Global Depression

• In 1929, the world plunged into an economic depression that was so long-lasting, so severe, and so global that it became known as the Great Depression

The Great Depression

• By the mid 1920’s, most countries seemed on the way to economic recovery, and industrial productivity had returned to prewar levels

Economic Problems

• The governments of Austria and Germany relied on U.S. loans and investment capital to finance reparation payments to France and England

• The French and British governments depended on reparation payments to pay off loans taken out in the United States during the Great War

• Improvements in industrial processes reduced worldwide demand for certain raw materials, which had devastating consequences for export-dependent areas

• Technological advances in the production of automobile tires permitted the use of reclaimed rubber

• The excess amount of natural rubber badly damaged the economies of the Dutch East Indies, Ceylon, and Malaysia which relied on rubber exports

• The increased use of oil undermined the coal industry, and the growing adoption of artificial nitrogen virtually ruined the nitrate industry of Chile

• One of the nagging weaknesses of the global economy in the 1920’s was the depressed state of agriculture

• During the Great War, when Europe’s agricultural output declined significantly, farmers in the U.S., Canada, Argentina, and Australia expanded their own production

• The reduced income of farm families contributed to high inventories of manufactured goods, which in turn caused businesses to cut back production and to dismiss workers

The Crash of 1929

• The United States enjoyed a boom after the Great War, which prompted many people in the United States to invest their earnings and savings in speculative and risky financial ventures, particularly in stocks

• By October 1929, warnings from experts that stock prices were overvalued prompted investors to pull out of the market

• On Black Thursday, a wave of panic selling on the New York Stock Exchange caused stock prices to plummet

• The crisis deepened when lenders called in loans thereby forcing more investors to sell their securities at any price

Economic Contraction Spreads

• When businesses realized that shrinking consumer demand meant they could not sell their inventories, they responded with layoffs

• With so many people unemployed, demand plummeted further, causing more business failures and soaring unemployment

• Because much of the world’s prosperity depended on the export of U.S. capital and the strength of U.S. import markets, the contraction of the U.S. economy created a ripple effect that circled the globe

• The hardest hit countries of the Depression were the ones that depended on the export of a few primary products such as coffee, sugar, minerals, ores, and rubber

• U.S. investors tried to raise money by calling in loans and liquidating investments, and Wall Street banks refused to extend short-term loans as they became due

• Banking houses in Austria and Germany became vulnerable to collapse because they had been major recipients of U.S. loans

Economic Nationalism

• The Great Depression destroyed the international financial and commercial network of the capitalist economies

• As international cooperation broke down, governments turn to their own resources and practiced economic nationalism

• By imposing tariff barriers, import quotas, and import prohibitions, politicians hoped to achieve self-sufficiency

• The Smoot-Hawley Tariff Act: raised duties on most manufactured products to prohibitive levels

• The Smoot-Hawley Tariff Act caused the governments of dozens of other nations to retaliate by raising tariffs on imports of U.S. products, resulting in a sharp drop of international trade

Despair and Government Action

• French physician Charles Richet insisted that: removing women from the workforce would solve the problem of male unemployment

Keynes

• John Maynard Keynes: the most influential economist of the twentieth century

• In Keynes’s work, The General Theory of Employment, Interest, and Money, he argued that the fundamental cause of the Depression was not excessive supply but inadequate demand

• Keynes urged governments to stimulate the economy by increasing the money supply, thereby lowering interest rates and encouraging investment

• Keynes also advised governments to undertake public works projects to provide jobs and redistribute incomes through tax policy

The New Deal

• U.S. President Franklin D Roosevelt took aggresive steps to reinflate the economy and ease the worst of the suffering caused by the depression

• Roosevelt’s progam to deal with the national calamity was called the New Deal

• The New Deal: included legislation designed to prevent the collapse of the banking system, to provide jobs and farm subsidies, to guarantee minimum wages, and to provide social security in old age

• The fundamental premise of the New Deal was that the federal government was justified in protecting the social and economic welfare of the people

Challenges to the Liberal Order

• The new rulers of Russia, Vladimir Ilyich Lenin and then Joseph Stalin transformed the former tsarist empire into the world’s first socialist society, the Union of Soviet Socialist Republics

Civil War

• The Bolshevik Party changed its name to the Russian Communist Party

• In response to the civil war, Lenin’s government began a policy of terror in which 200,00 suspected anticommunists were arrested, tried, and executed

