The 'Long Depression' (1873–1896) affected much of the world from the early 1870s until the mid-1890s and was contemporary with the
Second Industrial Revolution. At the time it was regarded as the ''Great Depression'', until the more severe
Great Depression occurred in the 1930s. It was most notable in
Western Europe and
North America, but this is in part because reliable data from the period is most readily available in those parts of the world. The
United Kingdom is often considered to have been the hardest hit by the Long Depression, and during this period it lost much of its large industrial lead over the economies of
Continental Europe. The Depression is usually believed to have ended by 1897. The global economy grew at an impressive rate from that year to the start of
World War I.
Two decades of contraction
The "Long Depression" was a period of economic growth in the US that was mistakenly taken for a depression since prices were falling in a period of deflation. Unemployment was very low and production was increasing. Increases in productivity and a strong currency, backed by gold, made deflation possible. Consumers benefited by falling prices.
Causes of the crisis
The causes of the Depression are also debated. The most immediate cause, and the date that is often used as the start of the Depression, was the collapse of the
Vienna Stock Exchange on
May 9,
1873. Others have argued the depression was rooted in the 1870
Franco-Prussian War that hurt the French economy and forced them to make large
war reparations payments to
Germany.
Monetarists believe that the depression was caused by shortages of
gold that undermined the
gold standard, and that the 1848
California Gold Rush, and more importantly the 1886
Witwatersrand Gold Rush in
South Africa and the 1898-99
Klondike Gold Rush helped alleviate such crises. Others pointed to developmental surges (see
Kondratiev wave), theorizing that the
Second Industrial Revolution was causing large shifts in the economies of many states imposing transition costs which may also have played a role in causing the depression.
Reactions to the crisis
Like the Great Depression, the Long Depression saw many nations of the world resort to
protectionism to shore up faltering industries. Influenced by
List's nationalist argument for industrial protection,
Bismarck abandoned the German free trade policy in 1879, enacting tariffs over the objections of his
National Liberal Party allies. France, which had adopted free trade during the
Second Empire (1852-1870), also abandoned it, while
Benjamin Harrison won the 1888 US presidential election on a protectionist ticket. Only the United Kingdom retained the low tariffs enacted in the 1846 repeal of the
Corn Laws.
Besides
tariff policy, governments of the time were not closely involved in managing the economy. According to the tenets of
classic liberalism, it was generally believed that it was not the government's role to intervene in the economy, and thus little was done.
The Long Depression also contributed to the revival of
colonialism leading to the
New Imperialism period, symbolized by the
scramble for Africa, as the western powers sought new markets for their goods. According to
Hannah Arendt's ''
The Origins of Totalitarianism'' (1951), the "unlimited expansion of power" followed the "unlimited expansion of
capital".
In the
United States, the meltdown of the European economies led directly to the
Panic of 1873 and ushered in the Long Depression.
GNP for selected European Great Powers
:at market prices, in 1960 US dollars and prices; in billions
(Paul Kennedy, ''The Rise and Fall of the Great Powers'', Fontana Press, 1989, p 219)
See also
★
Panic of 1873
★
Economic history
★
Great Depression
★
Kondratiev wave
★
New Imperialism
★
Second Industrial Revolution
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