e.g. goods and

services bought by tourists). Demand can be affected by many influences: for

example poor weather in an area may reduce demand for hotel rooms there,

However, in general, demand for a product will fall if it becomes more

expensive and rise if it becomes cheaper. Equally, an increase in demand will

tend to push up prices and a fall in demand to push them down.

6) Direct Impacts A change in incomes or employment in an industry or sector

which experiences a change in its output. A component of multiplier

calculations.


7) Exchange Rate The price at which one currency can be bought or sold for

another. Thus the exchange rate of the pound Sterling against the US dollar in

February 2015 was £1 = $1.54. A fall in the Sterling exchange rate against

another currency makes the UK a cheaper place to visit for tourists from that

country and a rise in the Sterling exchange rate makes the UK more

expensive. Exchange rates can thus be an influence on the number of visitors

to the UK.

8) Economic Growth – An increase over any given time period (e.g. one year)

in the total output of an economy as measured by GDP.

9) Full Time Equivalent (FTE) The jobs created or supported by a project may

involve a mix of full time jobs (i.e. standard weekly hours, year round), parttime jobs and seasonal jobs: the latter are common in tourism sectors. To

enable comparisons to be made between projects or programmes it is useful

to express job impacts using a common measure: Full Time Equivalent. In this

approach a job with standard full time hours which will exist year round is

treated as one job (1 FTE). A full year part time job is treated as a fraction of

an FTE depending on the number of hours worked and a seasonal job can be

similarly be expressed as a fraction of an FTE based on hours worked as a

proportion of those worked by someone employed year round. FTE

calculation are used in various HR contexts as well as in impact assessment.

10) Gross Domestic Product (GDP) GDP is a measure of the value of what is

produced in a country in a given period (generally one year). It is Gross

because it does not subtract or allow for the “using up” of capital assets which

would be needed to sustain production. It is Domestic because it relates to

what is produced in a county irrespective of who produces the output and who

gains the income from the production; thus it includes the value of all the UK

production of foreign owned businesses in the UK but not overseas production

by UK business. It is Product because it is a measure of the value of what is

produced. Government statisticians can estimate GDP in three ways. The

income method involves adding up the incomes earned by persons and

businesses in the production of goods and services; the output method adds

the value of output from the different sectors of the economy; and the


expenditure method adds up all spending on goods and services produced in

the country including exports. These three methods should produce the same

result because the expenditure on goods and services produced will equal the

value of output and all output becomes someone’s income (wages, salaries,

rent, and profits). Statistical errors mean that the results produced by the three

methods may not match.

11) Gross National Product (GNP) GNP measure the value of the output

produced by the residents of a country or by assets which they own. It differs

from GDP because it excludes profits and income from domestic production

which goes abroad to overseas owners but includes income which residents

of the country receive from abroad (e.g. from overseas investments). In a

country in which many businesses are foreign owned GDP is likely to be

larger than GNP (e.g. Ireland) while in countries whose residents have

substantial overseas assets GNP is likely to exceed GDP (e.g. UK)

12) Gross Value Added (GVA) GVA is a measure of the value of goods and

services produced in a business, an area, an industry or a sector of an

economy. It is the value of output from an activity minus the goods and

services used up in producing the output (hence Value Added). It equates to

the sum of incomes earned in the activity (Wages, Salaries, Profits and

Rents). Adding up all the GVA of businesses and organizations in the

economy is part of a calculation of GDP. The relationship is Total GVA +

taxes on products - subsidies on products = GDP.

13) Macroeconomics The study or analysis of the working of the economy as a

whole focusing on economy-wide topics such as economic growth, inflation

and the Balance of Payments. An example of a macroeconomic issue would

be analyzing whether inflation would be expected to rise or fall in the coming

year.

14) Microeconomics The study and analysis of the behaviour of and inter-action

of consumers and producers of goods and services trading with each other I

markets. Microeconomics is concerned with such issues as how prices are

established, how changed in demand and supply affect prices and how price

changes affect both the demand for goods and services and the supply of


them. An example of a microeconomic issue would be analysing whether and

by how much a fall in transatlantic air fares would increase in-bound tourism

to the UK from North America.

15) National Income Accounts A set of accounting procedures through which

government statisticians calculate the level of income and production in a

country and specifically calculate Gross Domestic Product and Gross National

Product.

16) Nominal Value When a value, say average wage, GDP or tourist spending, is

measured in nominal terms it is measured in the cash value at the relevant

point in time (sometimes called money of the day). Thus, we might find that the

average earnings of an employed person in the UK were £4,500 in 1980 in

nominal terms (i.e. the cash amount actually paid). By comparison the

equivalent figure in 1990 was £10,600 in nominal terms. In nominal terms

average income has more than doubled (increased by 135%). However, we

cannot conclude that people were better off in 1990 unless we know what

happened to the average prices of goods and services (the Price Level) over

the period. To make a meaningful comparison we need to adjust the two

income figures so that they are expressed in terms of prices of the same year.

This enables us to establish the change in incomes in real terms. If we do that

we find that earnings in 1990 were about 23% higher than in 1980 in real

terms.

17) Price Level The average price of goods and services in the economy as

measured by the RPI or CPI. A rise in the general price level is termed

inflation and a fall is refered to as deflation.

18) Real change It is in an economic measure such as GDP or income or the

cost of a product is a change which is not only the result of a change in the

general price level but which represents, for example, a change in the amount

produced or what an income will buy. A real change can be measured by

comparing the change in the cash value of the item with a measure of price

change such as CPI. For example, if my income has gone up in cash (nominal)

terms by 10% but average prices have risen by 5% then my real income (what I

can buy with that income) has risen by just under 5%

Recession A fall in the output of an economy (as measured by GDP) which


goes on for some time. By convention, a fall in output in two successive three

month periods is termed a recession.

19) Retail Price Index (RPI) The RPI is a long-established measure of the

average level of prices in the UK and changes in that level over time. Although

replaced by the CPI for many government purposes, because it goes back to

1947 it is still calculated and used. One of the main differences between the

two measures is that the RPI includes mortgage interest as an item while the

CPI does not.

20) Supply The quantity of any good or service which people and organizations

providing those goods and services will offer for sale at a given price. Normally

an increase in price will lead to an increase in supply and a fall the reverse but

this process can be slow for some goods and services. For example, a rise in

demand for hotel rooms in London may increase the prices hoteliers can

charge. If the increase in prices is believed to be permanent, businesses will be

encouraged to provide more hotels rooms and thus increase supply. However,

organizing the construction or extension of hotels takes time and supply may be

slow to respond. When supply is eventually increased there will be some

downward pressure on prices. If businesses miscalculate and, for example,

increase supply of hotel rooms in an area by too much, prices (i.e. room rates)

may then fall sharply

ADDITIONAL REFERENCE MATERIAL

https://www.khanacademy.org/humanities/us-history/rise-to-world-power/great-depression/a/the-great-depression

https://www.britannica.com/event/Great-Depression

https://www.sahistory.org.za/article/what-was-great-depression-and-why-did-it-start-usa

https://www.history.com/topics/great-depression

https://www.thebalance.com/effects-of-the-great-depression-4049299

https://www.youtube.com/watch?v=GCQfMWAikyU&t=176s
















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