How did shifting government policy contribute to both the boom of 1920s and the bust of 1929s the domestic and international policy played in these developments, including taxation, tariffs, and international banking.

On Thursday October 24th 1929 the great New York stock exchange panic began. 12,894,650 shares changed hands, many at fire sale prices. The following Black Tuesday October 29th Wall Street began its long meltdown. The Wall Street crash divides two eras: the jaunty 'jazz age' of the 1920s and the 1930s - the decade of depression.

Crowd outside Wall Street 1929

Crowd outside Wall Street 1929

Everybody knows that shares in New York experienced 'a little local difficulty' in October 1929. And everybody knows that millions experienced hunger and destitution for the next ten years - hardship only ended by the horror of World War. But what is the connection? Crises are inherent in a system where production is unplanned and carried out for private profit. Crises take the form of overproduction, with idle workers confronting idle machinesEach recession has its own characteristics and may be set off by a different trigger. The Wall Street crash may be regarded as the trigger of the Great Depression, just as the 'credit crunch' marks the beginnings of our present crisis.

Sure, panic played its part. In all capitalist crises apparently accidental factors play a role. In both the 1929 crisis and today the downturn would have come along sooner or later in any case. Industrial production in the USA fell from an index of 127 in June1929 to 122 in September, 117 in October, 106 in November, and 99 in December. Automobile production declined from 660,000 units in March 1929 to 440,000 in August, 416,000 in September, 319,000 in October, 169,500 in November and 92,500 in December.

In other words the recession was already under way in the 'real economy' when Wall Street imploded. Galbraith, historian of the events, comments, "Cause and effect run from the economy to the stock market, never the reverse. Had the economy been fundamentally sound in 1929 the effect of the great stock market crash might have been small." This recession in production reflected itself in the world of shares, of dreams and illusions. The panic on Wall Street in turn had a knock back effect on the world of production and profits.

The collapse was unprecedented. In the USA between 1929 and 1933 national income fell by 30% and industrial production more or less halved. By 1933 over a quarter of the workforce was jobless. According to the League of Nations world unemployment nearly tripled between 1929 and 1932.

After the First World War the USA provided the dynamism for the world economy - and led the world into depression. The upswing was powered by new or expanding industries - mass production of cars and electrical appliances, electricity generation and construction