1923 1929 1933

Great Depression

Principles of the period were determined by two events:

› İzmir Economic Congress (1923)

› Lousanne Agreement (1923)

Aim: To determine the problems andneeds of the society in a collectivemanner

1135 Delegates

Principles of Economic Agreement: Economic Nationalism/Independence

To encourage private entrepreneurship

Capitulations were abolished

Cabotage right

Foreign debts will be started to be paid in 1929

Current custom duties will be applied for 5 more years

Balanced budget

Balance in international trade

Constant money supply

The aim of fiscal policy: Balanced budget

Revenues:› Indirect taxes after abolishment of Aşar› Salt, tobacco, sugar taxes

Expenditures:› Infrastructure (railways)› Domestic/foreign debt payments

Aim: To increase production

1925: Aşar was abolished

Private land ownership

1927: First population and agricultural census (82% percent of the labor force is employed in agriculture)

No mechanization

Prices are volatile

The credit markets are unorganized› Ziraat Bank: 1888› Agricultural Credit Cooperation: 1929

Technical schools, model farms

1925: Sanayii ve Maadin Bank

1927: The Law for encouragement of industry

1929: Independent custom duties

Duty free imports for export oriented industries

Agriculture : 43%

Textile : 24%

Mining and Machinery: 22%

During the period:› Exports decreased› Imports increased› At the end of the period: trade surplus

The fall in export prices were sharper than the fall in import prices, so terms of trade deteriorated.

Exports Imports Balance

1923 85 145 -60

1924 159 194 -60

1925 192 241 -49

1926 187 235 -48

1927 158 211 -53

1928 173 223 -50

1929 155 256 -101

1930 151 147 +4

1931 127 126 +1

1932 101 86 +15

Volatile

Depends on agricultural production

Share of agriculture: 40-50%

1921: The first constitution

1926: The Central Statistical Department

1928: Ministry of Economics

1929: Milli İktisat ve Tasarruf Cemiyeti (National Economy and Saving Association)

Domestic Factors:› The fall in cereal output because of whether

conditions. Turkey started to import cereals.› Rapid rise in import demand because of the

new import duties that will be implemented in 1929.

› The rise of import demand because of railway construction

› Moratorium (First installment of the foreign debt)

External factors:

› The Great Depression: Incomes of our export markets fell

Measures:

› 1930: TCMB› 1930: The law regarding the protection of

the T.L. › 1931: Import quotas› 1932: Clearing agreements

The beginning of the Great Depression in the United States is associated with the stock market crash on October 29, 1929, known as Black Tuesday.

Picture from the Franklin D. Roosevelt Library, courtesy of the National Archives and Records Administration.

During this time (in US):

the prices of stock fell 40%

9,000 banks went out of business

86,000 businesses failed The unemployment rate

went from 9% all the way to 25%, about 15 million jobless people.

Although the depression wasworld wide, no other country except Germany reached so high apercentage of unemployed.

The poor were hit the hardest. By 1932, Harlem had an unemployment rate of 50 percent and property owned or managedby blacks fell from 30 percent to 5 percent in 1935. Farmers in the Midwest were hit by economic downturns and the Dust Bowl.

The Dust Bowl was a series of dust storms causing major ecological and agricultural damage to American and Canadian prairie lands in the 1930s, caused by decades of extensive farming without crop rotation among cotton, corn and grain farmers using techniques that promoted erosion coupled with severe drought.

In the 1920s, in the U.S. the widespread use of purchases of businesses and factories on credit and the use of home mortgages and credit purchases of automobiles, furniture and even some stocks boosted spending but created consumer and commercial debt.

People and businesses who were deeply in debt, when demand for their product decreased, were in serious trouble. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged.

Banks which had financed a lot of this debt began to fail as debtors defaulted on debt and bank depositors became worried about their deposits and began massive withdrawals. Government guarantees and Federal Reserve banking regulations to prevent these types of panics were ineffective or not used.

Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade.

Families on the road with all their possessions packed into their trucks, migrating and looking for work. (Circa 1935)

Unemployed: Typical picture capturing the number of people who were unemployed and looking for a job. (Circa 1935)

Breadlines: long line of people waiting to be fed- New York City: in the absence of substantial government relief programs during 1932, free food was distributed with private funds in some urban centers to large numbers of the unemployed. (Circa February 1932)