The Interwar Years and the Rise of Totalitarianism

The Intellectual Legacy of World War I

Impact of WWI on Enlightenment Assumptions: - The Enlightenment era fostered intense optimism based on the belief that human reason and science could solve all societal problems. - Enlightenment Expectations: - Improvements in farming were expected to end hunger. - Industrial development and manufacturing were expected to end poverty. - Medical advancements were expected to cure all diseases and lead to virtual immortality. - Reason would promote liberty, equality, and democracy while ending superstition, ignorance, prejudice, and warfare. - The Shift in Perception: - World War I served as a "bursting of the balloon" regarding this optimism. - Science and industry were utilized for unprecedented destruction and death on a global scale. - Innovations like chemical warfare and large-scale national weapons challenged the idea that progress was inherently good. - Resulting Mindset: - A widespread questioning of human nature, enlightenment ideals, and political systems emerged. - The post-war outlook became deeply disillusioned, cynical, and pessimistic.
Cultural and Theological Expressions of Disillusionment: - Literature: - Ernest Hemingway: In A Farewell to Arms, he rejected the Napoleonic view of war as a glorious adventure or a test of manhood. - Erich Maria Remarque: In All Quiet on the Western Front, war is portrayed as meaningless suffering, characterized by dying in droves before machine guns and artillery, and dying of dysentery in trenches. - Theology: - Karl Barth: A prominent Protestant theologian of the $20^{th}$ century. In his Epistle to the Romans, he criticized liberal Enlightenment-influenced theology for trying to create a secular utopia on Earth. - Political Skepticism: - Some began to criticize the spread of democracy and the right to vote, arguing that well-educated elites were necessary to manage the state rather than the general public. This view became particularly influential in Germany.

The Great Depression and Economic Collapse

The International Financial System: - A circular flow of money kept the global economy afloat during the $1920$ s: 1. The United States loaned money to Germany and Austria. 2. Germany used these loans to pay war reparations to Britain and France. 3. Britain and France used reparation payments to pay back wartime loans taken from American banks. - This system relied entirely on the continuous flow of American capital.
Underlying Economic Weaknesses: - Oversupply and Overproduction: There was an excess of raw materials, manufactured goods, and farm crops. - Price Declines: This led to falling incomes for export-driven countries and severe hardships for farmers.
The Stock Market Crash of $1929$ : - Speculative Bubble: Growth in the $1920$ s was often imaginary, driven by reckless investors pouring money into the market, which further inflated prices regardless of actual company profits. - Lack of Regulation: There was no Securities and Exchange Commission (SEC) to require honest accounting of debts, assets, or profits. - Buying on Margin: Investors purchased stocks with loans, sometimes putting as little as $3\%$ down and financing the remaining $97\%$ . This left investors heavily leveraged in debt. - Black Thursday ( $10/29/1929$ ): The market began to tick down as investors realized companies were overvalued. Panic selling ensued, driving prices lower and forcing more sells to cover debts. The market plummeted, and many lost everything.
From Wall Street to Main Street: - Though the crash began as a loss of "money on paper," it suppressed the real economy by restricting consumer and business demand. - The Vicious Downward Spiral: - Uncertainty led businesses to stop expanding and individuals to stop buying homes, cars, and appliances. - Low demand led factories to lay off workers. - Higher unemployment and wage cuts led to even less spending. - This cycle continued until the economy bottomed out in $1933$ .
Global Contagion: - As the world's largest industrial power, the U.S. collapse pulled other nations down. - Financial Freeze: The U.S. stopped financing Austria and Germany, breaking the circular flow of reparations and loan repayments. - Reduced Imports: The U.S. stopped consuming foreign goods, hurting export-driven economies like Germany. - Economic Nationalism: Countries turned to protectionism. The U.S. passed the Smoot-Hawley Tariff Act in $1930$ . While intended to raise revenue and protect domestic jobs by taxing imports, it sparked a trade war that hurt exports and worsened the crisis.
Statistical Impact of the Depression (By $1932$ ): - United States: Industrial production fell by $50\%$ . National income fell by $50\%$ . $44\%$ of U.S. banks failed, causing millions to lose their life savings. - Germany: Unemployment reached $35\%$ . Industrial production declined by $50\%$ . - Global: International trade declined by $66\%$ . World production declined by $38\%$ .

