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The economy in the inter-war years, image, image, image, image, image,…
The economy in the inter-war years
Post-war crisis
Between 1918 and 1923, Europe went through a significant economic crisis which had some characteristics
High levels of debt
It was caused because of the loans Europeans had to pay to the United States for paying the costs of the war
Shortage of products
It happened because of the destruction of areas of agricultural land, factories and transport systems
The prices of products increased as a consequence
Germany was one of the most affected countries not only because of the crisis but also because of the war reparations they had to pay
As a solution to this, the government put into circulation lots of bank notes which were worthless because Germany had no gold, so people needed large quantities of money to buy basic goods (known as hyperinflation)
In 1923, Germany's economic crisis became worse when France occupied the richest and most industrialised part of Germany, called Ruhr
The suffragist movement
Groups of women demanded the right to vote when they realised they were capable of doing the same work as men
Women started to protest against inequality between men and women and to fight for women's right to participate in political and economic life
In the USA and Europe, the mobilisation of women was supported by the Socialist Party, which established International Women's Day
Women acquired the right to vote after the post-war period in some countries
Russia, Great Britain, Poland, the Netherlands and Austria in 1918
Germany and Belgium in 1919
Czechoslovakia and the USA in 1920
The Wall Street crash of 1929
In 1929 the Wall Street stock market in New York collapsed
It was the beginning of a major economic crisis
It lead to the Great Depression of the 1930s
The causes of the crisis
Agricultural overproduction
During WWI, American agricultural system had increased its production
The cultivation of more land made it posible
The mechanisation of agriculture made it posible, such as the tractor, harvester and threshing machine
After WWI
European countries began to produce their own agricultural products
American agricultural production was maintained
The result was a surplus of production which caused prices to fall
Speculation on the stock market and excessive bank credit
During the period of prosperity, companies and individuals bought shares in companies on the Wall Street stock market because they offered guaranteed profits
To buy these, both people and companies obtained credit or loans from the banks
The increasing demand for shares led to a rise in share prices which caused stock market speculation
Shares were bought in order to make quick profits, despite the fact that the share value did not reflect the real value of the companies, which were bankrupt or in financial crisis
But soon, companies that sold shares on the stock market began to have problems and shareholders wanted to sell their shares
On 24 October 1929, thirteen million shares went up for sale, which caused share value to fall dramatically due to oversupply, which resulted in the Wall Street Crash
The stock market crisis spread to banks and became a financial crisis
Banks found themselves without access to money because the investors, who could not sell their shares, did not have the money to pay back their loans
So people tried to withdraw their savings from the banks to avoid losing them
The banks collapsed and millions of citizens were ruined
Industrial overproduction
After WWI European countries started to bought less from the Unites States as their industry recovered. But, United States didn't reduce the amount of products that were being produced and as a consequence, unsold products accumulated in warehouses
As a result, companies lost money and some of them had to close down
Unemployment rose, so people had less money to buy consumer goods and consumption decreased even more
Recovery in the 1920s
United States and Japan were the first countries to recover from the crisis, because their industries and soil hadn't been devastated by war
This allowed United States to help European countries come out of the economic crisis
In 1924, United States applied the Dawes Plan in Germany
It consisted on
A series of economic measures which involved loans and American investment in German industry, with the aim of increasing the value of the German mark
Thanks to this plan, in 1925 Germany's economy began to recover and it was able pay reparations to the victorious European countries which then were able to pay back their loans
Revising and reducing war reparation payments
Under this plan France agreed to abandon the occupied areas of the Ruhr in August 1925
The roaring twenties
The roaring twenties was a prosperous time when the world economy began to recover. It was thanks to the United States that helped European countries by giving loans and selling the consumer goods they lacked
Because of the economic prosperity, society changed; the suffering of the war years had passed, and life was focused on enjoyment
New forms of enterteinment arose
Cabarets
Music-halls
Ballrooms
Radio shows
Cinema as well as famous Hollywood film stars
Consumerism grew again
The car industry and the development of the production of electricity were the driving forces behind the economic recovery
Consumers bought shares in companies on the stock market because they paid large profits in a short period of time
The Great Depression of the 1930s
It began with the Wall Street Crash of 1929 and continued for a decade
The economic crisis led to a fall in prices (deflation) and put an end to the prosperity of the roaring twenties
Unfortunately, The crisis soon spread to Europe and other parts of the world because the United States stopped investing and asked other countries to repay the loans they had received after the war
It had several consequences
Wages fell
Unemployment increased and millions of people were forced to live off charity and government support
The world economy was affected
Other countries, to save national production, adopted protectionist measures
Companies closed
Banks collapsed because they didn't have access to money
There was a decrease in the standard of living
It generated discontent with the liberal capitalist system, which most people blamed for the crisis
The New Deal
Governments of all countries tried to end the crisis by state intervention in the economy
In 1933 the United States President, Franklin Roosevelt implemented the New Deal
It consisted on a series of economic and social measures adopted by the government in order to try to stimulate demand
The measures taken in the New Deal
To give subsidies to agricultural producers so that they could pay off their loans
To limit agricultural and industrial production to prevent a fall in prices
To carry out public works to create employment
To establish government control of the stock market to avoid the large scale sale of shares, and control of the banks to safeguard citizens' savings
To establish a minimum wage and provide unemployment compensation disability insurance and old-age and widow's benefits to help alleviate the misery of the working class
Luckily, After 1938, the United States economy began to recover though full employment was never reached again
