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TWO DECADES OF CONTRACTION The "Long Depression" was a period of economic growth in the US that was mistakenly taken for a depression since prices were falling in a period of deflation. Unemployment was very low and production was increasing. Increases in productivity and a strong currency, backed by gold, made deflation possible. Consumers benefited by falling prices. CAUSES OF THE CRISIS The causes of the Depression are also debated. The most immediate cause, and the date that is often used as the start of the Depression, was the collapse of the Vienna Stock Exchange on May 9 , 1873 . Others have argued the depression was rooted in the 1870 Franco-Prussian War that hurt the French economy and forced them to make large War Reparations payments to Germany . Monetarist s believe that the depression was caused by shortages of Gold that undermined the Gold Standard , and that the 1848 California Gold Rush , and more importantly the 1886 Witwatersrand Gold Rush in South Africa and the 1898-99 Klondike Gold Rush helped alleviate such crises. Others pointed to developmental surges (see Kondratiev Wave ), theorizing that the Second Industrial Revolution was causing large shifts in the economies of many states imposing transition costs which may also have played a role in causing the depression. REACTIONS TO THE CRISIS Like the Great Depression, the Long Depression saw many nations of the world resort to Protectionism to shore up faltering industries. Influenced by List's Nationalist argument for industrial protection, Bismarck abandoned the German free trade policy in 1879, enacting tariffs over the objections of his National Liberal Party allies. France, which had adopted free trade during the Second Empire (1852-1870), also abandoned it, while Benjamin Harrison won the 1888 US presidential election on a protectionist ticket. Only the United Kingdom retained the low tariffs enacted in the 1846 repeal of the Corn Laws . Besides Tariff policy, governments of the time were not closely involved in managing the economy. According to the tenets of Classic Liberalism , it was generally believed that it was not the government's role to intervene in the economy, and thus little was done. The Long Depression also contributed to the revival of Colonialism leading to the New Imperialism period, symbolized by the Scramble For Africa , as the western powers sought new markets for their goods. According to Hannah Arendt 's '' The Origins Of Totalitarianism '' (1951), the "unlimited expansion of power" followed the "unlimited expansion of Capital ". In the United States , the meltdown of the European economies led directly to the Panic Of 1873 and ushered in the Long Depression. GNP FOR SELECTED EUROPEAN GREAT POWERS :at market prices, in 1960 US dollars and prices; in billions (Paul Kennedy, ''The Rise and Fall of the Great Powers'', Fontana Press, 1989, p 219) SEE ALSO
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