The Great Depression of 1929 vs 2020 coronavirus crisis: Similarities, differences - ERDAL TANAS KARAGÖL

The Great Depression of 1929 vs 2020 coronavirus crisis: Similarities, differences

The market crash of 1929 and the 2020 economic crisis caused by the coronavirus epidemic are being compared quite frequently nowadays. Looking at the damage it has caused so far and will likely cause in the economy, both similarities and differences can be seen between the two.

SIMILARITIES

The 1929 economic crisis was triggered by stock market speculation, while the reason underlying the current crisis is the fact that we are face to face with a freeze in the economy due to the coronavirus epidemic.

There was a situation in both the 1929 and 2020 coronavirus crises that had an adverse effect on workers. The further the coronavirus spreads and the further the economy shrinks, its impact on unemployment becomes deeper.

The two crises are not only economic, but they rather stand out as a social and, in fact, as a political matter. In the event that the coronavirus epidemic is prolonged, it appears the unemployment issue will be the most serious matter in the social and political domain.

A shrink in demand was and is in question for both the Great Depression of 1929 and the 2020 coronavirus crisis, in addition to the interest rate cuts made by central banks to boost economic activities and reactivate the business world, fiscal policies that encourage recruitment are also striking.

Though the impact of the 1929 economic crisis and the 2020 coronavirus crisis were initially observed in developed countries, the effect of both crises have reached a global scale.

DIFFERENCES

The 1929 economic crisis had started with stock market speculations, yet the cause of the current crisis is the coronavirus epidemic, which has brought economies to a standstill.

In the 1929 crisis, the world had united and formed institutions such as the International Monetary Fund (IMF) and World Bank to deal with global finance problems post-crisis, and thanks to the measures taken with this cooperation, the Great Depression was overcome. However, in the coronavirus economic crisis of 2020, countries have individual decision-making processes. While the epidemic is global, the measures taken to fight the virus and the economic problems it has caused are on a domestic scale.

The source of the 1929 economic crisis was economic shocks, while the most striking characteristic of the crisis caused by the coronavirus epidemic is, perhaps, that it compels countries to make a choice between health and the economy.

While it was the shrinking demand that stood out in the 1929 crisis, the shrinking demand as well as the drop in demand for fuel, oil prices plummeting worldwide, and the global energy wars that have heated up after the shock appear as the serious consequences of this epidemic.

HOW EFFECTIVE ARE THE MEASURES TAKEN AGAINST THE CRISIS?

Many countries are currently taking measures to avoid adverse impacts on their economies following the coronavirus epidemic. Central Banks are struggling to provide the resources demanded by the market with the interest cuts and the asset purchases they have made and will make aimed at injecting money into the market. Meanwhile, with conveniences such as credit opportunities provided by banks, loan deferrals and the government’s tax deferrals, measures are being taken to avoid the likely shrink in the economy.

However, if the economy does shrink, people will lose their jobs, and their expenditures will decline, hence providing income appears to be the sole solution for the state to increase spending.

This chiefly depends on the resource amount the state has allocated or will allocate to increase spending.

While countries that possess such resources are being generous, the subject of how and from where countries lacking them will provide these resources or financing is bound to be the hottest topic in the upcoming period.

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