As the “Great Depression” looms, measures must be taken on the condition of “uncompromising implementation”
The Great Depression (1929–1939), which ravaged the entire world, caused severe devastation through the great catastrophes it unleashed across the globe, and is believed to have paved the way for the Second World War—which claimed millions of lives—erupted on 29 October 1929, exactly six years after the proclamation of the Republic of Turkey. When we examine the causes behind this period – which is also believed to have laid the foundations for the bipolar world order – we first observe the rapid growth phase entered into by the stock market in the United States. This growth continued throughout the first six months following the inauguration of US President Herbert Hoover in January 1929.
During the great ‘Hoover bull market’, share prices soared to incredible heights, and everyone – from banking and industrial giants to drivers and cooks – rushed to brokers to invest their liquid assets or savings in securities from which they could make a profit. To fuel this growth, brokerage firms channelled billions of dollars from banks to Wall Street to provide credit for margin accounts.
According to researchers’ findings, these developments were reminiscent of the ‘Mississippi Bubble’ – described as an early economic crisis and stock market crash in France in 1719–1720 – and the major crash known as the ‘South Sea Bubble’, which occurred on the London Stock Exchange in 1720. These major crashes occurred after the Scottish financier John Law had excessively printed paper money and speculatively inflated the shares of the Mississippi Company; by the end of 1720, when the unrealistic promises faded, the shares crashed and France plunged into a deep crisis. The South Sea Bubble, too, was a major stock market crash in England caused by speculation surrounding the South Sea Company, political bribery and unfounded promises.
In short, some 200 years later, the scenes created by the South Sea Bubble and the Mississippi Bubble had re-emerged. By mid-summer 1929, approximately 300 million shares were being traded on margin, a situation that drove the Dow Jones Industrial Average to a peak of 381 points in September. As a result of these developments, prices began to fall in early September and October, yet speculation continued; much of this speculation was fuelled by individuals who had borrowed money to buy shares — a practice that could only be sustained as long as share prices continued to rise.
On October 18, the market went into free fall and the frenzy to buy shares turned into an equally frenzied rush to sell.
On October 24 — known as ‘Black Thursday’ and marking the first day of genuine panic on the US stock markets — a record 12.9 million shares were traded as investors scrambled to recoup their losses. Nevertheless, whilst a number of major banks and investment firms made a successful effort that day to stem the panic by purchasing large blocks of shares—resulting in the Dow closing down by just six points—these efforts were not enough to keep the market afloat.
The panic reignited on ‘Black Monday’ (October 28), when the market closed down 12.8 per cent. On ‘Black Tuesday’ (October 29), over 16 million shares were traded. The Dow lost a further 12 per cent and closed at 198; this represented a fall of 183 points in less than two months. Blue-chip shares fell very sharply; even shares in the robust General Electric company dropped from 396 on 3 September to 210 on October 29. American Telephone and Telegraph (AT&T) lost 100 points. DuPont fell from its summer high of 217 to 80, United States Steel from 261 to 166, Delaware and Hudson from 224 to 141, and shares in the Radio Corporation of America (RCA) from 505 to 26.
Whilst these developments were causing turmoil on the stock markets, political and financial leaders in the US initially sought to portray the situation as a temporary market jolt, issuing statements aimed at instilling confidence. In particular, President Hoover and Treasury Secretary Andrew W. Mellon sought to allay concerns about these extraordinary events with optimistic remarks, stating that the economy was ‘fundamentally sound’ and that a major revival in prosperity was ‘just around the corner’.
Partly as a result of these statements, although the Dow Jones Index had almost reached the 300 mark again by early 1930, it plummeted once more in May; the ‘Great Depression’ had now begun; in other words, it would take another 20 years for the Dow Jones Index to regain enough momentum to surpass the 200-point mark again.
Among the most prominent causes triggering the stock market crash was the fact that, during this
period when speculation had become widespread, those who had purchased shares on margin had not only
lost the value of their investments but were also unable to
repay the loans they had taken out to invest in shares. Furthermore, the US Federal Reserve’s (Fed) decision in August 1929 to tighten credit by raising interest rates from 5 per cent to 6 per cent, the proliferation of holding companies and investment funds that opened the door to new borrowing, and the impact of a large number of large bank loans that could not be written off all contributed to the severe economic stagnation that had begun in the middle of the year.
In short, whilst the Wall Street crash of October 1929 triggered the Great Depression, around 90 per cent of American households at that time held no shares whatsoever. However, such crashes in the markets where securities such as shares and funds were bought and sold affected not only those who owned shares or funds, but society as a whole. Consequently, one in four workers became unemployed, and by 1933, with approximately 15 million people out of work, the unemployment rate in the US peaked at around 25 per cent.
