Reasons for the length and extent of the Great Depression
Financial crisis that stemmed directly from the war and peace settlement
Crisis arose in the production and distribution of goods in the world market
Neither the major western European powers nor the United States offered strong economic leadership or acted responsibly.
The Financial Tailspin
Immediately after the armistice, there rose a demand for consumer and industrial goods that drove up prices.
German inflation peaked peeked in 1923 and is one of the main reasons why most governments refused to run budget deficits when the depression struck.
Reparations and War Debts
France had paid reparations in 1815, after Napoleon’s final defeat, and again in 1871, after the devastating loss to Prussia, and now as victor, intended to receive reparations and use them to finance its postwar recovery.
1923 invasion of the Ruhr demonstrated French determination to exact reparations
US was equally intent on collecting the money it was owed by the Allies.
Governments and finance
Governments exercised control over credit, trade, and the currency.
The financial and currency muddle thus discouraged trade and production and, in consequence, hurt employment.
The Dawes Plan reorganized the transfer of reparations and, consequently, smoothed the dept repayments to the United States.
After the Dawes Plan, private American flowed into Europe, and particularly Germany, which provided the basis for brief prosperity around 1925.
Problems arise in 1928
American money was withdrawn from European investments and moved to the booming New York stock market.
US banks made large loans to customers, who then invested the money in the stock market, and when stock prices collapsed, the customers could not repay the banks.
All types of credit that had been available disappeared.
Little American capital was available to invest in Europe.
In May 1931, Kreditanstalt, a large bank in Vienna, collapsed.
It had been the primary lending institution for much of central and eastern Europe.
The collapse of Kreditanstalt put enormous pressure on the German banking industry and in 1931, Germany was unable to pay reparations dictated by the 1929 Young Plan.
American president Herbert Hoover (1874-1964) announced a one-year moratorium on all payments of international debts.
In the summer of 1932, this meeting decided to end the era of reparations.
Problems in Agricultural Commodities
The 1920s saw the market demand for European goods shrink relative to the Continent’s capacity to produce goods.
Better methods of farming, improved strains of wheat, expanded tillage, and more extensive transport facilities all over the globe vastly increased the world supply of grain, leading to record low wheat prices.
Although initially good for the consumer, it mean lower incomes for European farmers.
Higher industrial wages raised the cost of the industrial goods farmers or peasants used.
Farm problems in Eastern Europe
Democratic governments that took over Romania, Czechoslovakia, and Yugoslavia, broke up large estates and replaced them with small peasant-owned farms.
These smaller farms proved inefficient and farmers in these regions were unable to buy consumer goods or new equipment for their farms.
Many blamed the problems in the farming industry on democratic politics.
Many German farmers supported the Nazi party.
Economic problems outside of Europe
People who produced wheat, sugar, cotton, rubber, wool, and lard in underdeveloped nations in Asia, Africa, and Latin America could no longer make enough money to buy finished goods from industrial Europe.
Depression and Government Policy
The Great Depression was not depressive to everyone, as those with jobs always outnumbered those without.
New economic sectors, such as the production of automobiles, radios, and synthetics, continued to develop during the depression.
Economic uncertainty, though, made many people anxious which fueled social discontent.
Emergence of a body of economic thought
John Maynard Keynes (1883-1946)
Author of General Theory of Employment, Interest, and Money
advocated active government involvement in the economy and encouraged the expansion of government spending in times of economic downturn.
Private economic enterprise became subject to new trade, labor, and currency regulations.
New economic policies usually involved further political experimentation.
Section Three: Confronting the Great Depression in Democracies
In Britain, the depression led to a new coalition government and the abandonment of economic policies considered sacred for a century.
In France, economic stagnation gave rise to a bold political and economic program sponsored by parties of the left.
Great Britain: The National Government
In 1929, a second minority Labour government, headed by Ramsay MacDonald, took office.
Ministry became divided on how to deal with economic problems
MacDonald wanted to slash the budget, reduce government salaries, and cut unemployment benefits.
Many members of his cabinet refused this plan as they believed it punished the poor and unemployed.
MacDonald requested the resignations of his entire cabinet and arranged a meeting with George V.
To settle the political squabbles, MacDonald artfully crafted the National Government which was composed of Labour, Conservative, and Liberal ministers.
Most of the Labour party believed MacDonald had sold out.
The National Government fights against depression
To balance the budget, it raised taxes, cut insurance for the unemployed and elderly, and lowered government salaries.
In September 1931, Britain went of the gold standard.
The value of the British pound dropped by 30%
However, this move stimulated exports because it made British products cheaper for foreigners to buy.
