The Roaring Twenties & the Great Depression: A Global Economic Overview
The Roaring Twenties: Light and Shadow
The 1920s began with economic hardship, particularly after 1924. However, a period of improvement and international cooperation followed. The post-war readjustment was challenging for European economies due to destruction, inflation, and unemployment. After 1923, production increased, unemployment decreased, and living standards improved.
Authoritarian empires dissolved, and new, fragile democracies emerged. These democracies faced economic crises and social strains. The middle and upper classes feared a communist revolution, leading to dictatorial regimes in some countries.
The situation worsened when Germany couldn’t pay war reparations to France. France occupied the Ruhr, Germany’s coal and steel production center, intending to exploit its resources. German workers went on strike. The United States intervened with the Dawes Plan, providing Germany a loan to repay the Allies, who in turn would repay the U.S. The Locarno Treaty saw Germany recognize its borders and a demilitarized zone under British and Italian control. Germany joined the League of Nations. This era became known as the “Happy Twenties” due to a sense of euphoria.
The Stock Market Crash of 1929 and the Great Depression
The 1929 New York stock market crash triggered a severe global economic crisis.
Causes of the Crisis:
- Overproduction: During World War I, economies focused on war production, and other nations filled the market gaps. After the war, traditional producers resumed production, leading to a surplus.
- Speculation: The U.S. economy relied heavily on real estate and stock market speculation. Banks gave loans to companies that falsified accounts to appear profitable. This uninvested capital inflated interest rates, ruining companies unable to repay loans, ultimately causing the market crash.
- Black Thursday (October 24, 1929): Massive share selling led to plummeting business values and investor ruin.
Implications of the Crisis:
The crisis caused widespread unemployment, reduced consumption, and business failures. Banks restricted lending, worsening the crisis. The U.S. reduced imports and repatriated capital from the Dawes Plan, exacerbating the situation globally.
Responses to the Crisis:
Countries implemented policies to combat the crisis. In the U.S., President Roosevelt introduced the New Deal, increasing government intervention through public works and agricultural subsidies. The 1933 London Conference aimed for international cooperation but failed due to national self-interest.
Workers and peasants turned to communist parties, while the middle and upper classes gravitated towards extreme-right parties, leading to a new wave of dictatorships.