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in The World Between 1919 and 1945 by (51.6k points)
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Write the main causes and consequences of the economic crisis.

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In the year of 1929 AD, the economic crisis began in the world. The currency was devalued and the value of agricultural products came down drastically. The condition of farmers and labourers became pathetic due to unemployment and inflation. This economic crisis started in 1929 and prevailed till 1934. 

The causes of this economic crisis were the following :

  • Effect of the first World War : In the first World War, the products were supplied by the industries for the army thereby, income, employment opportunities and purchasing power were increased. But after the end of the first World War this increase took the form of an economic crisis. 
  • Mechanization of Industries : A large number of workers became unemployed due to the implementation of mechanization in industries. The workers were replaced by the machines. As a result, unemployment invited the economic crisis. 
  • Excess of Production : Increased production capacity due to mechanization, but lack of buyers due to unemployment. For this reason, the factories gradually started shutting down and unemployment increased more. 
  • Economic Nationalism : Most of the nations followed their selfish economic policy by not worrying about the world economy after the war. They reudced their imports increased taxes on foreign goods, which caused the loss of international trade. 
  • Uneven distribution of gold : After the II World War, America started to recover it debts in form of gold, which caused the lack of gold in other countries. European countries had to impose restrictions on gold exports, which was the cause of economic crisis. 
  • Decline of American stock market: In October 1929 the value of shares fell to 50 billion in the American stock market. It has an impact all over the world. Many banks became bankrupt.

Effect of economic crisis : The economic crisis affected all the small and big countries. 

The effects of economic crisis are the following : 

  • Japan’s imperialistic aspirations started to grow due to economic crisis. As a result, Japan invaded Manchuria. 
  • During the economic crisis government was unable to deal with unemployment, inflation, instability and insecurity. As a result of this, the people were disillusioned with this method. 
  • As a result of economic crisis, most of Europe’s territories came under the control of dictators. 
  • As a result of the crisis (downturn), government control began to grow in the economic sector. 
  • Masses dissatisfied by economic system, were attracted to communism. 
  • Countries with a sense of insecurity started developing their own military power. 
  • The economic downturn shifted the attention of nations from global security to national security, this caused damage to the objectives of the League of Nations.

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