There’s one realization I just had when looking back through economic history: the Great Depression isn’t only a past event—it’s also an extremely important lesson for how we manage the economy today.

The so-called Great Depression began in 1929 and continued throughout the 1930s. It wasn’t merely a financial crisis, but a global economic storm with horrific effects. Unemployment rose to as high as 25% in some countries, millions of people lost their jobs, businesses closed one after another, and living standards fell significantly.

But do you know where it started? It all began in October 1929, when the stock market crashed—the day people call Black Tuesday. Throughout the 1920s, speculation ran rampant, and stock prices were inflated in a completely unrealistic way. When people lost confidence, stock prices plunged like never before. Millions of Americans—many of whom had borrowed money to invest—lost all their savings overnight.

But that was only the beginning. As panic spread, banks began to fail because of mass withdrawals. People who had lost their savings had less money to spend, and the economy spiraled into a terrible deflationary cycle. There was no deposit insurance back then, so when a bank shut down, the entire community lost their lifetime savings. Credit flows dried up, affecting every area of the economy.

Things became even worse when it spread around the world. Although it started in the United States, European countries—already weakened by the costs of World War I—were also hit severely. The U.S. government passed the Smoot-Hawley Act in 1930 to protect domestic industries with high tariffs. But other countries retaliated, and global trade fell sharply. Thousands of businesses went bankrupt, from small shops to major industrial conglomerates.

With unemployment climbing, people and businesses cut back on spending and investment. Weaker demand led to layoffs, and the cycle continued. The Great Depression grew increasingly severe, with no real prospects for a natural recovery.

The social and political impacts were also substantial. Economic hardship became fertile ground for political extremism in some countries. Democratic nations carried out reforms, while other countries saw the rise of authoritarian movements. Homelessness increased, and charity soup kitchens became common in urban centers.

The path to recovery was long and rough. No single solution was enough. In the United States, President Franklin D. Roosevelt rolled out the New Deal with public works projects to create jobs and restore confidence in the financial sector. Many developed countries also introduced unemployment insurance, pension schemes, and social welfare benefits. But what truly reversed the Great Depression was the outbreak of World War II, when governments invested resources into industry and infrastructure—boosting production and creating jobs.

Looking back now, the Great Depression is an important reminder of how fragile the global economy can be. The lessons learned from that period—deposit insurance, regulations for securities, and social safety nets—still shape how leaders and experts respond to today’s economic challenges. In other words, the Great Depression changed how we view the role of government in managing the economy, ensuring banking stability, and providing social safety nets during times of crisis.