Subject: World History

Answer:

The Great Depression of 1929-1939 was the most severe economic downturn in modern history, leading to widespread unemployment, poverty, and social upheaval across the globe. Various nations implemented diverse policy instruments to combat this unprecedented crisis, marking a shift from laissez-faire economics to more interventionist approaches.

Monetary Policy Measures

• The Federal Reserve initially maintained a tight monetary policy but later adopted expansionary measures through Open Market Operations to increase money supply and ease credit conditions.
• Bank Holiday declared by President Roosevelt in 1933 helped restore public confidence in the banking system through mandatory bank inspections.
• Glass-Steagall Act of 1933 separated commercial and investment banking to prevent speculative activities with depositors' money.

Fiscal Policy Interventions

• New Deal Programs under Roosevelt implemented extensive public works projects like the Tennessee Valley Authority (TVA) and Civilian Conservation Corps (CCC) to generate employment.
• The Agricultural Adjustment Act (AAA) provided subsidies to farmers for reducing crop production to stabilize agricultural prices.
• Social Security Act of 1935 established unemployment insurance and pension systems for elderly Americans.

International Economic Measures

• Abandonment of Gold Standard by Britain (1931) and US (1933) provided monetary flexibility to combat deflation.
• The Smoot-Hawley Tariff Act (1930) raised import duties to protect domestic industries, though it ultimately worsened global trade.
• Imperial Preference System by British Empire created preferential trading arrangements within colonial territories.

Labor Market Reforms

• The National Industrial Recovery Act (NIRA) established codes for fair competition and workers' rights.
• National Labor Relations Act (Wagner Act) of 1935 protected workers' rights to unionize and engage in collective bargaining.
• Fair Labor Standards Act (1938) introduced minimum wage and maximum working hours regulations.

The policy response to the Great Depression marked a paradigm shift in economic thinking, leading to the rise of Keynesian Economics. These interventions laid the foundation for modern welfare state policies and financial regulations. The experience demonstrated that government intervention could play a crucial role in managing economic crises, influencing post-World War II economic policies and the establishment of institutions like the International Monetary Fund and World Bank.