Global Economic Impact of World War I and the Roaring Twenties
Global Economic Impact of World War I
Europe was severely affected by World War I, suffering significant demographic losses with 8 to 10.5 million deaths, over 6 million disabled, and more than 21 million injuries. The post-war economy was chaotic, with over 10% of its production base destroyed, including machinery and infrastructure. Europe lost its economic dominance and colonial markets, experiencing high inflation. The U.S. was owed large sums of money, while European countries were indebted to each other, with England being the most indebted to the U.S. War reparations imposed on Germany were not viable, and the occupation of the Ruhr region by Belgium and France further exacerbated the situation. The U.S. loan to Germany was the only solution. England faced difficulties with competing products from the U.S. and Japan and was also in debt. New frontiers created trade imbalances, and agricultural products and raw materials saw a decline in prices.
Stock Market Fever
There was a surge in investment securities. After 1925, corporate profits were increasingly invested in credit and the stock market rather than productive sectors. Initially, the stock market boom was due to a good business environment, but it turned into a speculative bubble. The increased value of shares was driven by the belief that buying early would lead to greater profits. This generated strong demand for securities, further increasing their market value. Small investors, many of whom borrowed to buy stocks, entered the market. The problem began in 1929 when stock values started to decrease.
The Roaring Twenties
The 1929 crisis followed several years of economic prosperity in the U.S., known as the Roaring Twenties. The U.S. became a major supplier of capital goods, accelerating industrial production. Increased exports allowed the U.S. to penetrate markets previously served by European powers, creating a trade surplus. This economic expansion was driven by technical innovation and changes in work organization. There was a significant increase in the use of electricity and oil. The use of telephones, automobiles, and household appliances like radios, irons, and refrigerators became widespread. The automobile industry, which pioneered mass production through assembly lines, was a landmark of this booming sector. This had positive effects on related sectors such as iron, steel, and electrical equipment. The construction of skyscrapers in large cities also increased. This led to a large increase in productivity, allowing the U.S. economy to reduce production costs. This had positive effects on employment, which in turn led to an increase in demand. Between 1922 and 1929, there was a period of great prosperity.
The Rise of Consumerism
This period saw a big change in trading systems, with specialized, small-scale businesses having to compete with chain stores that introduced new sales methods, stimulating consumption through hire purchase or credit. Advertising and marketing played a major role, leading to a consumer revolution and the rise of the consumer society. The confidence of much of the population led to consumption growing at a rate higher than in England, resulting in high household indebtedness. However, not all population groups improved their situation, and the purchasing power of workers was not enough to absorb increased production. Overproduction became a problem for the U.S. economy. Agriculture was the hardest-hit sector, with farmers facing reduced revenues due to lower exports and prices, leading to the ruin of millions.