The 1929 Economic Collapse and the Rise of Totalitarian Regimes
The 1929 Economic Collapse: Causes and Consequences
Causes of the 1929 Economic Crisis
Between 1914 and 1918, during World War I, European industrial production shifted to wartime efforts, while countries like the U.S., Spain, and Argentina significantly increased their industrial output to supply Europe. After the war, the U.S., now a major industrial power, began lending money to Europe. Domestically, new financial products like credit cards and installment plans became popular, enabling people to purchase home appliances and cars on credit. This surge in U.S. consumerism, fueled by loans, coincided with a booming stock market. Investing became widely popularized, with many individuals even taking out loans to invest in stocks. The influx of small investors artificially inflated stock prices, creating a speculative bubble. Gradually, Europe’s industrial capacity and infrastructure began to recover. Stock market valuations began to detach from actual industrial output, and the market failed to reflect the underlying economic realities. On Thursday, October 24, 1929, known as Black Thursday, over 13 million shares were suddenly offered for sale, leading to a massive market crash. Suddenly, consumption slowed, debt grew, and U.S. banks demanded repayment of loans from Europe, effectively exporting the crisis worldwide. Countries attempted to find individual solutions, often resorting to protectionist policies that limited international trade and consumption of foreign products, further worsening the global crisis.
Consequences of the 1929 Economic Crisis
- The crisis led to stagnant population growth and limited immigration.
- Industrial, commercial, and agricultural production plummeted as the credit system collapsed.
- Unemployment soared, leaving millions unprotected.
- The middle classes lost significant economic and political power.
- Traditional politicians and parties proved ineffective in solving the crisis, leading to the rise of new, radical ideologies like communism and fascism, which gained widespread popular support.
However, the U.S. reacted to the crisis with an ambitious economic and social plan: the New Deal. This program transformed the state into a major employer, focusing on large-scale infrastructure projects like roads and railways. Its aim was to reduce unemployment, stimulate economic activity, and provide relief to the jobless, thereby combating poverty through beneficial social policies.
The Rise of Totalitarianism: Nazism and Fascism
The devastating crisis of 1929, which peaked in the 1930s, provided the ideal conditions for economic collapse, soaring prices, and the inability of traditional right and left-wing parties to offer effective solutions. Democracy appeared outdated and ineffective to many. This allowed anti-establishment groups from both the extreme right and left to gain significant support, particularly among the disillusioned middle class. While communist revolutions succeeded in Russia, similar attempts in Western Europe (e.g., Germany) largely failed. This situation alarmed industrialists and property owners, leading them to support extreme right-wing movements. These movements advocated for the existence of a stronger, united, and authoritarian state that suppressed dissent and political freedom. Amidst their pursuit of electoral power, political systems transformed into dictatorships. State control extended to the economy and society, using education and propaganda to control mass thinking. Industrial groups assisted and guided the economy towards protectionist systems. They rejected social equality, deeming it incompatible with their racial ideologies. They persecuted and murdered Jews and Roma (Gypsies). These ultranationalist movements appealed strongly to sentiment. Militarists argued that countries needed strong armies and societies, leading to significant investment in military forces and a societal structure where the strong commanded the weak.
Fascist Italy
Founded by Benito Mussolini in 1919, the Italian Fascists, also known as the Blackshirts, evoked the imagery of Imperial Rome. These groups, dressed in military-style clothing, gained notoriety after 1922 for attacking trade unions and garnered sympathy from authorities, industrialists, and and the King. In 1922, to consolidate their power, they organized a massive March on Rome. King Victor Emmanuel III then handed power to Mussolini, who swiftly eliminated political opposition and established the Fascist regime.