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The Great Depression

The End of the Great Depression

What actually ended it

Seven steps, about ten minutes, a question at each. You need no economics and no preparation, only a willingness to guess before you are told.

Step 1 of 7

The question

America's central bank published two essays on the same day in 2013. They give different answers to what ended the Great Depression.

Recovery began in 1933, six years before the Second World War began in Europe. The American economy grew 11 per cent in 1934 and 9 per cent in 1935, faster again in 1936, at rates no rich country has matched in peace since.

Why it matters and what it covers

It was never finished: output passed its 1929 level by 1937 and 7,700,000 people still had no job. Then policy tightened too early and the whole thing went backwards, and full employment, meaning enough jobs for all the people looking for one, came back only during the war.

Seven steps cover the recovery, why it was incomplete, the second fall and its cause, the spending that was never tried, and the question four institutions answer five ways.

What this module covers

  • Growth of 11 and 9 per cent, and faster again, from 1933
  • Output back, and 7,700,000 still out of work
  • The second fall, May 1937 to June 1938
  • Why it broke: reserves doubled and a new tax
  • The spending programme that was never tried
  • What ended the Great Depression, and who says so
  • How the war did it, and what was learned

Written for every level. Tap any underlined word for what it means, and open the boxes below for the economics behind each decision. If you already know the theory, skip both and the history reads straight through.

Step 1 · 1933 to 1936

Recovery began in 1933

What ended the Depression has more than one respectable answer. The dates are the place to start.

Recovery began in 1933. American started growing again that year, six years before the Second World War began in Europe.

The National Bureau of Economic Research puts the bottom of the fall at March 1933.

The Brookings Institution puts the growth that followed at 11 per cent in 1934 and 9 per cent in 1935. The third year was faster again.

These are enormous figures, against about 2 or 3 per cent in a good year for a rich country today.

output
How much an economy actually produces, in goods and in services. It is the thing growth measures the change in, and the thing a recession is a fall in.

Take a guess. You are not expected to know the answers, and being wrong is what makes a number stick.

The American economy grew 11 per cent in 1934 and 9 per cent in 1935. What did it do in 1936?

For scaleA good year for a rich country today is about 2 or 3 per cent.

Step 2 · 1937

Output came back, work did not

The recovery was incomplete: American factories produced more in 1937 than in 1929, and 7,700,000 people still had no job.

Output and employment are two different measures, and in 1937 they moved apart: the factories were past their 1929 level and the workforce was not.

The rate was 14.3 per cent that year, against 3.2 per cent in 1929.

A recovery that returns the goods without returning the jobs does not feel like a recovery to the people counting it.

unemployment
The number of people who want paid work and cannot find it, usually given as a share of all those working or looking for work. People who are not looking are not counted, so the figure understates how many are out of work.

By 1937 American factories were producing more than in 1929. Why were 7.7 million people still out of work?

For scaleUnemployment was 14.3 per cent in 1937 and 3.2 per cent in 1929.

Step 3 · May 1937 to June 1938

It broke

A second fall began in May 1937 and ran until June 1938.

The National Bureau of Economic Research counts it as thirteen months, a separate fall from the one that ran from 1929.

The recovery between the two falls is dated from March 1933, so this second fall interrupted four years of growth.

Brookings judges that the 1937 decision to make borrowing harder and raise taxes added two years to the Great Depression.

Unemployment was 14.3 per cent in 1937. What did it average across 1938, after the second fall?

For scaleThe 1937 fall ran thirteen months, against forty-three months for the first one.

Step 4 of 7
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That was module 7 of 7, the last in The Great Depression

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Take it further

🏦The 2008 crisis, where these lessons were used→ 🇺🇸United States: the numbers today→ 🎯Guess the Value, which trains you to estimate numbers like the ones these questions asked for→

Where every figure came from

[1] How fast the recovery was: Brookings Institution, Christina Romer, Lessons from the Great Depression for economic recovery in 2009.
[2] When each fall started and stopped: National Bureau of Economic Research, US Business Cycle Expansions and Contractions.
[3] What happened to jobs: Congressional Research Service, Labor Market Data: Great Depression vs. Recent Recession, R40655.
[4] Output back, employment not: US Department of Labor, History, Chapter 5: Americans in Depression and War.
[5] Why 1937 went wrong, and what ended it: Federal Reserve History, Recession of 1937-38 and The Great Depression.
[6] The three steps of the tightening: Economic History Association, Frank Steindl, Economic Recovery in the Great Depression.
[7] Whether spending was ever tried: National Bureau of Economic Research, Price Fishback, US monetary and fiscal policy in the 1930s, w16477.
[8] Unemployment before and during the war: Economic Report of the President 2015, Table B-11, printing the Bureau of Labor Statistics series, via GovInfo.

Country data from the World Bank (CC BY 4.0) and the UNDP Human Development Report (CC BY 3.0 IGO)
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