Salah Uddin Shoaib Choudhury
The Great Depression
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 the world; 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. The Great Depression is commonly used as an example of how intensely the global economy can decline.
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 percent. By comparison, worldwide GDP fell by less than 1 percent from 2008 to 2009 during the Great Recession. 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.
The Great Depression had devastating effects in both rich and poor countries. Personal income, tax revenue, profits and prices dropped, while international trade fell by more than 50 percent. Unemployment in the U.S. rose to 23 percent and in some countries rose as high as 33 percent.
Cities around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming communities and rural areas suffered as crop prices fell by about 60 percent facing plummeting demand with few alternative sources of jobs, areas dependent on primary sector industries such as mining and logging suffered the most.
Coronavirus versus Wuhan virus controversy
President Donald Trump and his administration have already claimed that the coronavirus had originated from China and Washington tried to force the United Nations to call this as Wuhan virus. Countering Washington’s actions, senior Chinese officials claimed the virus came from the US military. Rising fury between the two largest economies during a massive crisis of this scale seems like a very dangerous situation.
American economic experts are seeing a mass wave of business closure throughout the European nations, the United States, Britain and Canada.
Post Coronavirus economic recession
According to analysts, due to the outbreak of coronavirus pandemic, the world already is under unprecedented economic turbulence. Immediately after this pandemic disappears, the world will witness a tremendous recession, which might even be much worse than the Great Depression.
Commenting on the post-coronavirus world economic scenario, Adam Tooze, the Kathryn and Shelby Cullom Davis professor of history and the director of the European Institute at Columbia University said, “China is the dog that hasn’t barked in this crisis so far because of the success of [its] conservative strategy. There has not been a big movement in the Chinese exchange rate and very little action on the Chinese balance of payments. But the situation may be more fragile than Beijing is comfortable with. And that has implications for everyone around them: the South Koreans, the Taiwanese, Singaporeans, the Japanese, the Australians. If the Chinese economy doesn’t come back strong, that’s a game changer for all of them.
“I think the third element is the crisis that is hitting the big emerging markets: the South Africas, the Brazils, the Nigerias, and potentially the Algerians, the Indias, the Indonesias. These are huge countries with big economies, with large American interests in them, and big geopolitical ramifications. And they are in harm’s way. Their currencies are plunging, they have large debts, and they’re going to be hit by the public health crisis on a really epic scale — especially in South Africa, where they have a big immunocompromised HIV [positive] population.
“The fourth zone of risk is the OPEC [Organization of the Petroleum Exporting Countries] complex. A trigger for the crisis in the financial markets was the breakdown of the OPEC-Russia negotiations and the signal from the Saudis that they were just going to produce and let the oil price crash. That was the moment that the financial markets really plunged. We tend to focus very much on Russia, Saudi, and shale in the US, but the vulnerable high-cost oil producers and energy producers is a really alarming list of countries. On top of the list for me will be Algeria and Nigeria — I think there is the potential for quite substantial regional destabilization”.
About the possible economic consequences in the United States, Shawn Tully wrote in the Fortune: “Never in recent decades has America suffered a deterioration in our economic outlook as swift and shocking as the tremors of the past five weeks caused by the coronavirus crisis. The 30% drop in the S&P 500 since its all-time high in mid-February is the fastest slide on that scale in its history; since Valentine’s Day, $10 trillion in shareholder wealth has vanished. The short-term funding that’s the lifeblood of corporations is freezing up as folks withdraw cash from money-market funds to pay for rent and groceries. An economy that was rebounding a few weeks ago after President Trump called a trade war truce is now universally viewed as heading for what could be the steepest one-quarter contraction in history.
“Americans are looking to crashes of the past for a prognosis on how sick the coronavirus will make our economy. And the one that’s top of mind is the most recent, the Great Recession, or what I’ll simply call “2008.” The Great Recession is such a terrifying precedent because it was both extremely deep, and it was long—a full recovery took not a quarter or two, but years.
“GDP shrank by 4% over six quarters, bottoming in mid-2009, and national income didn’t rebound to late 2007 levels for 14 quarters, until mid-2011.
To be continued
Salah Uddin Shoaib Choudhury is an internationally acclaimed multi-award-winning journalist and editor of Blitz