Impact of the Great Depression on Australia - Essay Example

How was Australia transformed by the Great Depression? 2007 Chapter The Great Depression in the world The Great Depression is worldwide economic downturn that began in 1929 and lasted until 1939. It was the longest and the most severe depression ever experienced by the world economy, which caused its significant changes as well as the changes of the overall macroeconomic policy and political life1. Having originated from the USA, Great Depression affected great many countries throughout the whole world. It should be mentioned the world economy experienced different crises long before the Great Depression, however, the latter was different from all earlier economic crises. It started in October 1929 with the Stock Market Crash in the United States. The causes were disastrous: international trade fell by 30 %; the number of the unemployed people all around the world reached 30 million by 19322. The reasons and consequences of the Great Depression were much researched and still there is no common idea about this. Thus, economist Milton Friedman supposed that the Depression was the result of faulty monetary policy, while British economist John Maynard Keynes believed that the Depression resulted from an imbalance between consumption and production, still the other consider that the Great Depression was the result of certain historical events3. However, I consider that we should take into account all these factors. Besides, I’d like to add that great role in this process was played by the World War I, which destroyed traditional economy systems of the countries: nations were in debt, production had to be reconstructed and the Russian market was closed because of the Revolution. Before turning to the particular case of the Great Depression in Australia, I’d like to mention that this economic event had a great influence on the overall flow of the history and the further development of the world policies and international relations. The Great Depression made all the countries to reconsider their line of policy, which led to the advent of fascism, nazism and militarism (Germany, Italy, Japan), totalitarian communism (Soviet Union) and the final response to the Depression was welfare capitalism (Canada, Great Britain and France) 4 Chapter 2. The Great Depression in Australia 2.1. Historical conditions, which influenced the development of the Great Depression in Australia Australia was a part of the British Empire and its economy was tied with the Great Britain, it was the main Australia’s trading partner and the Australian pound depended on pound sterling. As the British economy suffered from the World War I, it had grate influence on the economy of Australia5. But in spite of this the population of the Green Continent raised rapidly, the industry in main regions developed confidently. In 1926 British government put pound sterling back to the Gold Standard. This made British exports less competitive in international markets and had immediate effect on Australian trade. Export demands and prices fell; employers didn’t have an opportunity to pay wages that workers demanded. As a result was number of strikes in many sectors of economy6. 2.2. Consequences of the Great Depression in Australia The Great Depression of the 1930s affected most nations of the world and Australia was not an exception. Australia depended on exports such products as wool and wheat and it was one of the hardest–hit countries. Unemployment reached a record of 29 % in 1932 it was one of the highest rates in the world7. There were many agricultural and production problems: Australian wheat lost half its value, wool lost 45 % of its value8. 2.2.1. Economic impacts The main impacts of the Depression are following: financial crises, decline in trade, declines in manufacturing, unemployment9. Australia did not have functional plan for economic recovery in Australia. There was no banking reform of socialisation of the economy. State governments and local councils continued with make-work unemployment relief scheme such as bridge building and other public works. The stimulation of the economy in the UK and the devaluation of the Australian pound, the abandonment of the Gold Standard and the 10% cut to award wages over time led to slow recovery 10. 2.2.2. Unemployment Unemployment, which had peaked at 29% in 1932, had been reduced to 10% at the start of the World War II11. Although the recovery in Australia was slow, there was a definite increase in industry and agriculture it formed high standards of industry and agriculture. In spite of political and economical spheres were transformed Australia restore its relationships with Britain12. 