In 1932, Parliament passed the Import Duties Bill, which placed a ten percent ad valorem tariff—a tax levied in proportion to the value of each imported good—on all imports except those from the empire.
Gold and free trade, the hallmarks of almost a century of British commercial policy, were abandoned.
The National Government produced great results
Britain avoided the banking crisis that hit other countries.
By 1934, industrial production expanded beyond the 1929 level.
Government encouraged lower interest rates which led to the largest private housing boom in British history.
Industries related to housing and home furnishing prospered.
Social contentedness in Britain
Unemployed protested, but social insurance, though hardly generous, did support them.
Future of the National Government
When MacDonald retired, Stanley Baldwin succeeded him as prime minister and then Neville Chamberlain.
Chamberlain was a Conservative who was a progressive thinker on social issues.
Fascism in Great Britain
In 1932, Sir Oswald Mosley (1896-1980) founded the British Union of Fascists.
He was disgusted by the Labour government’s feeble attack on unemployment.
His followers wore black shirts and staged rallies.
At the height of Mosley’s popularity, however, his party was comprised of only a few thousand adherents.
Mosley’s anti-Semitism drove people away from and he became a political oddity.
France: The Popular Front
Great Depression in France came later than that in Britain, and also lasted longer.
Unemployment was never a major problem in France.
Industries did lower wages.
The government raised tariffs to protect French goods, and particularly French farmers.
Hitler ran for the office of president against the incumbent, the 83-year-old, Hindenburg and forced a runoff.
Hitler earned 30.1 percent of the first vote and 36.8 percent in the runoff.
Hindenburg remained in office but the results convinced him that Bruning no longer commanded the confidence of the conservative German voters.
On May 30, 1932 Hindenburg dismissed Bruning and appointed Franz von Papen (1878-1969) as chancellor.
Von Papen was an extremely conservative advisor on whom Hindenburg increasingly became dependent.
Hindenburg and von Papen realized they needed the popular support that only the Nazis could generate but they didn’t want to give Hitler power; instead they called for a Reichstag election for July 1932.
The Nazis won 230 seats in the election.
Hitler demanded to be chancellor but Hindenburg refused.
In November 1932, Papen resigned and the next month General Kurt von Schleicher (1882-1934) became chancellor.
Fear of civil war between the right and left marked the political climate in Germany.
Schleicher tried to negotiate with another Nazi leader in order to stabilize Hitler’s influence in German politics, but the plan back fired and Hitler gained more support within his party.
Due to the circumstances, Schleicher retired on January 28, 1933.
Hindenburg’s advisors convinced him to appoint Hitler chancellor, and on January 30, 1933, Adolf Hitler achieved his goal and became chancellor of Germany.
The conservative von Papen was appointed vice chancellor and other conservatives were appointed to cabinet positions in an effort to neutralize Hitler’s power.
Hitler forged a rigidly disciplined party structure and mastered the art of mass politics and propaganda.
Hitler’s support was strong among farmers, war veterans, and the young.
There was some opposition from Catholics in rural areas.
Vision of Hitler’s supporters
Suspicious of big business and giant capitalism
They wanted a simpler world, one in which small property would be safe from both socialism and big business.
Hitler Consolidates Power
Once in office, Hitler consolidated his power with lightening speed, following a three-step process:
First, capture full legal authority
Second, the crushing of alternative political groups
Third, the purging of rivals within the Nazi Party itself
On February 27, 1933, a mentally ill Dutch communist set fire to the Reichstag building in Berlin.
The Nazis quickly claimed the fire had been set by communists who were threatening the government and German citizens feared an attack from communists.
Hitler used this event to issue an emergency decree suspending civil liberties and arrested communists or alleged communists, authorized Under Article 48 of the Weimar constitution.
On March 23, 1933, the Reichstag passed an Enabling Act that permitted Hitler to rule by decree, and thus the Weimar constitution became a dead document.
Then, Hitler moved to outlaw any institution that might serve as a rallying point for opposition.
The Nazi Party seized offices, banks, and newspapers of the free trade unions and arrested their leaders.
In late June and early July, all other German political parties were outlawed and by July 14, 1933, the National Socialists were the only legal party in Germany.
Also in July, the Nazis took over the governments of the individual federal states in Germany and by the close of 1933, all major institutions of potential opposition had been eliminated.
Internal Nazi Party Purges
Storm Troopers (SA)
Membership included 1 million by 1933 and several more reservists.
Ernst Roehm (1887-1934) was the commander of the SA and Hitler feared he could be a rival to power.
On June 30, 1934, Hitler ordered the murder of key SA officers, including Roehm.
Between June 30 and July 2, more than a hundred people were killed, including former chancellor Kurt von Schleicher and his wife.
The Germany army, the only institution capable of preventing the murders, did nothing.
