Wall Street Crash: A Summary of the Events That Triggered the Economic Crisis of 1929.The First World War brought a shortage of all kinds of products to Europe, which led states to exercise broad control of the market, stifling private initiative. In the USA, the democrat Wilson, with his Fourteen Points, positioned himself as a defender of democracy and supporter of the free market economy; the Paris Conference of 1919 also gave hope for an open world economic system, but Europe’s economic situation was precarious: the shortage of goods was accompanied by a devaluation of the currency.
Unlike European countries, the USA only used 9% of its wealth for the war, so in the post-war period it experienced an economic development, thanks also to the loans granted to the allies, thus becoming the reference nation of the capitalist world. However, joining the League of Nations , created to preserve peace and facilitate trade, gave rise to doubts and uncertainties within the USA, which did not look favorably on American interference in the affairs of other states; this led to the fall of Wilson , who in 1920, gave way to the Republican Harding, whose political line was based on:
- detachment from European affairs;
- exploitation of loan repayment;
- increase private initiative;
- protectionism : ban on the trade in alcohol, which affects foreigners, judged to be addicted to drinking, and preserves industrial production, threatened by the alcoholism of workers; it will be repealed in 1933, because it encourages smuggling.
Harding is supported by the religious right, by women, by Calvinists, by the WASPs (anti-Catholic and anti-Irish white Anglo-Saxons) and by the nationalist and xenophobic movement, which develops more in these years and which will also lead to violent actions and the reaffirmation of secret societies such as the Ku Klux Klan , ultraconservatives and anti-Catholics. The isolationist policy will also produce a saturation of the internal market, which will lead the Americans to think of a necessary financial aid so that Europe could return to being a market territory: this is the premise of the Daws plan of 1924 and the Young plan (with the Weimar Republic ), which will lead to the revitalization of the European economy. In 1925 we witness the reinstatement of the gold standard , that is, the convertibility of money into gold, which had been lost in the war and which had caused the devaluation of the currency.
The protectionist policy of various states restricts the export possibilities of the USA, because the European governments, to fight inflation, adopt the path of deflation, that is the subtraction of money from circulation, which however leads to market stagnation. The increase in private initiative and the concession of numerous loans by banks produces an increase in liquidity , which leads companies to invest capital in shares; between ’27 and ’28 the wealth of the stock market grows enormously but without a real expansion of production, therefore the increase in the price of shares is no longer in relation to society, while a crisis of overproduction is lurking.
BLACK THURSDAY
On October 24, 1929, “ Black Thursday ,” there was a rush to sell that fueled a chain reaction that led, on the following Tuesday (“Black Tuesday”), to the collapse of the Wall Street Stock Exchange , that is, the fall of stock prices, followed by the closure of companies and the ruin of wealthy families, who, no longer able to pay the installments of their expenses, also caused the failure of the family banks that had granted the loans. Furthermore, in the South there was a collapse in the price of agricultural products that led to the bankruptcy of farmers who went to the city to increase the mass of unemployed.
