1929 and 1973 Global Economic Crises

 

SEVDA ÖZBAY

In this article, I tried to explain and discuss the main causes and the social, economic, political, ideological, and cultural consequences of the 1929 and 1973 global economic crises that hit the world.

1929 Global Economic Crisis

Global Economic Crisis of 1929 began as financial crisis in the United States but soon spread to Europe and developed into worldwide macroeconomic crisis that involved sharp falls in demand, output, and trade. (Lindvall 2018)

The USA was profitable from the First World War. Well-being increased. When the process begins to normalize after the war, there was not enough demand for production. Surplus production is a cause of crises in capitalism. Also, failure to repay loans was a great problem.

The main economic consequence of the crisis is transition to Keynesian economic policies. It is seen that "the invisible hand" of classical economics did not work, so they turned to Keynesian policies. This meant that the state was expected to more intervene in the economy. During the crisis period, 50 million people were unemployed in the world, total production in the world decreased by 42% and world trade decreased by 65%. (EFE 2018)

The most important political consequence of the 1929 global economic crisis was of course the rise of right-wing authoritarianism in Germany, Austria, Central and Eastern Europe, and Latin America. But in countries that remained democratic, the Great Depression is instead associated with political realignments that favored the left, such as the “red-green” coalitions behind ascending political leaders such as Franklin D. Roosevelt (Lindvall 2018)

In this process, thousands of people's assets disappeared, thousands of people faced hunger. People have started to make a living by growing vegetables and fruits. People used the barter method. In this period, however, many soup kitchen were opened in the USA and served people. Social effects of the 1929 global economic crisis can be listed as follows: mass migrations, rise in the crime and suicide rates, increasing of alcoholism, lack of access of higher education, decreased divorce rates, rise in awareness about birth control…

In this period, Turkey, to increase the use of domestic goods has been declared a domestic goods week.

1973 Global Economic Crisis

This crisis is also known as The Oil Crisis. Member countries of Organization of Arab Petroleum Exporting Countries decided to apply an embargo against countries which support Israel during Arab-Israel Wars (exactly Yom Kippur War). This is the main reason of the crisis.

It will be useful to start with a background information about Middle Eastern oil in terms of understanding the subject. Oil in the region was discovered before the first world war. After the war, Britain and France tried to dominate the region with the mandate system while US tried to be effective with the oil companies. During the cold war, western states lost their former domination and used oil companies to regain it. Oil companies were nationalized in reaction in some countries where companies were located. Meanwhile, with the developing technology, oil had become an important energy source, especially in industry.

After western countries exported oil at low prices, OPEC was established in September 1960. The aim of OPEC is to ensure cooperation between oil producing countries and not to damage the producer countries on price, to increase and control the oil prices. After the Arab-Israeli wars, OAPEC was founded by oil-exporting Arab countries to use oil as a political power. Although the organization was established after the Six Days War (1968), it was not effective until 1973. (EFE 2018)

After the Yom Kippur war in 1973 members of OAPEC began to apply an embargo against western countries (there was Japan, too).  At the end of the embargo oil prices quadrupled; Britain changes its arms embargo; Japan reacted to Israel; The USA did not change its policy. In response to the embargo, the USA announced that they can do a military intervention in the Basra Bay.

Arab oil producers linked the end of the boycott to peace between the parties. To address this, the Nixon Administration began multilateral negotiations between the parties (Kissenger, Shuttle Diplomacy). They ensured Israel's retreat from the Sinai Peninsula and the Golan Heights. The embargo ended in March 1974. (wikipedia 2020)

As a result of the embargo, industrialized countries were obliged to accept that OPEC members to raise crude oil prices in every six months. On the other hand Western states established the International Energy Agency with the aim of cooperation in the field of oil and energy.

In response to the hikes in crude oil, industrialized countries have made a way to meet their financial losses by increasing the products they produce. Besides, the fact that oil producing countries assessment their money in American and European banks was another factor that reduced the losses of industrialized countries. The countries most affected by the crisis was developing countries such as Turkey.

The most important result of the crisis, in the field of technology is greater interest towards alternative energy sources. Work has begun to generate electricity mostly from dams, nuclear or thermal power plants, wind, and sunlight. (AKŞİN 2018)Small cars that use less fuel began to be produced. At this stage, Japan was moving fast, and Japanese brands started to be seen on the roads mostly (Toyota, Datsun, Mazda, Honda). Then western automotive industries also completed this transformation.  The 1973 Oil Crisis was a determining factor in the shift of the Japanese economy from the oil-dependent industry to electronics.  

 

Bibliography

AKŞİN, Sina. Kısa 20. Yüzyıl Tarihi. İstanbul: Türkiye İş Bankası Kültür Yayınları, 2018.

EFE, Süleyman. Çağdaş Türk ve Dünya Tarihi. Ankara: Limit Yayınları, 2018.

Lindvall, J. «The Political Consequences of the Great Depression and the Great Recession: Remarkably Similar.» Swiss Political Science Review, 2018: 514-517.

wikipedia. 6 6 2020. https://en.wikipedia.org/wiki/1973_oil_crisis (erişildi: 8 7, 2020).