Economic Downturns & Political Shifts: 1920s-1930s History

Posted on Aug 16, 2025 in History

The Great Depression and the New Deal Era

Causes of the Great Depression

  • Poverty: More than half the population was too poor to share in the prosperity of the 1920s, living “below the poverty line.”
  • Overproduction: Due to mass production, more goods were produced than could be sold, leading to market saturation.
  • Tariff Policy: When the USA placed tariffs on foreign imports in the early 1920s, foreign governments retaliated by placing tariffs on US goods.
  • Speculation: Americans bought shares on credit in the 1920s, expecting a profit. When the value of shares did not rise in 1928, people began to sell, causing share values to fall.
  • The Wall Street Crash (1929): This event brought the collapse of the stock market as the value of shares crashed.

Effects of the Wall Street Crash

  • Collapse of the stock market on Black Thursday.
  • Banks recalled loans.
  • Run on the banks.
  • Businesses closed.
  • Workers became unemployed.
  • Initiated a cycle of depression.

Effects of the Depression

  • Widespread unemployment.
  • Rise of “Hobos” (migrant workers).
  • Increased homelessness.
  • Emergence of “Hoovervilles” (shantytowns).
  • Increased reliance on charity.

The Republican Government and the Depression

Herbert Hoover had been elected President in 1928 on the promise that prosperity would continue. When the Depression came, Hoover believed that it would end by itself. Republicans believed in “rugged individualism,” meaning people should help themselves. In the 1932 elections, American voters turned to the Democrats and Franklin D. Roosevelt.

Roosevelt’s Hundred Days

Upon taking office, Franklin D. Roosevelt was granted emergency powers. Key actions included:

  • The Emergency Banking Act.
  • Establishment of “Alphabet Agencies.”
  • “Fireside Chats” to communicate directly with the public.
  • Restoration of public confidence.
  • Government earned the trust of the people.

The New Deal: Relief, Recovery, Reform

The New Deal was a series of programs and reforms aimed at addressing the Depression’s challenges:

  • Relief: Help for the poor and the homeless.
  • Recovery: Aid to industry to provide jobs.
  • Reform: Assistance for the elderly, unemployed, sick, and others in need.

Key Alphabet Agencies

  • AAA (Agricultural Adjustment Act): Limited the amount of food produced by farmers, which reduced the supply of food and caused prices to rise.
  • FERA (Federal Emergency Relief Administration): Provided direct relief to states for distribution to the needy.
  • CWA (Civil Works Administration): Created 4 million jobs in 1933-34 through public works schemes.
  • PWA (Public Works Administration): Created jobs in public works schemes, such as building schools and hospitals.

Benefits of the New Deal

The New Deal brought about significant positive changes:

  • Helped agriculture.
  • Created jobs.
  • Aided environmental conservation.
  • Improved working conditions.
  • Introduced welfare reforms.
  • Recognized trade unions.

Opposition to the New Deal

Despite its successes, the New Deal faced opposition from various groups:

  • Republicans.
  • Business people, such as Henry Ford.
  • The Supreme Court.
  • Radicals, like Huey Long.

Lasting Effects of the New Deal

The New Deal created jobs for millions of Americans who had suffered in the Depression. It developed confidence in the American economy again. Some measures, like the TVA (Tennessee Valley Authority) and the Social Security Act, had lasting effects on American society.

Fascism in Mussolini’s Italy

Causes of Fascism’s Rise

  • Economic Causes: The economy was afflicted by rapid inflation and rising unemployment.
  • Political Crisis: A divided party system was encouraged by proportional representation (PR).
  • Social Causes: Industrial unrest fueled fears of communism, as did soaring trade union membership between 1918 and 1920.
  • Revenge Causes: Many felt an acute sense of national humiliation after Italy failed to gain African and Middle Eastern colonies from the post-war settlements.

Mussolini’s Rise to Power (1922)

Business and large landowners saw in the Fascist Party the promise of stiffer regulation of labor, leading to their support for Mussolini’s ascent to power.

The Weimar Republic: Successes and Crisis

Successes of the Weimar Republic

  • The defeat of the Spartacist threat in 1919.
  • The crushing of the Bavarian Soviet the same year, followed by the failure of the Kapp Putsch in 1920, which bought the new system time to win over more of the German people to democratic values.
  • Normalization of relations with Germany’s western neighbors, notably the Locarno Treaties of 1925, which improved relations with France.

The 1929-1933 Crisis

This period was marked by:

  • Division among the Weimar coalition parties.
  • Brüning’s deflationary policy.
  • Political maneuvering on the right.