Causes of the Great Depression

1
Causes of the Great Depression

• And how Britain, Germany, France, Italy, and the
  Soviet Union dealt with it.

2
Intro

• The severity and length of the Great Depression
  have three interrelated causes
• the financial crisis caused by the Great War and
  the Paris peace settlement
• the global crisis in the production and
  distribution of goods, especially after 1929
• the failure of western European and U.S.
  governments to respond appropriately to these
  conditions.

3
Intro

• European governments had an overriding fear of
  inflation, based on their recent experience and
  the example of Germany's uncontrolled inflation.
• The Allies, and particularly France, depended on
  payments from Germany to subsidize their
  economies and pay their own debts to the United
  States the German economy, in turn, had become
  heavily dependent on U.S. private investment in
  the mid-1920s.

4
Intro continued

• When the U.S. stock market collapsed in 1929,
  U.S. loans to Europe dried up, and the German
  economy very nearly collapsed. Reparations were
  finally cancelled in 1933.
• Meanwhile, production and trade faced their own
  difficulties, including agricultural
  over-production, which caused raw-product prices
  to plummet farmers could no longer afford to
  purchase industrial products, so the manufacture
  of consumer goods stagnated this led to a
  reduction in demand for coal, iron, and textiles,
  crippling those industries as well..

5
Intro continued

• Economic theory in this period held that
  governments should cut spending in these
  circumstances, in order to avoid inflation.
  Governments did experiment with other forms of
  intervention, though, and these influenced the
  politics of the period. (Think the rise in
  Keynesian economics).

6
Britain Responding to the Depression

• The political responses to the Depression were
  very different in Great Britain and France, and
  yielded quite different results.
• In Britain, Ramsay MacDonald's coalition
  ministry, the National Government, was basically
  a sell-out by the Labor leader to the
  Conservative party. It produced impressive
  results industrial production increased beyond
  1929 levels by 1934, and the housing market
  boomed.

7
GB continued

• Unemployment persisted, however, with nearly 1.5
  million still unemployed in 1937. Most British
  citizens remained confident in their government,
  and radical politics of both the right and left
  held little appeal.

8
France Responds

• In France, the Depression came later and lasted
  longer. Right-wing political groups grew, as did
  political bitterness, incivility and violence. A
  right-wing political demonstration in Paris in
  1934 resulted in fourteen deaths and many
  injuries. A coalition ministry dealt with
  economic matters by decree. Leftist groups made
  alliances in the fact of right-wing threats, and
  formed the Popular Front in 1935. Socialist Leon
  Blum became premier of a Popular Front government
  in June, 1936..

9
French response continued

• Blum instituted progressive labor policies and
  made other moves that alienated the banking and
  business communities, leading Blum to resign in
  June 1937. A Radical ministry came to power in
  1938. In contrast to Britain, French industrial
  production did not regain 1929 levels until 1939.
  Also in contrast to the British experience, many
  French citizens had lost faith in the Republic
  itself, and in republican principles

10
Germany during the depression

• In the late 1920s, the Nazis were visible on the
  Weimar political scene, but had little influence.
  The effects of the Depression allowed them to
  seize power. In the early 1930s, unemployment
  soared as did membership in the Nazi storm
  troopers (SA). President von Hindenburg appointed
  Hitler chancellor of Germany in January 1933,
  hoping to control him through conservatives he
  also appointed to the cabinet.

11
Germany

• But Hitler and the Nazis had a broad base of
  support, because they combined an understanding
  of the electorate's social and economic
  insecurities with an inspirational nationalism.
  Hitler consolidated his power by capturing full
  legal authority, crushing alternative political
  groups, and purging the Nazi Party of rivals..

12
Germany continued

• The February 1933 Reichstag fire gave Hitler a
  pretext for suspending civil liberties. In March
  1933, the Enabling Act allowed Hitler to rule by
  decree. By the end of 1933, the Nazis had
  disabled or outlawed all institutions that might
  oppose Hitler. Through violence and intimidation,
  the Nazis created a terroristic police state,
  directed particularly against German Jews. The
  Nuremberg Laws and Kristallnacht marked the
  escalation of official anti-Semitism, which
  culminated in the so-called Final Solution. Nazi
  racial ideology called for selective breeding.

13
Germany continued

• They encouraged or discouraged women to
  reproduce, depending on their ethnic and health
  characteristics, and women were given special
  responsibilities in transmitting the approved
  culture.
• Hitler's economic policies, by subordinating all
  economic enterprise and policies to the state
  while retaining private ownership and capitalism,
  achieved stunning successes, particularly in
  eliminating unemployment. Rearmament and other
  preparations for war became the engine for
  economic growth.

14
Italy

• In the 1920s, Mussolini used massive public works
  projects, subsidies, and tariffs to attempt to
  stimulate the economy. The fascists sought a
  middle course between socialism and liberal
  laissez-faire capitalism, in a policy known as
  corporatism. Private ownership was preserved, but
  industries were organized into syndicates
  representing labor and management, both of which
  were supposed to maximize productivity for the
  sake of the nation rather than pursuing their own
  class interests.

15
Italy continued

• After 1930, industrial syndicates were replaced
  by bodies called corporations, which grouped
  industries by production area. Neither form of
  organization increased productivity, but they did
  foster bureaucracy and corruption. With Italy's
  1935 invasion of Ethiopia, the economy was
  mobilized for war. Taxes rose, while wages and
  the standard of living declined.

16
Soviet Union

• Stalin led a plan for rapid industrialization,
  which led to tremendous economic growth through
  the 1930s but cost millions of lives. Starting in
  1928, a succession of five-year plans set
  production goals, and the State Planning
  Commission organized the economy to meet those
  goals. Huge new factories were built, and
  millions of workers were employed.

17
Soviet Union

• Between 1928 and 1940, Soviet industrial
  production rose a mind-boggling 400 percent.
  Meanwhile, in 1929, Stalin had ordered the
  collectivization of agriculture, so that
  production could be increased under state control
  and so that restive peasants could be transformed
  into obedient industrial laborers in the new
  factories.

18
Soviet Union

• The elimination of the kulak class successful
  farmers who had gained wealth but made the
  political mistake of expressing their discontent
  at having little to buy with it was part of the
  program. Both collectivization and liquidation of
  the kulak class were ill-defined, however, so the
  state could and did turn against peasants at
  will.

19
Soviet Union

• Religious leaders became targets of the state, as
  well. Millions of peasants migrated to the
  cities, where housing, food, clothing, and
  consumer goods were in perennially short supply.
  Stalin retained his grip on power largely through
  the Great Purges and the "show trials" of the
  late mid to late 1930s.