• Anticommunists: Whites

• The Bolsheviks executed Tsar Nicholas II, Empress Alexandra, and their 5 children because they feared that the Romanov family could strengthen counterrevolutionary forces

• Britain, France, Japan, and the United States supported the Whites and sent a limited number of troops and supplies to aid them

• In 1920, the Red Army defeated the Whites

War Communism

• The new rules of Russia transformed the economy by embarking on a hasty and unplanned course of nationalization, known as war communism

• After annulling private property, the Bolshevik government assumed control of banks, industry, and other privately held commercial properties

The Communist International

• Moscow organized the World Congress of the Communist International also known as the Comintern, and was supposed to be composed of communist parties everywhere

• The purpose of the Comintern was to defeat the international bourgeoisie through revolution and to replace it with an international Soviet republic

• At the second meeting of the Comintern, Lenin argued in his Theses on National and Colonial Questions that communists in the West should partner with communists in the colonies in order to damage the economic foundations of the capitalist powers

• The first to form Communist parties was the Parti Komunis Indonesia

• Other colonies that adopted communist parties included South Africa, India, Algeria, Korea, Malaya, the Philippines, and Indochina

• Colonial Communist parties often received funds and operatives from the Comintern and sent their own representatives to Moscow for training

• The support by Moscow for international communist movements led most of the colonial powers and Britain, France, and the United States to believe that communism was a deeply destructive force long before the Cold War

The New Economic Policy

• Faced with economic paralysis, in the spring of 1921 Lenin decided on a radical reversal of war communism

• The New Economic Policy temporarily restored the market economy and some private enterprises in Russia

• One of the features of the NEP included a vigorous program of electrification and the establishment of technical schools to train technicians and engineers

Joseph Stalin

• Joseph Stalin was the general secretary of the Communist Party and emerged as the new leader of the Soviet Union in 1928

• Stalin: Man of steel

• Stalin’s First Five-Year Plan set targets for increased productivity in all spheres of the economy but emphasized heavy industry(especially steel and machinery) at the expense of consumer goods

Collectivization of Agriculture

• Integral to the drive for industrialization was the collectivization of agriculture

• The Soviet state expropriated privately owned land to create collective, or cooperative, farm units whose profits were shared by all farmers

• Stalin and his regime viewed collectivization as a means of increasing the efficiency of agricultural production and ensuring that industrial workers would be fed

• Outraged peasants reacted to the government’s program by slaughtering their livestock and burning their crops

• Enforced collectivization caused millions of farmers to leave the land and migrate to cities in search of work

• Kulaks: Relatively wealthy peasants who had risen to prosperity during the NEP

The Great Purge

• The Congress of Victors quickly became the Congress of Victims as Stalin purged 2/3 of the delegates from the Communist Party

The Fascist Alternative

• Fascism: A political movement and ideology that sought to create a new type of society, developed as a reaction against liberal democracy and the spread of socialism and communism

• Benito Mussolini founded the first fascist party in 1919

• National Socialism: Nazism

• Fascists sought to create a new national community as a nation-state or as a unique ethnic or racial group

• Most fascist movements shared the common features of veneration of the state, a devotion to a strong leader, and an emphasis on ultranationalism, ethnocentrism, and militarism

• Fascist movements emphasized a belligerent form of nationalism and a fear of foreign people

• Chauvinism: A belligerent form of nationalism

• Xenophobia: A fear of foreign people

• Militarism: A belief in the rigors and virtues of military life as an individual and national ideal

• In practice, militarism meant that fascist regimes maintained large and expensive military establishments, tried to organize much of public life along military lines, and generally showed a fondness for uniforms, parades, and monumental architecture

Italian Fascism

• The first fascist movement grew in Italy after the Great War

• Conditions conducive to the rise of fascism included a widespread disillusionment with uninspired political leadership and ineffective government, extensive economic turmoil and social discontent, a growing fear of socialism, and Italy’s territorial spoils from the peace settlement after the Great War

Benito Mussolini

• The guiding force behind Italian fascism was Benito Mussolini

• Benito Mussolini was a former socialist who turned after the Great War to a political program that emphasized virulent nationalism, demanded repression of socialists, and called for a strong political leader

• Mussolini established the Fasci Italiani di Combattimento (Italian Combat Veteran League)

• Much of the newly found public support resulted from the effective use of violence against socialists by fascist armed squads known as Blackshirts

