Depression, in economics, a period during which there is a widespread decrease in economic activity. Factories close, or else operate at a reduced pace, because not enough of their products can be sold at a profit and great numbers of men and women lose their jobs. Persons and companies cannot pay their debts, and credit is hard to get. Numerous firms, especially smaller ones, go out of business. Depressions form a basic problem of capitalism. What to do about them often is the subject of much political and economic dispute.
1785-88. Debts and disorganized business conditions at the end of the Revolutionary War caused this first United States depression. Shays' rebellion in Massachusetts reflected the distress of debtors.
1792. Speculation in 1791 raised the price of new bank notes and of the Western lands that often backed those notes. When several unstable banks collapsed, a business panic followed.
1815-22. A steep drop in prices after the War of 1812 and refusal of banks to redeem their notes in specie (coin) brought hard times. The depression included a panic in 1819.
1837-43. The extension of bank credit to too many borrowers for canal and railway building projects and a general crop failure were among the causes of this slump. Banks again suspended specie payment in 1837 after President Jackson forced adoption of a new national bank policy.
1857-58. Failure of the Ohio Life Insurance Company in Cincinnati started a commercial panic in the wake of overexpansion connected with the Mexican War and the discovery of gold in California.
1873-79. Production cutbacks after the Civil War, railway speculation, wars in Europe, and losses in big fires in Boston and Chicago led to hard times. Failure in September, 1873, of Jay Cooke & Company, a Philadelphia firm that handled federal war financing, signaled the business collapse. Nationwide railway strikes involving violence occurred in 1877.
1884-85. Numerous railway bankruptcies led to a panic that was centered mainly in the East.
1893-97. Mass unemployment, distress among farmers, and strikes, including the Pullman strike of 1894, marked this era. A result was vigorous political debate over the quantity and kind of money in circulation. Crop failures in Europe, leading to increased demand for American farm products, helped bring recovery.
1907. Failure of the Knickerbocker Trust Company in New York City, gambling in stocks, and exposure of mismanagement of certain life insurance firms combined to cause this slump.
1913-15. A mild business decline starting in 1913 became a serious depression in 1914 after World War I began in Europe. The war-created demand for American goods restored prosperity by 1916.
1920-22. When European industry recovered from the effects of World War I, the demand for American goods fell sharply. A postwar depression developed.
1929-39. The “Great Depression” of this period was the longest and severest economic slump in American history. According to some estimates, nearly half the industrial workers of the nation were unemployed at the worst period of the depression. President Franklin D. Roosevelt's New Deal program of many economic changes was a result.