THE ECONOMIC CATALYST
THE ECONOMIC CATALYST Post-War Situation:
Europe had lost ground to US in dominating world trade and industrial production
Immediate outcomes influenced by revolution and peace settlements: o
War Communism and New Economic Policy
Bolsheviks repudiate pre-war debts (especially affecting France)
Emergence of 11 new states destroyed previous customs union
o
Italy – economic collapse
o
Germany
o
Russia
Treaty of Versailles reparations (Germany defaults 1923)
Printing paper money, collapse of mark
Britain and France – post-war boom, followed by recession in 1922
Reversal of malaise and increase in prosperity, 1924–9. Factors include: o
Stabilized international situation
o
Dawes Plan, 1924 (resolution of German reparations crisis)
o
US investment in Europe, loans etc. (1925–9)
o
Implementation of gold standard to stabilize international exchange
Five problems with immediate recovery:
Eastern Europe isolated from any benefits and under dictatorships
Western European industrial growth not accompanied by increased trade
Overproduction in agricultural sector in western Europe and US
Unsteady industrial growth – dependent on American short term loans
Short-lived international economic relations
The Great Depression
Features: o
Wall Street Crash, October 1929
o
Central European banking system collapses, 1931
o
Decline in industrial production, food output, extraction of raw materials by end 1932
Political reactions – Maintaining democracy:
o
Scandinavian countries contained emergency
o
Britain political upheaval within parliamentary context
o
France maintains democracy through broad-based coalitions
National Government replaces bipartisan approach
Léon Blum’s Popular Front, 1936
Political reactions – Failing democracy: o
Germany
Müller’s broad-based coalition collapses 1929 over strategy for economic crisis
o
Shift to the right benefits Nazis and rise of Hitler by 1933
Eastern Europe, Balkans, Portugal resort to emergency powers to replace parliamentary governments
Policy attempts to resolve depression o
Cutting government expenditure and budget balances (France, Britain, Germany)
o
Corporativism (Italy, Portugal, Austria)
o
Self-sufficiency/autarky (Germany)
Capitalism survives, but democracy does not o
‘Liberal capitalism’ extinguished
o
‘Economic nationalism’ emerges (state control, mobilization of labour and resources)
International relations damaged o
International trade suffers as national programmes of economic survival installed
o
Free trade destroyed by high tariffs and bilateral/regional agreements (Oslo Group and 1932 Ottawa Agreement)
o
Rearmament and aggression as economic solution (Japan, Italy, Germany)
Italian invasion of Abyssinia leads to withdrawal of American investment, 1929
Hitler’s Four Year Plan prepares Germany for war by 1940
Europe had lost ground to US in dominating world trade and industrial production
Immediate outcomes influenced by revolution and peace settlements: o
War Communism and New Economic Policy
Bolsheviks repudiate pre-war debts (especially affecting France)
Emergence of 11 new states destroyed previous customs union
o
Italy – economic collapse
o
Germany
o
Russia
Treaty of Versailles reparations (Germany defaults 1923)
Printing paper money, collapse of mark
Britain and France – post-war boom, followed by recession in 1922
Reversal of malaise and increase in prosperity, 1924–9. Factors include: o
Stabilized international situation
o
Dawes Plan, 1924 (resolution of German reparations crisis)
o
US investment in Europe, loans etc. (1925–9)
o
Implementation of gold standard to stabilize international exchange
Five problems with immediate recovery:
Eastern Europe isolated from any benefits and under dictatorships
Western European industrial growth not accompanied by increased trade
Overproduction in agricultural sector in western Europe and US
Unsteady industrial growth – dependent on American short term loans
Short-lived international economic relations
The Great Depression
Features: o
Wall Street Crash, October 1929
o
Central European banking system collapses, 1931
o
Decline in industrial production, food output, extraction of raw materials by end 1932
Political reactions – Maintaining democracy:
o
Scandinavian countries contained emergency
o
Britain political upheaval within parliamentary context
o
France maintains democracy through broad-based coalitions
National Government replaces bipartisan approach
Léon Blum’s Popular Front, 1936
Political reactions – Failing democracy: o
Germany
Müller’s broad-based coalition collapses 1929 over strategy for economic crisis
o
Shift to the right benefits Nazis and rise of Hitler by 1933
Eastern Europe, Balkans, Portugal resort to emergency powers to replace parliamentary governments
Policy attempts to resolve depression o
Cutting government expenditure and budget balances (France, Britain, Germany)
o
Corporativism (Italy, Portugal, Austria)
o
Self-sufficiency/autarky (Germany)
Capitalism survives, but democracy does not o
‘Liberal capitalism’ extinguished
o
‘Economic nationalism’ emerges (state control, mobilization of labour and resources)
International relations damaged o
International trade suffers as national programmes of economic survival installed
o
Free trade destroyed by high tariffs and bilateral/regional agreements (Oslo Group and 1932 Ottawa Agreement)
o
Rearmament and aggression as economic solution (Japan, Italy, Germany)
Italian invasion of Abyssinia leads to withdrawal of American investment, 1929
Hitler’s Four Year Plan prepares Germany for war by 1940