New Economic Theories: Keynesianism vs. Classicalism

Classical Economic Theory: - Based on the ideas of Adam Smith, David Ricardo, and Thomas Malthus. - Advocated for laissez-faire (no government regulation) and believed markets were self-correcting. - In the initial years of the Depression, some believed the crash was a "survival of the fittest" event that would wash the "rot" out of the system.
Keynesian Theory: - John Maynard Keynes: Author of The General Theory of Employment, Interest, and Money. - Argued the fundamental problem was a lack of demand. - Proposed Solutions (Stimulus): - Government intervention to make up for lost private demand. - Big tax cuts to put money in consumers' pockets. - Lower interest rates to encourage business investment. - Public Works: Creating government jobs (roads, bridges, schools) to provide income for spending. - The Reverse Spiral: Increased spending leads to business profits, which leads to hiring, which leads to more spending. - Deficit Spending: Keynes argued the government should run deficits during crises and pay them back by raising taxes once the economy is healthy.
The New Deal (Franklin D. Roosevelt): - The American response to the Depression, applying many Keynesian concepts. - Banking Reform: Separation of investment and commercial banking. - FDIC (Federal Deposit Insurance Corporation): Government guarantee for bank deposits. - Farm Subsidies: Regulating supply to keep farmers afloat. - Labor Rights: Minimum wage and the right to organize unions for better wages. - Social Security: Provided pensions, unemployment insurance, and disability insurance. - Outcome: The New Deal cut unemployment in half, but a tax hike in $1937$ to balance the budget caused a secondary recession. The Depression finally ended due to massive military spending for World War II.

The Rise of Communism in the Soviet Union

The Russian Civil War: - The Bolsheviks (Reds) fought the non-communists (Whites). - Terror: Both sides used terror. The Reds created a secret police that killed approximately $200,000$ people, including the Romanov royal family. - Foreign Intervention: Britain, France, and the U.S. sent troops to occupy ports and supply the Whites to get Russia back into WWI, but they did not engage in direct fighting. - Red Victory: The Whites were poorly organized and lacked a broad base of support.
Wartime Communism: - Ad hoc measures to build a communist society during the war: confiscation of banks, industries, and church lands. - Food was forcibly taken from peasants to feed the cities. - Economic Collapse: By $1920$ , industrial output was $1/10^{th}$ of pre-war levels; agricultural output was half.
Lenin’s New Economic Policy (NEP): - Initiated in $1921$ , it allowed limited private enterprise and a partial market economy to revive production. - Peasants could sell crops at market prices. The state focused on the electrical grid and technical education.
Stalin’s Rule and "Socialism in One Country": - Following Lenin's death in $1924$ , Joseph Stalin emerged as the leader. - Five-Year Plans: A program for rapid industrialization (heavy industry and steel) to compete with Western powers. - Forced Collectivization of Agriculture: Pulling individual farms into large collective units to achieve economies of scale and free up labor for factories. - Failure and Famine: Collectivization removed incentives and disrupted production, leading to a famine that killed $3,000,000$ peasants. - Stalinist Purges ( $1935$ – $1938$ ): Stalin eliminated suspected opponents. $2/3^{rds}$ of the Communist Party Central Committee and half of the high-ranking military officers were purged. By $1939$ , $8,000,000$ citizens were in labor camps, and $3,000,000$ had died.

The Rise of Fascism

Core Principles of Fascism: 1. Strength of the State: The primary goal is the growth of the nation, not individual liberty. 2. Charismatic Leader: A strong leader with extraordinary powers. 3. Super-nationalism and Xenophobia: Intense national pride coupled with a fear/hatred of foreigners and minorities. 4. Militarism: The military serves as a symbol of national strength and sacrifice. 5. Rejection of Liberal Democracy: Democracy is seen as weak, corrupt, and selfishly individualistic. 6. Organic State (Class Harmony): Rejection of communist class struggle; instead, all classes must work together harmoniously for the state (the "fasces" metaphor: individuals are weak like twigs, but strong when bound together).
Fascism in Italy: - Benito Mussolini (Il Duce): Rose to power amid disappointment with the post-WWI peace settlement and fear of communism. - Seizure of Power: His "Black Shirts" paramilitary group helped him get appointed as Prime Minister, after which he dismantled democracy to create a one-party state. - The Rome-Berlin Axis: Mussolini allied with Hitler, seeing fascism as the future of the world.
Fascism in Germany (National Socialism): - Adolf Hitler: Became chairman of the Nazi Party in $1921$ . After the failed Beer Hall Putsch ( $1923$ ), he wrote Mein Kampf in prison and decided to seek power legally through elections. - Why People Voted for Nazis: - Disillusionment with the Weimar Republic, which was blamed for the Treaty of Versailles and hyperinflation in the $1920$ s. - The government's inability to solve the Great Depression or stop the threat of communism. - Hitler’s promise of fast action vs. the "talk shop" gridlock of democracy. - Nazi Racial Ideology: - Claimed Jews were a "contaminant" to the German bloodline. - Nuremberg Laws: Stripped Jews of citizenship and prohibited marriage/sex between Jews and Germans. - Euthanasia and Sterilization: Between $1939$ and $1945$ , the regime murdered approximately $200,000$ people deemed "useless," including the mentally/physically handicapped, the elderly, Gypsies, and homosexuals. - Kristallnacht: A night in November when Jewish stores and synagogues were destroyed, and over $100$ Jews were murdered.