Economic and Political Turmoil: 1905-1939
Roosevelt’s New Deal
In the United States, President Hoover’s situation had worsened since the crash of 1929. The votes of the workers, the National Confederation of Agricultural Syndicates (CNAS), and middle peasants gave the Democrats victory in the elections. Their principles were the same as those of Keynes:
- The Social Security Act established unemployment insurance and pensions and disability for the first time in the U.S.
- Public works were launched, including the construction of roads, housing, and reforestation. The schools provided jobs for 3 million youth.
- Banks were monitored to facilitate concentration.
- The dollar was devalued to facilitate exports.
- The right of workers to organize and bargain collectively was recognized.
These measures were designed to grow the purchasing power of citizens, who would buy more, reactivating domestic production and, in turn, reducing unemployment.
Bankruptcy of 1929
From January to August 1929, the New York Stock Exchange had seen an increase of 118 points. However, on October 24 of that year, which went down in history as Black Thursday, the great panic began, ending dreams of easy wealth. The trading session began with many shares on sale, which brought down prices. The casualties were settling in, and fear and large amounts of shares for sale brought down prices even more. By mid-morning, riots were organized in the streets, where it was rumored that several tycoons had committed suicide rather than survive the ruin. The stock market crash of October 29 swept away not just investors but also banks, trusts, and companies.
Keynes
In the meantime, the British economist Keynes preached in vain for a new economic policy, whereby during the crisis, the government should not spend less, but more, even if they had to borrow money. The state should employ by investing in public works; this would cause the deficit to be covered by the taxes generated. This way, unemployment would be reduced, and consumers could buy again.
Debt
It is estimated that the war had cost 260,000 million dollars. The countries that had spent the most were Great Britain, the United States, Germany, France, and Italy. As taxes were insufficient to meet such expenses, banks had granted loans to governments in exchange for commitments to pay when the war was over. The economically strongest country was the United States. In 1914, the U.S. was a debtor country, and yet by 1919, it was a creditor country. To facilitate purchases of the belligerent countries, the U.S. government had issued very favorable public credit. The problem was worse in neighboring countries, which were defeated because of their mortgaged wealth. Prices were five times higher than before the war, and the German mark was worth half.
First Five-Year Plan
In 1928, the goal was to build heavy industry in the USSR without using foreign loans. This required an agricultural revolution. Collective farms were established, owned by the peasants who lived on them. The farmers contributed their land and livestock to the community, but the rich peasants (kulaks) adjourned collectivization by force. Soon, purely mechanized agriculture began. The results were admirable. Never had such high industrial growth been seen at any time or in any country. By 1938, the USSR was the world’s largest producer of tractors and locomotives. By 1939, only the U.S. and Germany exceeded the USSR in gross industrial output.
Gosplan
Industrial development was needed quickly if the USSR wanted to build socialism in one country. A radical change in economic policy was needed so that the USSR was self-sufficient, so a system of central planning (Five-Year Plans) was devised. A central agency called the State Planning Committee was set up, which decided the amount of each item that the country should produce. Gosplan would intervene in the final decisions and put them into practice. Then, they had to ensure that all forecasts were met and that each reached its time.
The Revolution of 1917
Tsarism could not survive World War I. The war began with great military disasters (Tannenberg). In just this year, there were 2 million casualties among the dead and prisoners. To the cry of protest, the Tsar made the decision to dissolve the Duma that, despite being dominated by conservatives, expressed his outrage at the shameful performance that had been offered at the front. The fronts were being defended by an army of peasants, poorly fed, ill-clothed, with inadequate weapons and little ammunition.
The Revolution of 1905
The troops charged and opened fire on demonstrators, killing several hundred. There, the Tsarist agony began. Everyone came out of hiding to try to lead this revolution. Soviets (workers’ councils) were formed in Moscow and Saint Petersburg. Terror rose among the peasants, invading lands and apportioning them, killing landowners, and burning chateaux. The universities of Kiev and Petersburg were overrun by high school students, workers, and all sorts of people. The Petersburg Soviet summoned an industrial strike that paralyzed banking and transport. Ultimately, the sole achievement of the Revolution of 1905 was the Duma. There were four Dumas since the Tsar exercised his right to disband them when they attempted to introduce reforms. No road, reformist or fear, consolidated Tsarism, only the most severe repression. In 1914, with the participation of Russia in World War I, the Tsar believed that the revolutionary movement would be liquidated, and vice versa.