ECONOMY in the INTERWAR Period [AP World History] Unit 7 Topic 4 (7.4) [REUPLOAD]

What happened to the countries that made up the Allied Powers?

While victorious in the war, they lost huge amounts of their workforce and they spent tremendous amounts of money on the war effort. And therefore they were not in the best economic position.

What happened to the countries that made up the Central Powers?

In general, they fared even worse.

For example, GERMANY. As part of the Treaty of Versailles, Germany was blamed for the entire war and made to pay reparations for all the damage they caused. Additionally, Germany paid for their part in the war on credit cards. And they assumed that by winning the war and annexing resource rich lands, they were going to pay back their debt. But as it turned out, the winning part of that equation didn't work so well. This means Germany, in addition to paying reparations, was in debt. So in the face of such crushing expectations, the German government started printing more money. When that happened, the value of the German mark plummeted precipitously, and that led them into a situation called hyperinflation.

Did this hyperinflation situation only affect Germany?

No. They owed money in the form of reparations to powers like France and Britain. But when Germany couldn't pay them, they in turn struggled to pay their debts to the United States. Add to that, the Soviets weren't paying back their war debts either because they went ahead and has themselves a communist revolution and the Bolshevik government decided that old war debts did not belong to the new government. In further addition to all this, colonial economies suffered too because they had come to depend on their parent economies. And so colonial governments in Africa and Asia, and Latin America all got thrown into this giant economic turd stew. Then in 1929, the United States stock market crashed and plunged it into a Great Depression that affected the other countries mentioned above.

What was the solution that many of these nations came up with in order to solve the economic problems?

Get the government to step in and fix it

Who was John Maynard Keynes?

British economist.

Many European nations had transitioned into a more laissez-faire type economy in which there was very little government intervention in the affairs of the economy. He thought that the economy will correct itself in the long run, but while that's happening the people who live in that economy are suffering terribly. So Keynes argued that we shouldn't wait for the economy to correct itself. Instead, the government should get involved and try to stimulate the economy back into health. Keynes' idea was to prime the pump of a depressed economy with deficit spending and that's how you get the water, which is the money, to come out.

What did laissez-faire economics say?

The economy will always correct itself in the long run. If you give it enough time, the economy will fix itself.

How would the government get involved and try to stimulate the economy back into health?

By spending money and borrowing money. This is called deficit spending.

Who was Franklin Delano Roosevelt?

In the Untied States, he was a huge believer in the idea of deficit spending (Keynes' idea). His flagship program to get the United States out of depression was called the New Deal. So the way the U.S government stepped in to address their economic difficulties was by borrowing money and putting millions of people to work on government projects. Under the New Deal, people got jobs building dams, and public buildings and roadways.

What was the government intervention in the economy over in Russia like?

During this time, the Bolshevik government presided over a starving population and an economy on the brink of collapse. So, in 1921, Vladimir Lenin introduced the New Economic Plan.

What was the New Economic Plan?

Essentially, it was a rollback of communist policies intended to spur the economy back to health, by, among other things, reintroducing private trade into Russia. Lenin died in 1924 and the new Economic Plan essentially died with him.

Who was Joseph Stalin?

Ruthless authoritarian dictator. Just like Lenin, Stalin also got the government heavily involved in economic affairs. In order to do that Stalin introduced a series of Five Year Plans.

What was the goal of the Five Year Plans?

The goal of these was to further industrialize Russia so they could catch up with their European counterparts.

Step one: Collectivize agriculture. So the government confiscated private land and set agricultural quotas for the farmers to meet. This collectivization enraged the farmers whose land was seized. Why? Much of the food they grew was taken and sent to feed people back in the urban centers. And so their reaction was to burn their crops and kill their livestock.

Stalin's Five Year Plans was pretty much an utter failure. Why?

Millions of people starved to death under these plans. While all those people were starving to death, at least the industrialization part of the plan went pretty well.

What is another example of the government stepping in to correct over the economy in Mexico?

After the Mexican Revolution was over, one political party came to dominate Mexican politics. And they were called the Institutional Revolutionary Party (PRI). Under the guiding hand of the PRI, the Mexican economy improved greatly. For example, they nationalized Mexico's oil industry, which heretofore had been largely owned by foreign investors.

What are fascist governments?

A new kind of government during this time; fascism is an authoritarian and nationalistic system of government and social organization. A chief characteristic of fascist governments is the glorification of military might and the necessity of armed struggle. Often fascist governments blamed their problems on the ethnic minorities that lived within their borders. And economically speaking, fascist governments wielded a heavy hand in the economy

Italy was the first proper fascist government in Europe during this time. Who was Benito Mussolini?

Mussolini reorganized the Italian economy in terms of corporatism. This meant that each sector of the economy was like different organs of the same body. And each organ was free to organize itself in whatever way it wished just as long as it served the purposes of the greater whole.

But in reality, fascist Italy was a totalitarian state that essentially controlled every aspect of the Italian society.

He had a great admirer in Germany by the name of Adolf Hitler.

Who was Adolf Hitler?

He was the leader of the Nazi party which he fashioned after the fascist Italians. And once Hitler was in power, he addressed the severe economic depression in Germany in the following manner. He went ahead and cancelled all German reparation payments. Additionally, he led the German government into massive deficit spending to build up the military and take on internal infrastructure projects.

What's happening in Brazil?

Over in Brazil, they had experiences a very slow transition from an agricultural economy into an industrial one. In 1930, a coup called installed Getulio Vargas as president. Now the people supported the installation of Vargas because they thought he'd bring democratic principles to bear on Brazil. But instead he went ahead and organized the Brazilian government in a similar fashion as Mussolini's Italian government. Under Vargas's leadership, it's true that industry grew rapidly, but he also consolidated power by removing indivudual freedoms from the people.

For example, under what is called the {"New State" program Vargas limited the freedom of the press and imprisoned his political oppnents.