On August 2, 1934, President Hindenburg died and Hitler combined the offices of president and chancellor making him the sole ruler of Germany.
The Political State and Anti-Semitism: Hitler Fashion a Police State
SS (Schutzstaffel, or “protective force”) Organization
He became the head of all police matters in Germany
One of Hitler’s closest advisors
Group formed to serve as the body guard for Hitler
It became a much more elite paramilitary organization with 52,000 members, than the much larger SA.
Attack on Jewish Economic Life
Anti-Semitism was a key element of Nazi ideology
Based on 19th century biological racial theories
Three stages of terror, or racial discrimination, of Jews
1933-exclusion of Jews from civil service and boycotts of Jewish shops and businesses
Racial Legislation—stage one of terror against Jews
Nuremberg Laws of 1935
Robbed German Jews of their citizenship
Professions and major occupations were closed to Jews
Definition of who was a “Jew” was confusing and complex
Took into account number of Jewish parents and grandparents, as well as whether a person actively practiced Judaism
All persons with at least three Jewish grandparents were defined as Jews
Persons who had two Jewish grandparents, and also practiced Judaism, were also considered Jews
See page 920 for more info defining Jews in Nazi Germany
Kristallnach (“Crystal Night”): Organized Persecution of Jews—the stage two of terror against Jews
On November 9 and 10, 1938, under Nazi Party orders, thousands of Jewish businesses and synagogues were burned and destroyed.
This helped instill in the German people the notion of a master race
Master race of pure German “Aryans”
The Final Solution—stage three of terror against the Jews
After the war broke out, Hitler decided in 1941 and 1942 to destroy the Jews in Europe.
More than six million Jews were murdered.
Racial Ideology and the Lives of Women
German women had the special task of preserving racial purity and giving birth to more pure Germans who were healthy in mind and body; this policy of selective breeding is known as antinatalism.
Nazi journalists frequently compared women during child birth to men in battle and, in both cases, the nation was more important than the individual.
Nazi policy on childbearing disapproved of fostering motherhood among Jews, Slavs, and Gypsies.
The government sought to prevent “undesirables” from reproducing as they were responsible for the alleged “degeneracy.
Nazi programs were designed to benefit Aryan families.
Government provided loans to encourage early marriage
Tax breaks were given to families with children and child allowances were available.
Although the Nazi party emphasized motherhood, the party vowed to protect jobs for women and the number of women in the workforce rose steadily in Nazi Germany.
Agricultural labor, teaching, nursing, social service, and domestic service were jobs deemed fit for women under Nazi policy.
Mothers were required to instill love of nation in their children.
As consumers for the home, women were to support German owned shops, buy German made goods, and boycott Jewish businesses.
Nazi Economic Policy
By 1936, while the rest of Europe was still experiencing economic hardship, unemployment and other difficulties associated with the Great Depression was no longer haunting Germany.
Hitler’s success in confronting the depression was one of the primary reasons Germans supported his tyrannical regime.
Nazi economic policy proved that, by sacrificing all political and civil liberty, destroying a free trade movement, limiting the private exercise of capital, and ignoring consumer satisfaction, a government could achieve full employment to prepare for war and aggression.
Nazi and ideology and free trade
Supported private property and capitalism
However, it subordinated all significant economic enterprise and decisions about prices and investment to the goals of the state.
Massive program of public works and spending
Many projects related to rearmament
Built canals, reclaimed land, constructed extensive highway system with clear military uses
Laborers were not permitted to change jobs without permission
In 1935, the renunciation of the Treaty of Versailles led to open rearmament and military expansion.
Hitler charged Hermann Goring (1893-1946), former head of the German air force, to undertake a four-year plan to prepare the army, navy, and economy for war.
Government outlawed trade unions and dealt with labor disputes through government arbitration.
Required workers and employees to join the “Labor Front,” an organization designed to demonstrate that class conflict had ended.
Labor Front sponsored “Strength Through Joy,” a program that provided vacations and other recreational opportunities.
Section Five: Italy—Fascist Economics
Discipline was a substitute for economic policy and creativity.
In 35 years, the Russian economy grew more rapidly than that of any other nation in the Western World during any similar period.
The Collectivization of Agriculture
Agriculture and the NEP
Government purchased grain and reduced prices from farmers and the farmers sold their surplus at market price.
Farmers decided to hoard their surplus
Since few consumer goods were available for consumption in the countryside, farmers decided to hoard their grain until the market would pay higher prices for it or so they could begin selling once consumer products became available.
Due to hoarding, food shortages occurred in 1928 and 1929 leading to social unrest in the cities.
Stalin reversed the agricultural policies of the NEP by the end of the 1920s.
