US Economic Crisis & Global Politics 1929-1991
The US Economic Crisis of 1929
1. The growth of domestic and external demand was insufficient to absorb the growth in production.
2. Due to the constant threat of a crisis of overproduction, Americans reduced investments and increased production. Consequently, agricultural product stocks rose, and prices fell.
3. The buying power of much of the population remained very low due to the poverty of farmers and the high number of unemployed, coupled with the low wages of workers. Credit was increased in a manner disproportionate to the real purchasing power of workers.
4. The great profits of companies disproportionately increased the price of shares. Consequently, a speculative bubble formed.
The Wall Street Crash
When some experts began to realize that the profits of companies did not increase at the pace of trading, they began to sell thousands of shares. As a consequence, the stock price started to fall, and panic seized investors. On October 24, 1929, “Black Thursday,” more than 13 million shares went on sale. The crash of Wall Street marked the beginning of the deepest crisis of capitalism and ended the optimism of the twenties.
Keynesian Economics
The depth of the crisis prompted a rethinking of economic thought. Keynes, a North American economist, believed the crisis was produced by a decrease in demand due to market saturation. According to Keynes, to stimulate demand, it was necessary to increase employment and boost the purchasing power of the working class. With his economic thought, Keynes legitimized state interventionism, defending the need to boost public investment and undertake public works to stimulate the economy and achieve full employment.
Roosevelt’s New Deal
In 1933, Roosevelt’s Democratic Party was elected to the US presidency and began a new economic policy known as the “New Deal.” It was based on the theories of Keynes, with some adaptations.
1. To achieve its objectives, the US dollar was devalued, and silver coins were minted. These measures were intended to produce inflation but were accepted as a means to stimulate the economy.
2. Public investment was increased, and a plan of public works was initiated, focusing on large dams, with the aim of creating jobs and wealth.
3. The state became involved in the capital of banks in order to control them.
4. Farmers were asked to reduce production to boost the prices of agricultural products.
5. At the industrial level, efforts were made to secure benefits for employers, achieve higher prices, and increase wages.
Item 10: Germany’s Expansionist Policy Before WWII
The expansionist policies of Germany before the Second World War (1939-1945) included: The Nazi Party’s desire to conquer “living space” (Germany wanted to expand), the annexation of the Saar, and the remilitarization of the Rhineland.
Item 11: The Cold War
The Cold War was a period of geopolitical tension between the United States (USA) and its liberal democratic capitalist allies, and the Soviet Union (USSR) and its planned Marxist totalitarian allies. We can distinguish three stages in this period:
- The Cold War (1945-1955): Stage of maximum tension.
- Peaceful Coexistence (1956-1975): Stage of détente.
- The Return of the Cold War (1976-1991): Stage of renewed tension.
Decolonization
US President Roosevelt believed that China should not return to French rule but should be under the supervision of an international commission. The Russian leader, Zhdanov, maintained that metropolises could not continue to dominate the colonies because it would lead to colonial wars. The ideological basis of Roosevelt’s text is liberal, while Zhdanov’s is Marxist.