The Great Depression and the Great Recession: History Repeating?
As time progresses, we start to see patterns emerge in history. The Great Depression of the 1930’s was a period of economic disaster following World War One. Almost a century later came the Great Recession of the 2000’s following the turn of the century. Both of these economic disasters significantly affected people all over world. When they struck, no one expected them. People’s lives were dramatically changed almost instantly. There are many similarities and differences between the Great Depression and the Great Recession with social, political, and economic change.
In both cases prior to the economic crashes, the economy was thriving. In the 1920’s, the Great War had just ended and many things changed. Women were starting to gain more rights, they could vote and many were working outside of the home. The younger generation of women cut their hair above their shoulders and wore dresses with hemlines above the knees, which enraged the older generations. People were starting to buy low interest stocks, and many people got rich. This new wealth triggered the era of consumer spending. This, in turn, led to over production and expansion. Many people invested in the stocks too late, saw the prices of stocks falling and started to panic sell their shares. This led to the 1929 crash of the New York Stock Exchange, which was the main contributor to starting the Great Depression.
With the turn of the 20th of the century, many people thought the world was going to end and were ecstatic when it didn’t. Similar to the Great Depression, the economy was thriving for long time and people felt invincible. Technology was advancing rapidly and industries were booming. However, the economy is very delicate. If one market, in one country collapses it starts a domino effect. This can potentially affect the world, like the U.S. housing market. Many people took out sub-prime mortgages on their homes, because the interest rate was very low. This was the main reason the Recession started because it triggered a national bank emergency in the U.S. and consequently, the prices of homes plummeted.
During these crises events had a domino effect. People had to stop their consumer spending, which led to companies’ profits dropping, resulting in mass layoffs. It was a vicious cycle. In the 1930’s, Canadians turned to Prime Minister Richard Bedford Bennett to get the country out of the Depression. However, he thought that the government should interfere as little as possible and let the “invisible hand” fix the economy. Canadians were enraged with his solution, and he became the target of endless satire. The Prairies were hit the hardest out of the while country. The farming industry, coming mainly from the prairies, was hit by the Dust Bowl. The Dust Bowl was a severe drought, which prevented farmers from growing crops, driving the prices of food up. Two thirds of the prairie provinces were on government relief. Canada was hit the hardest because of their close trade connections with the U.S., which the Canadian economy relied on heavily.
Compared to the Great Depression, the Great Recession affected the world’s economy with more complexity because there was more at stake. People had more assets and the values of them were higher. Otherwise, the two are similar. Since most of the recession was happening with banks in the U.S., there wasn’t much Canada could do during the crash, other than wait it out. According to Statistics Canada, out of the G7 countries, Canada was affected the least by the recession. The reason Canada was affected mildly was because of the Canadian Bank Act, which prevents Canadian banks from being individually owned and protects Canadians from losing money saved in banks.
Towards the end of Prime Minster Bennett’s term in 1935, he came up with a strategy, which took after after U.S. President Franklin Roosevelt’s “New Deal”. The Canadian version of the “New