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Economy in the Interwar Period

• Introduction

  • Franklin Delano Roosevelt emphasized the need for government intervention in economics in the face of crises.

  • Essential Question: How did different governments respond to economic crises after 1900?

The Great Depression

• Impact of World War I

  • Global trauma from WWI led to economic crisis; Great Depression in the 1930s

  • Economic downturn undermined faith in market-based economics post-imperialism

• Government Response

  • As unemployment and hardships grew, citizens turned to governments for assistance.

  • Increased government intervention seen globally:

    • U.S. became more liberal under Roosevelt, addressing economic inequities.

    • Germany, Italy, and Japan radicalized to the right.

    • Russia implemented repressive Five-Year Plans.

Economic Hardship Post-WWI

• Germany's Economic Struggle

  • Treaty of Versailles imposed heavy reparations on Germany.

  • The need to pay reparations led to hyperinflation; citizens faced extreme prices for basic goods.

  • Economic ties: France and Britain also faced difficulties in repaying war loans to the U.S., exacerbated by German inflation.

• Global Downturn

  • Economic gains in the 1920s were halted by the Great Depression following the 1929 U.S. stock market crash.

  • Agricultural overproduction and withdrawal of investment worsened global economies, especially in Germany.

Economic Data from 1929 to 1938

• Production and Trade Statistics

  • Total global production and trade both significantly declined from 1929 levels.

  • Example data:

    • 1929 (100):

      • 1930 (Production: 86, Trade: 89)

      • 1931 (Production: 77, Trade: 81)

      • 1932 (Production: 70, Trade: 74)

      • 1938 (Production: 111, Trade: 89)

Keynesian Economics

• Keynes's Economic Theory

  • John Maynard Keynes rejected laissez-faire economics; advocated government intervention during depressions through deficit spending.

  • The idea was to stimulate economic activity by reducing taxes and increasing government spending.

• New Deal in the U.S.

  • Roosevelt implemented the New Deal to offer relief, recovery, and reform to the U.S. economy.

  • Aimed at aiding the unemployed and reviving the economy through government investments.

Global Impact of the Great Depression

• Worldwide Unemployment

  • By 1932, over 30 million worldwide unemployed due to the Great Depression.

  • Increased reliance on governments led to international trade declines and subsequent tariff implementations.

• Japan's Recovery

  • Devalued currency and military expansion allowed Japan to recover relatively quickly from the Depression.

Political Revolutions in Russia and Mexico

• Russia

  • Post-revolution, Lenin's government faced revolts due to severe hardships and civil war.

  • Lenin's New Economic Plan attempted to revive the economy by allowing limited private trade.

• Stalin's Regime

  • Stalin succeeded Lenin and introduced the first Five-Year Plan to industrialize the USSR; collectivization of agriculture led to widespread famine.

• Mexico's Institutional Revolutionary Party (PRI)

  • The PRI dominated Mexican politics, promoting economic reforms and state ownership of industries, such as oil.

Rise of Fascism

• Fascism Creation

  • The term fascism, coined by Mussolini, symbolized militarism and extreme nationalism.

  • Totalitarian governments suppressed opposition and justified violence against others.

• Rise in Italy and Spain

  • Mussolini's regime, despite post-WWI dissatisfaction, gained control through propaganda and military expansionist policies.

  • The Spanish Civil War involved ideological battles, with foreign involvement ensuring Nationalist victory under Franco.

Brazil and its Evolving Regime

• Political Shift

  • Brazil's economy transitioned from agriculture to industry under Getulio Vargas, who initially promised democracy but implemented authoritarian policies similar to fascism.

  • Despite rapid industrial growth, Vargas limited political freedoms and suppressed opposition.

Summary of Economic Ideologies

Key Terms

• Economics: Concepts

  • inflation, deficit spending, relief, recovery, reform, collectivize, kolkhoz, corporatism

• Events and Policies

  • Great Depression, New Economic Plan (NEP)

• Politics and Governments

  • Politburo, PRI, fascism, totalitarian state, Popular Front, Nationalists, New Deal, Republicans, Five-Year Plan, Loyalists, Luftwaffe

• Countries

  • U.S.S.R., Libya, Italian Somaliland, Spanish Republic, Basque region

• Leaders

  • Franklin Delano Roosevelt, Lázaro Cárdenas, Francisco Franco

• Institutions

  • gulag, PEMEX