During the World War I, demands on grains rapidly increased to feed the soldiers in the war. American farmers got heavily involved in debt trying to buy more land to produce more grain. Taxes increased to pay for the weapons and medicine used in the war. When World War I ended, taxes continuous to increase to pay to rebuilding cities. The economy is already tumbling, then on October 29,1929 the stock market crashed. Many people lost money, and do not have the money to pay goods. So workers in factories war laid off, unemployment increased and led to an economic depression known as the Great Depression.
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Economy depression is when the unemployment rate are high with a very low economic activities. Many countries were affected by the Great Depression like Canada and Germany. So in 1944, World Bank and International Monterey Fund were established at Bretton Woods by the United Nation to prevent economic depression from happening again.

An article:
"Globalization: Cause of global economic depression

January 1, 2010

Till last few months the concept of globalization, was not just seen as one of the most popular concepts in the studies of international relations but was also viewed for its advantages; such as making the world a global village. As this global village made all countries, communities and corporations whether big or small interdependent on each other, it was always known and predicted by economic analysts that any negative or positive economic impact will affect the entire world directly.external image depression_image004.jpg
It is for this reason that the recent global economic depression that initially was witnessed in United States has engulfed all the rich nations of the world. This global


depression has already been termed as global economic tsunami despite the fact that analysts proclaim that the worst is still to come. In such circumstances when every rich country is facing crashes in there foreign exchanges and a rapid fall in there index, the world leaders must try to evaluate the exact size of this gigantic economic tsunami because unless the true nature of the vexation is not determined none of any economic package or plan would be of any ascendancy."
Source:
"Globalization: Cause of global economic depression | News World Wide." News WorldWide -- News from around the globe.. N.p., n.d. Web. 5 June 2011.

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Purpose of World Bank and International Monetary Fund:
International Monetary Fund:
  • Promote international trade
  • Protect world trade
  • Have fund available for countries to use and correct a country's policies to help a developing country to become developed and be able to pay off their debt. (structural adjustment )

World Bank:
  • Original goal: Help to rebuild countries after the war
  • Reduce poverty and protect the environment
  • Making loans to developing countries for infrastructure

World Bank, International Monetary Fund and Structural Adjustment:
Every time when a developing country goes to the IMF or the World Bank to ask for loan, the World Bank or the IMF tell the country to change their policies and if the country does not agree with it the country does not get the loan. The IMF and the World Bank might ask countries to reduce social spendings and lower trade barrier. However, the structural adjustment can cause negative affect toward the developing countries, like when public services become privatized which I will talk about in the next topic.