MIA: Encyclopedia of Marxism: Glossary of Events
Wall Street Crash (October 1929)
The Wall Street Crash was the U.S. Stock Market crash of October 29, 1929, which precipitated a world-wide collapse of share values and triggered the Great Depression – 10 years of economic slump with catastrophic levels of unemployment across all the industrialised countries apart from the Soviet Union.
After the end of the First World War, the world economy was boosted by a period of reconstruction. In the early- to mid-1920s, a series of defeats were inflicted on the workers movement which had been engaged in revolutionary struggles in the wake of the War and the Russian Revolution. These events created conditions for an economic boom which became known as the “Roaring Twenties”. The value of shares on the US stock market rapidly climbed, reaching a peak at the end of August 1929. Prices began to decline in September and early October, while speculation continued, but came to an abrupt end on October 18, when the Stock Market began to fall precipitately. The first day of real panic, October 24, is known as “Black Thursday” – a record 12,894,650 shares were traded. Major banks and investment companies bought up stocks in an attempt to hold up prices and stem the panic, but the panic began again on “Black Monday”, and on “Black Tuesday”, October 29, 16,000,000 shares were sold, and prices on the stock market collapsed completely.
Bankruptcies and skyrocketing unemployment spread from the US to every country in the world, except the USSR, where production continued to expand after the devastation of the Wars of Intervention (1918-1922). The Soviet Union was relatively unaffected by the Crash, firstly because it was a planned economy and not dependent on speculation, and secondly because, in any case, it had been more or less isolated from the world economy. The Great Depression lasted into the late 1930s with 14 million unemployed in the US alone, most with little means of support until Roosevelt’s New Deal was brought in.
Share markets had collapsed before, indeed a ten-year business cycle of boom and bust was quite normal up to that time, but the particularly rampant speculation of the preceding decade of boom, inflating the value of shares, and the proliferation of holding companies and investment trusts and the extent of large bank loans in the U.S. had accumulated a vast mass of fictitious capital, and its collapse made this crash particularly spectacular. The extent of capitalist development meant that the effects of the crash were more devastating than ever before; every sector of the economy was tied up in bank loans and share issues. When the value of stocks fell, those who had invested in them lost money, including banks who had loaned money to failed firms; banks in trouble called in their loans, borrowers were invariably unable to pay and were repossessed and their businesses closed down; employees were put off and creditors remained unpaid, triggering an indefinite chain of bankruptcies and ejecting millions onto the dole queues; when the factories closed down people had no alternative means of livelihood. The preceding rapid growth of the world market meant that, as the saying went, “When America sneezed, the rest of the world caught a cold”, and stock markets crashed across the world in the wake of the Wall Street Crash, plunging the world into the Great Depression.
There have been even larger crashes since 1929 as well, which have not had the same extent of effect. This is mainly because the share market is only one relatively minor avenue for speculation and even a total wipe out on the share market has only a partial impact.