Almost all of the thousands of banks established, particularly in the second half of the 19th century and the early 20th century, went bankrupt. According to historical records, between 1930 and 1933, approximately 9,000 to 11,000 US banks went bankrupt, and over 1 billion dollars of depositors’ savings were lost. In the midst of this major economic downturn, the famous Empire State Building, completed in 1931, struggled to find tenants and, ironically, earned the nickname ‘Empty State Building’.
Amidst these developments, in 1935, Parker Brothers launched the board game Monopoly, and families buying and selling property with play money led the game to quickly become a national craze. Meanwhile, the notorious Chicago gangster Al Capone opened a soup kitchen in 1931 that served meals to hundreds of unemployed and hungry people every day.
The Walt Disney Company, one of the world’s largest media and entertainment firms based in California, also released the animated short film *The Three Little Pigs* in 1933, and the film’s hit song ‘Who’s Afraid of the Big Bad Wolf?’ became the unofficial anthem of resilience in the face of these severe hardships.
The devastating impact of the Great Depression forced millions of families across the US into ruin, and the severe problems that arose drove large sections of the population to rise up in protest. To curb these movements, President Franklin D. Roosevelt signed the Social Security Act in 1935, establishing a federal safety net for the elderly and the unemployed that remains in force to this day.
It was precisely at this time that Adolf Hitler came to power in Germany, a country plunged into a severe economic crisis by the First World War, and was appointed Chancellor on 30 January 1933. Paul von Hindenburg, who served as Germany’s second President and had appointed Adolf Hitler as Chancellor in 1933, died in 1934. Following this development, Hitler abolished democratic institutions and the office of the President, and proclaimed himself Führer.
Having seized all powers, Hitler violated the Treaty of Versailles and re-armed Germany, subsequently annexing Austria and parts of Czechoslovakia in quick succession. After Nazi Germany invaded Poland on 1 September 1939, Great Britain and France declared war on Germany, and thus the ‘Second World War’ officially began. In the wake of these developments in Europe and the outbreak of the Second World War, full employment was restored in 1941–1942 thanks to the massive scale of military production and expenditure for the war effort.
The Great Depression, which erupted amidst these market developments, was not only one of the most severe economic crises in history but was also replete with events that highlighted human ingenuity, social solidarity and the extraordinary circumstances of the era. Among the standout stories of ingenuity were ‘notebooks made from newspaper’.
As families affected by this great devastation had no money left to buy notebooks, books or paper, children would write their school notes and homework on slate stones—a fine-grained, layered metamorphic rock formed by low-grade regional metamorphism of shale or mudstone—which they collected from building sites, or they would glue pieces of old newspaper -water paste to turn them into notebooks.
Also during this period, socks with large holes could be mended repeatedly using egg-shaped wooden or stone tools. Furthermore, in the story—which has become part of the traditional narrative through years of retelling—of a mother and her children in Chicago who were trying to make ends meet on a widow’s pension and had lost their home, it is recounted how neighbours in the neighbourhood and the local community quietly left coal and food on their doorstep to protect the family from the winter cold.
Furthermore, according to eyewitness accounts from the period, whilst children were shivering with hunger due to rickets (a disease caused by vitamin deficiency) and unable to find protein, companies dumping surplus milk into rivers and canals, whilst farmers ploughed cotton into their fields and slaughtered pigs to prevent prices from falling, are counted amongst the most shocking and tragicomic tales of the era. Once again, in many cities, thousands of people – much like in the Hollywood cult film *They Shoot Horses, Don’t They?* – competed for days, even weeks, dancing to music whilst sleep-deprived and exhausted, simply to secure a plate of hot food and a roof over their heads.
To alleviate this societal collapse, even if only slightly, the colossal robot Elektro (The Moto-Man)—introduced by Westinghouse at the 1939 New York World’s Fair, capable of smoking a cigarette and inflating a balloon—was exhibited to instil in the public a sense of hope for the technological future.
Developments stemming from the Great Depression also gave rise to adventures linked to large-scale social migration. Thousands of young, unemployed men, not wishing to be a burden on their families, travelled across the country as stowaways in the sealed carriages of freight trains, forming a nomadic subculture known as ‘hobos’.
Thousands of families from the vast prairie regions of Kansas, Nebraska and Oklahoma, ravaged by drought and dust storms, migrated along the famous Route 66 towards California – which they saw as a ‘land of milk and honey’ – with their belongings loaded onto their cars.
What followed is well known; even before the Second World War had officially ended, a new international monetary system known as ‘Bretton Woods’ was established in 1944 with the participation of 44 countries, under which global currencies were pegged to the US dollar, and the dollar in turn was pegged to gold. Following this, the International Monetary Fund (IMF), the World Bank and the General Agreement on Tariffs and Trade (GATT) – which would later become the World Trade Organisation (WTO) – were established to support global trade and financial stability.
