The reason the .38Spl case is so long is that it was the very last cartridge designed for the old "black powder" gunpowder (in 1895 I believe). "Black powder" was 1 part potassium nitrate, one part yellow sulpher, 4 parts charcoal. The potassium nitrate produced oxygen on ignition, the sulpher was the initial heat source, the charcoal was the fuel.
The 9mm Para was among the first rounds (1907) designed for smokeless powder, which is chemically related to nitroglycerin and is a totally different substance. On average, smokeless is six times more potent than black powder, although that varies by type. The Germans used that "power to size efficiency" to produce a smaller yet potent round - small bullets mean smaller grips in an auto, and less bulk for the military to transport.
In other words, you can't judge potential power by the case size. The 357Magnum is still way bigger than it needed to be, because they stretched the .38Spl case for safety - the new round couldn't be inserted into an older .38 gun, but the newer gun could take the old ammo.
That said, large case volumes can allow you to get impressive ballistics with less peak pressure, when you're "walking the edge" of the cartridge's power limits. So if you handload, and take two identical guns in .38Spl and 9mm, you can get more energy out of the .38 before it blows up than you can the 9mm.
Other "leftover calibers from the black powder era" are in common use: the .45LC dates to 1873 and was used by Custer's men at the Little Bighorn, the .45-70 is a little bit older than that and saw service there too (probably on both sides!), the .30-30, several others. But the .38Spl is by far the most popular, and often the only one a particular shooter might see...hence the "whoa, is that case huge or WHAT?" comments
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