2.2.3. Social consequences I’d also say a few words on the social consequences of the Australia Great Depression. Of course, social problems were for the most part caused by the general unemployment, which consequently led to the fact that many people lost their homes and lived in very poor conditions. This can be exemplified by the words of the Great Depression survivor: People were forced into all sorts of tricks and expediencies to survive, all sorts of shabby and humiliating compromises. In thousands and thousands of homes fathers deserted the family and went on the track (became itinerant workers), or perhaps took to drink. Grown sons sat in the kitchen day after day, playing cards, studying the horses (betting on horse racing) and trying to scrounge enough for a three penny bet, or engaged in petty crime, mothers cohabited with male boarders who were in work and who might support the family, daughters attempted some amateur prostitution and children were in trouble with the police13. The other impacts of the Great Depression in Australia were: children from the working class left school at the age of 13 the majority of the domestic violence was laid on women married young people had better prospects to find the job but had less future career prospects bad position of migrants, who had lower wages and poor living conditions14 2.2.4. Political influences of the Great Depression The Great Depression had a very strong impact on the political life of the country. It led to the loss of confidence to the politics and abilities of the government. In its turn this public general dissatisfaction led to the appearance and popularity of numerous extremist organisations. During the Depression many people lost confidence in the abilities of their government. A number of political left communist, socialist, workers organizations became more active during the hard period. It made government to review its line of policy and propose new forms of government15. 2.2.5. Measures taken to manage the situation At the times of the Great Depression Australia was in the deep crises and the way out of this difficult situation was not so simple as well. Before the Great Depression there were no centralised unemployment assistance program in Australia. However, after the Wall Street crash, the situation changed. The first step was the federal government allocation of £1,000,000 to the states with the purpose of provision of relief to the people, who lost their working places. However, this first step did not produce the expected results and the number of unemployed population continued to grow16. The flow of the financing did not stop, followed by the further £1,000,000 in July 1930 and £500,000 in December. These funds were given to the states for public works, which were proposed by the leading economists of the country. For the most part this public work included hard manual labour, like the construction of the road built to the top of the Mount Wellington in Tasmania17 2.2.6.The recovery from The Great Depression The recovery from the Great Depression was not very quick and rather difficult. Numerous attempts were made by different governments but the majority of them were unsuccessful. Labour government headed by James Scullin was unable to drive the country from the deep economic crises. In fact because of the disputes within the party and its policy of deflationary, it led the country even to deeper crises if compared with the rest of the world. In the 1932 this government was voted out and substituted by the Lyons’ UAP government, which took the right course and managed to lead the country from the depression although also very slowly and painfully. Due to the more conservative direction of the Lyons’ government Australia reestablished its relations with the UK and relied much on the British course of the coming out of the great economic crises18. This course helped Australia greatly in managing the difficulties of the Great Depression and gradually the problem was solved, however, many historians and economists consider that the consequences of the Great Depression in Australia influenced its further development. REFERENCES AUSTRALIA ECONOMY, PEOPLE, CULTURE, FLAG. [Online]. (accessed March, 26 2007). AUSTRALIAN GREAT DEPRESSION. [Online]. (accessed March, 26 2007). AUSTRALIA, HISTORY OF. [Online]. [accessed March 26, 2007]. AUSTRALIA & NEW ZEALAND. HISTORY OF THE REGION. [Online]. (accessed March 26, 2007). BEHING THE HEADLINES AUSTRALIA: A NATION CHANGES DIRECTION. [Online]. (accessed March 26, 2007). COLE L. HAROLD, LEE E. OHANIAN AND RON LEUNG (2002).Deflation, Real Wages, and the International Great Depression: A Productivity Puzzle. DEE R. IVAN (2002). Rethinking the Great Depression: A New View of Its Causes and Consequences. DELONG J. BRADFORD. (February, 1997). Slouching Towards Utopia?: The Economic History of the Twentieth Century. The Great Crash and the Great Slump. University of California at Berkeley and NBER. Carew, Edna. (2005). The Great Depression. [Online]. (accessed April 25, 2007). THE GREAT DEPRESSION IN GLOBAL PERSPECTIVE. [Online]. (accessed March 26, 2007). HISTORY OF AUSTRALIA. [Online]. (accessed March 26, 2007). KINDLEBERGER C.P. (1973). The World Depression, 1929-1939. MACINTYRE STUART (2004). A Concise History of Australia. Cambridge University Press. MCELVAINE S. ROBERT. (2004). Encyclopedia of the Great Depression. Read More