The GLOBAL ECONOMY Between the World Wars [AP World History Review—Unit 7 Topic 4]

Post-World War I Economic Crisis

• Following World War I, global economic challenges emerged, laying groundwork for future conflicts.

Germany's Economic Struggles

• Treaty of Versailles: Germany was mandated to pay extensive reparations, adding to their financial strain.

  • Germany utilized credit for war expenses, relying on winning and acquiring resource-rich lands to pay off debts, which did not materialize.

• Hyperinflation: The German government began printing excessive money to address reparations and debts, leading to severe devaluation of the German Mark.

  • Example: By November 1923, $1 exchanged for 4.2 trillion marks.

  • Bread prices surged from 160 marks in 1922 to 200 billion marks in 1923.

Ripple Effects of Hyperinflation

• The inability of Germany to pay reparations affected Britain and France, straining their capacity to repay debts to the U.S.

• The Soviet Union, following the 1917 Communist Revolution, also defaulted on debts, compounding global economic turmoil.

• Colonial governments globally experienced economic difficulties as they relied heavily on their parent countries.

Stabilization and Recovery

• By 1924, Germany stabilized its economy by borrowing from U.S. banks to meet reparations payments, contributing to a recovery for multiple nations.

Soviet Union's Economic Measures

• Following Russia's exit from WWI during the 1917 Revolution, the economy was in disarray.

• New Economic Policy (NEP): Instituted by Lenin to reintroduce limited market principles while maintaining state control over key industries (1923).

  • The move aimed for economic stabilization amid revolutionary needs.

  • Limited success was noted, but Lenin's death in 1924 hindered further progress of NEP.

Stalin's Economic Policies

• Industrialization Goals: Stalin aimed for rapid industrialization via five-year plans.

  • Collectivization: Implemented large, state-owned farms to ensure supply for industrial workers, merging smaller farms.

  • Oppression of Kulaks: Wealthy landowners resisted, leading to mass arrests and executions; roughly 8 million were affected.

  • Impact on Ukraine: Collectivization led to severe famine (Holodomor, 1932-33) as food was redirected to urban centers, resulting in millions of deaths.

Global Economic Landscape During the Great Depression

• The U.S. economy initially thrived post-WWI but faced collapse with the 1929 stock market crash, precipitating the Great Depression.

  • European nations, reliant on U.S. investment for recovery, were adversely affected by this economic downturn.

Government Intervention During the Great Depression

• Roosevelt's New Deal: Introduced numerous government programs aimed at economic recovery, including:

  • Employment in infrastructure projects.

  • Government-sponsored retirement and medical insurance programs.

  • The effectiveness of the New Deal is debated, but WWII ultimately resolved many economic difficulties.