The Great Depression in Europe, 1929-1939
Clavin, Patricia, History Review
The economic crisis which began in 1929 is often seen as the major turning point in 20th-century world history. Patricia Clavin examines its causes and effects.
The modern world has never experienced an economic crisis as severe as the `Great Depression'. The term was first coined in the United States to describe the economic collapse that, by 1931, had shattered the US economy and Americans' faith in the future. Europe and the rest of the world were also badly hit, and while they first called the crisis `a slump', in time the label `Great Depression' was adopted on both sides of the Atlantic to describe this unprecedented global economic crisis.
Although there were national variations, no part of Europe was left untouched by the Great Depression. In the worst affected countries -- Poland, Germany and Austria -- one in five of the population was unemployed, and industrial output fell by over 40 per cent. Levels of trade between countries also collapsed. By 1932 the value of European trade had fallen to one-third of its value in 1929, while many of Europe's most respected banking houses and currencies teetered on the brink of collapse. By the end of the decade some semblance of recovery had been achieved, but it was neither complete nor sustained. If preparations for another war had not generated demand and investment, it is very likely the world would have entered a new `Great Depression' after 1937.
The depression brought mass unemployment and poverty to all levels of European society. As a consequence, domestic politics became increasingly turbulent. In much of central and eastern Europe, as in the Weimar Republic, when politicians from moderate, centrist parties (Liberals, Conservatives, Democratic Socialists) failed to introduce policies to tackle the crisis, they lost out to extremist parties to the Right and Left of the political spectrum. In 1931, Britain sought to combat this trend by forming a National Government, made up of members from the Conservative, Liberal and Labour parties, to `generate national unity'. There were similar developments in France, Belgium and the Netherlands in the mid-1930s.
Relations between countries were also disrupted by the Great Depression. The severity of the crisis pushed countries to protect their national interest above all else. By November 1932, every country in Europe had adopted, or enhanced, tariffs and quota systems to prevent foreign imports from damaging domestic industry and agriculture. The world was now divided into competing trade blocs and this development had profound implications for international peace. For Germany and Italy economic nationalism was the first step on the road to build new Empires. By 1935 it had become clear that their nationalism was not confined to economics, as Mussolini and Hitler began to assert territorial claims in the Mediterranean, Africa and eastern Europe.
By then, it was also apparent that the Depression had undermined the ability of other countries to resist these demands. Thanks to their economic troubles, Britain and France felt weak. Diplomatic co-operation, too, proved very difficult in the atmosphere of intense economic competition, even between countries like Britain, France and the United States which shared a common interest in defending democracy and capitalism.
America as the `World's Banker'
The origins of the depression begin with the economic and political changes wrought by the First World War. A number of developments were especially significant. The first was the emergence of the United States as the world's premier economic power: the `world's banker'. America had become the world's most powerful economy thanks to the way that the Entente powers had come to depend on American loans to fund their war effort, and the way that American business was able to grow rich because of increased demand around the world for its products. As the British economist John Maynard Keynes famously put it, when America sneezed, the rest of the world caught a cold. …