Government issued a list of problems confronting agricultural production
Traditional peasant holdings were two small to be efficient.
Claimed that a “class enemy” was responsible for hoarding and for what they regarded as speculation in the grain trade
Prosperous peasants, known as kulaks, were considered the enemy.
Stalin devised a program of collectivization of agriculture.
Replacement of private peasant farmers with huge state-run and state-owned farms called collectives
Stalin demonized the kulaks and vowed to dismember this class which came to include any peasant who opposed collectivization.
Enormous rural turmoil and violence resulted.
Peasants resisted collectivization.
Resistance often led by women
Between 1929 and 1933 millions of horses and cattle had been slaughtered by the resistance.
As a result, nearly two million peasants were removed from their homes were carted off to prison camps or Siberia.
Orthodox priests living in the countryside were also targeted by the communist party because Soviet Ideology was atheistic.
Between 1926 and 1937, the number of priests in Russia—as recorded by the census—had decreased by half.
Soviet government organized Motor-Tractor Stations
Supplied seed and equipment for several collective farms in a region and oversaw the collection and sale of grain.
By the middle of the 1930s, the government allowed collective farmers to also farm their own personal plots for their families and local sales.
Flight to Soviet Cities
As a result of collectivization, between 1928 and 1932, approximately 12 million peasants left the countryside and headed for the cities.
Most were young males leaving a disproportionate number of women and elderly people in the villages where they lived in extreme poverty.
Moscow’s population doubled in this four year period
Between 1939 and 1980, the proportion of the Soviet population living on the land fell from two-thirds to one-third.
Urban Consumer Shortages
Urban workers lived in barracks
In older cities, individuals and families had trouble finding apartments.
Several families shared kitchens, baths, and toilets.
Chronic shortages of the most basic consumer goods, including food and clothing—and particularly shoes.
From the end of the NEP through the collapse of the Soviet Union in 1991, city shops had few goods.
Goods that did appear when sold exclusively to party members.
The small minority of party members lived at a much higher standard of living than the general Soviet population.
Except for certain showplaces in Moscow and Leningrad (St. Petersburg), Soviet cities generally lacked the kind of infrastructure that Western European cities enjoyed.
Even important cities lacked sewer systems in the mid-1930s.
In the new industrial cities, running water, paved streets, and electrical lighting were rare.
The black market flourished, and peasants raised food on tiny plots.
People bartered with one another.
Coping became known as the blat—the belief of the Soviet people that they were enduring hardship to build a greater socialist future.
After a trip to Russia, the American writer Lincoln Steffens reported, “I have seen the future and it works.”.
Beatrice and Sidney Webb, British Fabian socialists, spoke of a “new civilization” in the Soviet Union.
These political ideologues did not know that the transformation of the Soviet Union came at the cost of millions of lives.
Internal difficulties caused by collectivization and industrialization led Stalin to shift his foreign policy in 1934 as he ordered the Comintern to permit communist parties in other nations to cooperate with non-communist parties against Nazism and fascism
The new Stalinist policy allowed the Popular Front Government in France to come to power.
Stalin’s decision to industrialize rapidly, to move against the peasants, and reverse the Comintern policy aroused internal opposition.
In 1929, Stalin forced Bukharin, the fervent supporter of the NEP and his own former all against Trotsky, off the Politburo.
Some lower party members rallied behind Bukharin but their opposition was modest at best.
Great Purges—Stalin’s paranoia of threats to his power led to the a series of mysterious and horrendous human rights violations.
Beginning of the Purges
On December 1, 1934, Sergei Kirov (1888-1934), a popular party chief of Leningrad and a member of the Politburo, was assassinated.
In the wake of Kirov’s assassination, thousands of people were arrested, and more were expelled from the party and sent to labor camps.
At the time, many thought the opponents of Stalin assassinated Kirov
Today, most historians believe Stalin ordered Kirov’s assassination himself.
Between 1936 and 1938, a series of spectacular show trials were held in Moscow
Former high ranking Soviet officials—including Bukharin--publicly confessed to political crimes and were convicted and executed.
Stalin frequently arrested the wives, children, siblings, and in-laws of “traitors” and had them shot or sent to die in labor camps.
Hundreds of thousands—perhaps millions—of regular Russian people received no trial at all and were either executed or deported for slave labor.
The Soviet government then tried and executed army and navy officials they believed were traitors.
Stalin eventually turned against the central party elite, his own supporters, and began to find or pretend to find enemies within its rank.
The “old Bolsheviks” of the October Revolution in 1917 were among Stalin’s earliest targets as Stalin sought to promote young Soviets who were not committed to Leninist principles.
The terror executed during this era in Russian history has been termed “centrally authorized chaos.”