2026-04-18
The 1920s is considered a booming era for the United States, with stock markets rising, factories producing, and ordinary people pouring savings into stocks on borrowed money. Beneath the surface, a speculative bubble was building; the stock prices didn't reflected the actual value of companies and production outpacing the actual demand. When it burst in 1929, unemployment soared, industrial output collapsed, and the shock rippled across the global economy.
American banks had previously lent enormous amounts of money to European countries to help them rebuild after WW1. When the crash hit, they called in those loans urgently. Global trade collapsed by roughly 65% between 1929 and 1934, with the Smoot-Hawley Tariff adding further fuel to the fire.
The Soviet Union, largely cut off from Western banking and trade, was shielded from that crash. Its industrial output grew nearly 50% between 1929 and 1934. Central planning seemed to work. But the same system that protected it from external shocks was quietly rotting from within. A modern economy runs on incentives, innovation, and the free flow of complete and honest information, none of which central planning could sustain. By 1991, the USSR collapsed under the weight of its own ideological rigidity.
The lesson is not that markets should run unchecked. The 1929 crash itself showed what happens when greed operates without guardrails - banks lend recklessly, bubbles inflate, and ordinary people pay the price. What drives lasting growth is a balance. Economic freedom that rewards innovation and individual initiative, paired with smart regulation that acts as a guardrail keeping greed in check and protect the general population from the worst excesses of the market.
Free flow of information, freedom to innovate, the right incentives, and a state that referees rather than controls are not just policy choices, they are the conditions under which nations grow, and without which, they eventually fall.