The Great Deflation or the Great Sag refers to the period from 1870 until 1890 in which world prices of goods, materials and labor decreased, although at a low rate of less than 2% annually. This is one of the few sustained periods of deflationary growth in the history of the United States.
This had a negative effect on businesses in established industrial economies such as Great Britain

Great Britain

Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...

 while simultaneously allowing incredible growth in the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 which was just beginning to industrialize. See: Long depression

Long Depression

The Long Depression was a worldwide economic crisis, felt most heavily in Europe and the United States, which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War. At the time, the episode was labeled the Great...

There were several so called depressions during the period that were actually profit recessions. Many businesses suffered, such as warehousing, especially in the London area, due to improvements in transportation, like efficient steam shipping and the opening of the Suez Canal, and also because of the international telegraph network. Displaced workers

Displaced workers

Displaced workers refers to workers 20 years of age and older who have lost or left their jobs because their company has closed or moved, there was insufficient work for them to do, or their position or shift was abolished.-External links:...

 found new employment in the expanding economy as real incomes grew.

By contrast to the mild deflation of the so called Great Deflation, the deflation of the 1930s Great Depression was so severe that deflation today is associated with recessions, but in fact there is no clear link.

Productivity caused deflation

The Great Deflation occurred at the beginning of the period sometimes called the Second Industrial Revolution

Second Industrial Revolution

The Second Industrial Revolution, also known as the Technological Revolution, was a phase of the larger Industrial Revolution corresponding to the latter half of the 19th century until World War I...

. It was characterized by dramatic increases in productivity made possible by inexpensive Bessemer and open hearth steel, the railroad boom, efficient steam shipping and animal powered agricultural mechanization. The prices of most basic commodities fell almost continuously; however, wages remained steady. Goods produced by craftsmen, as opposed to in factories, did not decrease in cost.

One of the best sources on this topic is David Ames Wells

David Ames Wells

David Ames Wells was an American engineer, textbook author, economist and advocate of low tariffs.-Biography:...

 (1891).

See also

• Productivity improving technologies (historical)
  Productivity improving technologies (historical)
  Productivity improving technologies date back to antiquity, with rather slow progress until the late Middle Ages. Technological progress was aided by literacy and the diffusion of knowledge that accelerated after the spinning wheel spread to Western Europe in the 13th century...
  
  
• Long depression#Myth of the Long Depression