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How did economic policies of the 1920s and 1930s help deepen the depression?

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heyheyheyyyy | Student, Undergraduate | eNotes Newbie

Posted February 27, 2011 at 9:06 AM via web

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How did economic policies of the 1920s and 1930s help deepen the depression?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted February 27, 2011 at 9:29 AM (Answer #1)

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This is a question of some controversy because not all economic historians agree as to what helped to cause and prolong the Depression.

For example, many conservative economists and historians believe that the New Deal did not help to alleviate the Depression.  Instead, they argue, more free market policies would have ended the Depression much sooner instead of having to wait for WWII to end it.

One thing that almost everyone agrees on is that the Smoot-Hawley Tariff helped make the Depression worse.  The tariff was imposed to try to prevent the loss of American jobs to imports.  But the tariff really backfired.  Many countries around the world imposed similar tariffs and world trade declined a lot.  When this happened, all sorts of jobs that depended on trade were lost and the Depression was deepened.  As the salem-history link below says

Measured in constant 1982 dollars, the United States had a surplus of exports of goods and services over imports of goods and services of $4.7 billion in 1929. By 1933, this had become a deficit of $1.4 billion. The League of Nations estimated that the volume of world trade declined in real terms by more than 65 percent between 1929 and 1933.

This shows that the Smoot-Hawley Tariff helped to make the Depression worse.

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