• King Victor Emmanuel III asked Mussolini to become prime minister and form a new government

• Mussolini inaugurated a fascist regime in 1922

The Fascist State

• Italy’s fascists consolidated their power through a series of laws that transformed the nation into a one-party dictatorship

• In 1926, Mussolini seized total power as dictator and subsequently ruled Italy as Il Duce

• Il Duce: The Leader

• The fascist regime moved to eliminate all other political parties, curb the freedom of the press, and outlaw free speech and association

• A Special Tribunal for the Defense of the State, supervised by military officers, silenced political dissent

• Antifascist: Subversives

• In May 1939, the leaders of fascist Italy and Nazi Germany formalized their political, military, and ideological alliance by signing a 10 year Pact of Steel

Hitler and the Nazi Party

• In 1921, Hitler became chairman of the party now known as the National Socialist German Workers’ Party

• National Socialism (the Nazi movement) made its first major appearance in 1923 when party members and Hitler attempted to overthrow the democratic Weimar Republic

The Struggle for Power

• The Treaty of Versailles: Identified Germany as responsible for the Great War and assigned reparation payments to the Allies; the hyperinflation of the early 1920’s that wiped out the savings of the middle class; and the suffering brought on by the Great Depression

• Until Hitler came to power in 1933, the Nazi party downplayed the Anti-Semitism aspect of its ideology in its propaganda

• Anti-Semitism and racist doctrines were consistently important to the party’s base, however, which consisted in the main of members of the lower-middle classes: ruined shopkeepers, impoverished farmers, discharged white-collar workers, and disenchanted students

• As Germany slipped into the Great Depression, the government’s inability to find solutions to unemployment and impoverishment radicalized the electorate and caused them to lose faith in the democratic system

• Both communists on the far left and fascists on the far right increasingly vied for the allegiance of Germans who sought alternatives to what was perceived as the failures of democracy

• The Nazi Party became the largest party in parliament between 1930 and 1932

• Paul von Hindenburg decided to offer Hitler the chancellorship

• Reich: empire (German)

Consolidation of Power

• Under the guise of a state of national emergency, the Nazis used all available means to impose their rule

• The Nazis suppressed the German communist and socialist parties and abrogated virtually all constitutional and civil rights

• Hitler made the National Socialist Party the only legal party

• The National Socialist state then guided the destruction of trade unions and the elimination of collective bargaining, prohibiting strikes and lockouts

• The Nazis also purged the judiciary and the civil service, took control of all police forces, and removed enemies of the regime through incarceration or murder

The Racial State

• The leaders of the Third Reich pursued the creation of a race-based national community by introducing eugenic measures designed to improve both the quantity and quality of the German race

• Implicit in this racial remodeling was the conviction that there was no room for the racially inferior or for biological outsiders

• The racial program of the Nazis was based on a diffuse mixture of racial anthropological, eugenic, and anti-Semitic theories that harkened back to the 19th century

• Through tax credits, special child allowances, and marriage loans, the authorities tried to encourage marriage and procreation among young people

• Annually on August 12, women who bore many children received the Honor Cross of the German Mother in three classes

• The Three Classes for the Honor Cross of the German Mother: Bronze for those with more than 4 children, silver for those with more than 6, and gold for those with more than 8

• Starting in 1933, the regime initiated a compulsory sterilization program for men and women whom the regime had identified as having hereditarily determined sicknesses, including schizophrenia, manic depression, blindness, deafness, and serious physical deformities

• The mania for racial health culminated in a state-sponsored euthanasia(mercy killing) program that was responsible for the murder of approximately 200,000 women, men, and children

• A flood of discriminatory laws and directives designed to humiliate, impoverish, and segregate Jews from the rest of society followed the Nazi rise to power

• In 1935, the Nuremberg Laws deprived German Jews of their citizenship and prohibited marriage and sexual intercourse between Jews and other Germans

• The Nazi party in cooperation with government agencies, banks, and businesses took steps to eliminate Jews from economic life and expropriate their wealth

• The official goal of the Nazi regime was Jewish emigration

• Kristallnacht: The Night of Broken Glass

• Kristallnacht was the night that the Nazis arranged for the destruction of thousands of Jewish stores, the burning of most synagogues, and the murder of more than one hundred Jews throughout Germany and Austria

• Pogrom: Yiddish term for devastation