GS Question

Several policy instruments were deployed to contain the Great Economic Depression. Here are some of the key measures adopted:

1. Monetary Policy: Central banks took various steps to stabilize the financial system and counter deflationary pressures. They lowered interest rates, expanded money supply, and intervened in the currency markets to maintain stability.

2. Fiscal Policy: Governments implemented expansionary fiscal measures to stimulate economic activity. They increased public spending on infrastructure projects, implemented job creation programs, and provided relief to unemployed individuals through welfare programs.

3. Banking and Financial Sector Reforms: Governments introduced regulatory measures to prevent bank failures and restore confidence in the financial system. They established deposit insurance programs, implemented stricter regulations on banking activities, and enacted reforms such as the Glass-Steagall Act, which separated commercial and investment banking.

4. Trade Protectionism: Many countries resorted to protectionist measures to shield domestic industries from foreign competition and preserve domestic employment. Import tariffs were raised, quotas were imposed on imports, and currency devaluations were undertaken to boost exports.

5. International Cooperation: Nations collaborated to stabilize the global economy. The 1933 London Economic Conference aimed to coordinate international efforts, but it ultimately failed due to disagreements. Later, the Bretton Woods Conference in 1944 established a framework for international monetary and financial cooperation, leading to the creation of institutions like the International Monetary Fund (IMF) and the World Bank.

6. Public Works Programs: Governments implemented large-scale public works programs to provide employment and stimulate demand. Projects such as infrastructure development, construction of public buildings, and resource conservation initiatives were undertaken.

7. Social Safety Nets: Governments established social safety nets to provide relief to vulnerable populations during the crisis. Unemployment insurance, income support programs, and job training initiatives were some of the measures implemented to protect individuals affected by unemployment and poverty.

These policy instruments were deployed by different countries in varying degrees and with varying success, providing valuable lessons for future economic crises.