"In America today we are closer to the final victory over poverty than ever before in the history of any country. The triumph of mass prosperity is upon us," declared Herbert Hoover in 1928 during the presidential campaign, not knowing that less than a year later the collapse of Wall Street would occur. This will cause the world's biggest economic crisis to date, known as the "Great Depression".
The economy is often one of the key factors in political change. When the standard of living of citizens in even democratic societies begins to deteriorate, support for ruling parties usually begins to wane, and the political scene becomes unstable. This pattern was clearly observed during the Great Depression (1929–1933), which almost no government of the time in the world survived politically. We can draw a parallel with today's global events. After the pandemic and since the beginning of the war in Ukraine, the world is facing high inflation and the deterioration of the standard of living of citizens. As a consequence of such a situation, many parties in power lose elections, while citizens' dissatisfaction causes social upheavals.
THE GREAT DEPRESSION - CAUSES AND CONSEQUENCES
During the 1920s, the US stock market grew rapidly as investors bought stocks en masse, even borrowing to do so (margin trading). Stock prices have reached unrealistic values, with no basis in real economic growth. In October 1929, there was a panic, a sell-off in stocks, and a sharp fall in the market, which caused huge losses and the collapse of the financial system. Banks were exposed to risk because they gave too many unsecured loans. When investors and companies went bankrupt, many banks failed because they could not repay their loans. In the USA, between 1930 and 1933, about 9.000 banks failed, which destroyed the savings of millions of people and further reduced consumption.
People lost confidence in the economy, reduced spending and started saving, which in turn reduced the demand for goods and services. Deflation (falling prices) further worsened the situation as companies made less profit and laid off workers. In 1930, the USA introduced high tariffs (Smoot-Hawley Tariff Act) to protect domestic production, but other countries retaliated with the same measure. International trade has fallen drastically, which has particularly affected the industrial and export sectors. This crisis quickly spilled over into post-war Europe. The Great Depression began with the stock market crash of 1929, but its true effects were felt by millions of citizens through mass unemployment, falling wages and collapsing markets.
Data from the Great Depression show that the unemployment rate in the US reached 25 percent by 1933. Industrial production fell by almost 50 percent, and the price of wheat and other agricultural products fell drastically, destroying farmers' incomes. Herbert Hoover lost the election to Franklin D. Roosevelt.
In Germany, the economic crisis led to an increase in unemployment of over 30 percent, which created fertile ground for political extremism and the rise of Hitler and the Nazis to power.
In Great Britain, the depression caused poverty and unemployment to rise, leading to changes in government and economic policy. Labor (McDonald) was replaced by Conservatives (Baldwin and later Chamberlain).
France, Italy and other European countries, including the Balkans, also suffered severe consequences, which led to political changes and the rise of populism, but also to the strengthening of extremism. One of the most dramatic examples of the impact of this crisis on political stability was seen in Spain, where civil war broke out.
In short: The Great Depression showed that no government is immune to economic crisis; where the standard of citizens drops sharply, political changes occur.
INFLATION AFTER 2022: NUMBERS
Although we are not living in an age of depression today, the world is facing high inflation and economic uncertainty. After the pandemic and the start of the war in Ukraine, disruptions in supply chains and the rise in energy prices led to a significant deterioration in the standard of living of citizens.
Thus, inflation in the Eurozone reached 10,6 percent in October 2022, which is the highest level in the last few decades. In the USA, inflation was 2022 percent in mid-9,1, which caused a decline in the purchasing power of citizens. Great Britain faced a serious cost of living crisis, with inflation reaching 11 percent, with major energy supply problems.
Polls in several countries have shown that inflation is the main factor in voter dissatisfaction. Namely, as research shows, 61 percent of Americans believe that inflation is their main economic problem (Galup, 2023); the rise in the cost of living is cited as the main political problem by 67 percent of the citizens of Great Britain (Ipsos, 2023); then, 58 percent of Germans believe that the economic situation is worse than three years ago, and more than half of them blame the government (YouGov). Finally, the Demostat survey from 2024 showed that almost 88 percent of Serbian citizens feel inflation and its consequences for personal standards.
POLITICAL CHANGES
Inflation, rising prices and deteriorating standards are the key factors that have weakened the ratings of the Democrats in the United States and President Joe Biden. Republicans used this topic in the election campaign of Donald Trump, whose return to power is precisely the result of Americans' dissatisfaction with the economic situation.
The Conservative Party in Great Britain, which has been in power since 2010, has lost the trust of voters due to the rising cost of living and economic problems. Labor defeated them convincingly in the July 2024 election.
Then, Germany recorded the highest inflation since the unification of the country, which seriously affected the citizens and affected the political crisis that led to the fall of Olaf Scholz's government. In February's elections, the parties of the ruling coalition suffered a defeat, while the far-right AfD recorded historic growth. And the new government led by the CDU/CSU union will be weak and will face many problems, while economic uncertainty remains one of the main factors of voter dissatisfaction.
In June 2024, early parliamentary elections were held in France, which Emmanuel Macron called after his party's poor results in the European elections. Here too, high inflation, rising energy prices and citizen dissatisfaction led to the strengthening of the right and left bloc, while Macron's coalition lost its majority. It is similar in Italy, where in the elections at the end of 2022, the majority of citizens supported the opposition parties, after which a government led by Giorgio Meloni from the right-wing party Brothers of Italy was elected.
In Poland, too, the long-lived ruling party Pravo i Pravda lost power in 2023, while the opposition led by Donald Tusk managed to win over voters dissatisfied with rising prices and stagnant wages, while in Romania citizens supported the controversial populist Djordjeska.
Finally, in Austria and the Netherlands, right-wing or opposition parties achieved great electoral success, while parties in power were punished.
Argentina faced a serious economic crisis during 2023, with inflation exceeding 50 percent. This led to mass protests and strikes, which was the prelude to the political changes that resulted in the victory of the right-wing populist Javier Miley in the elections.
SERBIA - PROTESTS AND THE BACKGROUND OF DISSATISFACTION
In Serbia, although there is formal economic growth, citizens feel a serious decline in purchasing power due to the rise in prices of basic foodstuffs and energy. The student protests began as a result of the fall of the canopy at the Railway Station in Novi Sad and the attack on FDU students, but they were soon joined by other citizens deeply dissatisfied with the high inflation that directly affects their standard, then dissatisfied with the work of institutions and without trust in them (Demostat's research: "Government?-Dissatisfaction/Institutions?-distrust/Life?-Satisfaction").
The Government of Serbia formed in May 2024 failed to survive for more than eight months and Prime Minister Vučević resigned at the end of January 2025. Although at first glance it does not appear that inflation is the key factor in these protests, it is also at their root.
Namely, there are two levels in every social change: the surface level, that is, the cause, which is a concrete event that causes protests, social and political crises, or the fall of the government. These can be fuel price increases, accidents, police repression or political scandals and the like. Then there is the deep level, i.e. the causes: accumulated social, economic and political injustices that last for years or decades. These processes are not immediately visible, but they create an atmosphere of dissatisfaction and mistrust that escalates when the occasion arises. This division can be explained through structural processes that shape society in the long run. Structural processes are slow but inexorable and when their accumulation occurs, one reason is enough for them to come to the surface. In Serbia, after the beginning of the student protests, they spread and gained wider support from citizens dissatisfied with inflation and the decline in purchasing power and a number of other issues that were not articulated, and now they are gaining space. Today, educators, lawyers, farmers are on strike...
The author is a researcher of Demostat