Alongside the US launching a new, politically driven initiative known as the ‘Marshall Plan’ – aimed at bringing the collapsing European economies into its orbit as a countermeasure to the rising socialist system – a period of growth ensued characterised by Keynesian policies involving state intervention in the economy, the expansion of social security networks and the rise of the consumer society.
Alongside these political developments, the United States’ new military initiative, which began with the Manhattan Project, paved the way for the use of nuclear energy for both military (the atomic bomb) and peaceful purposes, such as electricity generation. Furthermore, the V-2 rocket technology developed during the war evolved into a space race between the US and the USSR during the Cold War, with both sides launching satellites in quick succession and embarking on missions to the Moon.
Jet-powered aircraft, initially used in the military sphere, were quickly adapted for civil aviation, accelerating global travel. More importantly, the first electronic computers, developed during the war years to decipher codes, laid the foundations for the modern age of computing and communications alongside the invention of the transistor. In other words, the door to the digital age had been opened.
Whilst all these developments took place worldwide and brought us to the present day, serious ‘crises’ have occurred—and continue to occur—at times on a regional scale and at other times at a national level. Whilst some have become significantly wealthy, primarily through abuses of market systems or ‘short- and long-term speculation’, thousands, even tens of thousands of people are being added as another link in the chain of severe poverty as a result of this speculative wealth accumulation. In virtually all countries where laws and fundamental rules are applied without compromise, such unlawful “stock market and market abuses” are extremely rare, whilst they occur more frequently in more lenient systems. Consequently, all countries must, in reality, anticipate and identify such movements in advance and take all necessary measures, provided these are implemented without compromise.
ITR Economics (Institute of Trends Research) is one of many reputable organisations worldwide that conducts forecasting work on such potential developments. ITR Economics, which has maintained an overall accuracy rate of 94.7 per cent for its annual forecasts since 1985, maintains that, in their own words, “the validity period of a forecast is just as important as its accuracy.”
ITR Economics has for many years predicted that a second Great Depression (1929) will occur in the 2030s:
“The path leading up to the Great Depression will be a significant process in its own right, presenting both opportunities and challenges. As we all strive to maximise profit and corporate value, business leaders need to start preparing for this period now.”
ITR Economics also answers the following questions: “What trends are contributing to this forecast? How should businesses prepare throughout the 2020s? Are there any factors that could alter this forecast?”
“The trends we are seeing are so significant and have gained such strong momentum that it will be difficult to reverse them. Action is imperative. We must implement the economic measures that will protect us; we must do our utmost to prevent the next Great Depression from striking with unprecedented severity.”
In short, ITR Economics forecasts that a second global Great Depression will occur between 2030 and 2036. This projected six-year recession stems from structural imbalances such as an ageing population, rapidly rising healthcare expenditure, increased government spending on social welfare, rising inflation and ballooning national debt.
ITR Economics also lists the key factors behind this forecast as follows:
• Demographics: The ‘ageing population’ resulting from the ageing Baby Boom generation, coupled with shrinking labour pools in the US, China and Europe, is reducing economic productivity.
• National Debt and Deficits: Rising public debt and high interest payments are limiting the government’s fiscal flexibility.
• Social Security Expenditure: Programmes such as Social Security and Medicare are facing increasing pressures due to shifts in the ratios of contributors to beneficiaries.
• Healthcare Expenditure: Medical expenditure continues to rise at a rate exceeding general inflation.
• Inflation: Persistent and cyclical inflationary pressures are expected to peak before the economy shifts to a deflationary environment during the depression.
ITR Economics also explains the factors distinguishing this projected crisis from a standard recession as follows: “Unlike a typical recession lasting two to four quarters, ITR forecasts a multi-year economic contraction and a volatile trough period lasting approximately six years (2030–2036).” After noting that “temporary growth spurts or positive reports between 2030 and 2036 could create false hopes before a genuine structural recovery begins”, the firm outlines the following preparation strategies it recommends against this “major crisis” it emphasises is approaching:
“Strengthen Balance Sheets: Build up cash reserves during the 2020s and reduce unnecessary leverage.
“Invest in Productivity: Adopt automation and productivity tools to offset labour constraints.
“Diversify Revenue Streams: Assess regional, demographic and product risks to provide protection against simultaneous global recessions.”
Viewed from this perspective, it is clear that Turkey, which is seeking ways to escape the severe economic conditions it is currently facing, must shake off the effects of recent upheavals, recover from its current problems as quickly as possible, and get back on its feet; it must also anticipate and recognise potential developments in advance, taking all necessary measures under the condition of ‘uncompromising implementation’.
