Interwar Notes
The Great Depression
Connections:
The Long Nineteenth Century created a global economic system that %%linked the world through trade and finance.%%
Because of this, when most of Europe went to war in 1914, %%much of the rest of the world was affected in some way.%%
These connections continued after the war; if we follow them we will see how %%the crash of the U.S. economy could spread to the rest of the world.%%
Close markets
First, European markets were closely connected to American markets.
As European countries tried to recover from the war, they %%depended on American financing.%%
That’s how, in 1929, when the American economy started its crash, it brought Europe down with it.
What caused the Great Depression?
Many things, but %%inequality was high on the list.%% In 1929, %%the top 1% of Americans owned more than half of their country’s wealth.%%
To make matters worse, wealthy financiers on Wall Street took on %%risky debt and made risky investments.%% This recipe for disaster is what cooked up the 1929 stock market crash.
In the first years of the depression, the %%global production of goods ground to a halt.%% American manufacturing declined by 36% from 1929 to 1930 and by another 36% the following year. International trade fell by 30%.
Everyone panicked. They took all their money out of the banks. Now, %%banks didn’t have enough cash on hand,%% and the whole crisis got worse.
In the first years of the depression, the global production of goods ground to a halt. As a result, t%%he price of even basic necessities,%% like wheat and rice, %%plummeted.%%
Wheat prices fell by 40% and rice by 50%, globally. The price of coffee, cotton, rubber, and other cash crops fell 40%, crippling the economies that produced them.
As production and trade declined, %%factories shut down, and workers lost their jobs.%%
By 1932, around %%30 million people were unemployed worldwide.%%
Unemployment rates were most extreme in the United States and Germany, but they were bad everywhere. In 1933, %%25% of American workers were unemployed.%%
The Great Depression %%changed the way governments saw their relationship with production and distribution.%% This was a collapse of global proportions, but it was specifically a %%collapse of industrial free-trade capitalism.%%
The USSR and Fascism
The Soviet Union - the world’s first state based on communist economics - %%did not suffer economic collapse.%%
Stalin’s government purged Soviet society of anyone who resisted.
Around 20 million people starved or were killed in these purges. %%Nevertheless, the Soviet economy looked better.%%
This was one reason many countries in the West %%began to think maybe they should be controlling their economies more as well.%%
These new economic experiments - some call it welfare capitalism, democratic socialism, or the welfare state - %%gave more power to the idiomatic expression.%%
President Franklin Roosevelt sought to address wealth inequality and provide government jobs through the reforms and massive public works projects of %%the New Deal.%%
Most historians think that economic conditions weren’t directly responsible for dictators like Adolf Hitler in Germany. However, others argue that %%they did help them to appeal to suffering populations.%%
Ultimately, it wasn’t welfare reforms that ended the Great Depression. %%It was war.%%
Germany, Japan, and Italy %%took state control to the extreme with militant authoritarianism.%%
Germany and Japan pulled their countries out of economic stagnation by i%%ncreasing military production%% and using their new military might to %%aggressively seize new land and resources.%%
The U.S. economy, where the depression was most pronounced, only recovered when it started %%building and selling huge numbers of expensive tanks, planes, and ships.%%
One way to fix unemployment was to hire people to make guns and shoot other people with them.
What’s left?
In addition to setting the stage for WW2, the Great Depression prepared parts of the world for the %%waves of decolonization that followed the war.%%
Colonized people in Africa and Asia were hit by the depression. After the war, they looked at a global capitalist-imperialist system that produced economic collapse and two world wars and they asked themselves: “why do we let them rule us?”