The Great Depression
The most well-known, and likely the most studied economic contraction in history; started by the stock market crash on the infamous Black Tuesday, on October 29th, 1929, in the United States, the effects of this recession are vast and international. International trade of all sorts fell to less than 60 per cent of what it was in the decade prior, in an example of the largest trade contraction internationally in recorded economic history.
Cities dependent on the heavy industry market which arose after the Industrial Revolution were the hardest hit by the Depression. Construction, farming, mining, and other primary sector industries nearly collapsed, and the workers within these industries were overwhelmingly left unemployed.
Interestingly, however, by early 1930, stock prices were back to where they were before the bubble began; that is, they were at early 1929 levels – the mark of a market correction to irrational speculative behaviour. A fall in market interaction due to losses of speculative money, however, resulted in protectionist fiscal policy from the United States government which was encouraged to engage in tariffs and other factors which inhibit gains from trade and destroy international trade economies.
Structuralist economists, such as John Maynard Keynes, took hold of the world’s economic beliefs at this time; encouraging government investment in the facilitating structure and production type “make work” projects to gain American jobs. Much of the United States highway system was built this way – and likely to no avail within economic reconstruction; how recovery from this depression was achieved is unclear, but most believe that the onset of war, new banking regulation, and some level of structuralist deficit spending was involved.