Hardest hit were countries, like Britain and Germany, that owed the most to the United States.

In Germany, unemployment rose steeply, leaving one in four workers jobless. Britain was less badly hurt, but its industries and trade were depressed.

Desperate governments tried to protect their economies from foreign competition. The United States imposed the highest tariffs in its history. The policy backfired when other nations retaliated by raising their tariffs. In the end, all countries lost access to the global markets as world trade continued to shrink. The collapse of world trade spread the misery of the Great Depression beyond the industrial world to Latin America, Africa, and Asia.

Western Democracies React to the Depression

The Great Depression led to changes in government economic policies. For more than a century, Western governments had backed laissez-faire capitalism, the policy that calls for little or no government interference in the economy. During the 1930s, governments in Britain, France, the United States, and elsewhere stepped in to ease the impact of the Great Depression. None of their methods provided a quick fix, but they did alleviate some of the suffering.

Britain and France Search for Solutions

In response to the Depression, Britain set up a coalition government made up of leaders from all three of its major political parties. The government provided some unemployment benefits. It kept tariffs low throughout the British Empire to boost trade but raised tariffs against the United States and other countries. By the mid-1930s, Britain was slowly recovering from the worst of the Great Depression. Still, unemployment remained high, and the recovery was uneven.

The Great Depression took longer to hurt France than some other countries. However, by the mid-1930s, France was feeling the pinch of decreased production and unemployment. In response, several leftist parties united behind the socialist leader Leon Blum. His Popular Front government tried to solve labor problems and passed some social legislation. But it could not satisfy more radical leftists. Strikes soon brought down Blum's government. Democracy survived, but the country lacked strong leadership able to respond to the clamor for change.

Striking workers walk down a boulevard in Paris in June 1936.

Roosevelt's New Deal

Meanwhile, in the United States, President Herbert Hoover firmly believed that the government should not intervene in private business matters. Even so, he did try a variety of limited measures to solve the crisis. Nothing seemed to work.

In 1932, Americans elected a new President, Franklin D. Roosevelt, or FDR. Roosevelt argued that the government had to take an active role in combating the Great Depression. He introduced the New Deal, a massive package of economic and social programs.

Under the New Deal, the federal government took a more active role in managing the economy than ever before. New laws regulated the stock market and protected bank deposits. Government programs created jobs and gave aid to farmers. A new Social Security system provided pensions for the elderly and other benefits.

As the New Deal programs were being put into effect, a natural disaster in 1934 hit several central states. After years of drought and overfarming, huge winds blew across the plains. The winds picked up and carried away the topsoil exposed by erosion, creating the Dust Bowl. The storms destroyed crops, land, and equipment. Thousands of farmers lost their land. Many migrated to the cities of the West Coast in search of work and a new life.

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