If every country is in some sort of recession, shouldn’t the economy adjust accordingly as opposed to falling even more?
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The Great Depression typically was thought of happening from a crash of too much financial speculation. People without money were borrowing money and investing the money into the stock market. When the stock market crashed, essentially too much of the speculatory growth didnt happen, the people were stuck with debt without a mean of paying it back. This resonated down and down to people who were employed by the now broke speculators.
The recovery from the Great Depression happened because of the “New Deal”. A set of government subsidies and programs promoting injecting money to the regular people and helping the commons (agricultural land, rivers, roads) to be profitable again. To a European such as myself this was essentially fixing the economy by socialist policies.
New Deal had things in it like the CCC, basically setting up a HUGE government agency employing previously unemployed, but skilled workers, into nature conservation and agricultural land betterment projects. It injected purchasing power to the poorest bracket of society to generate need for products.
Without this kind of wealth redistribution to generate purchasing power every now and then, capitalism dies because purchasing power slowly dies. Private corporations require markets to their products and profits in order to inject cash to their laborers and they are always looking for ways not to give money to their laborers.
What helped the US to chug along was that at the end of the WW2, all industrial competitors were bombed to resemble the surface of the moon and US products essentially had infinite markets for them. Thusly, the US injected cash into defeated and bombed nations without purchasing power, by giving them money in the form of Marshall Aid.
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