Interwar Economic Crises, Depression & Rise of Dictatorships
Post-War Economic Crisis (Early 1920s)
In the early 1920s, Europe experienced an economic crisis caused by several factors:
- The material destruction which had occurred during World War I and the reduced workforce.
- The end of the war economy, which had been based on the production of military equipment and supplies. There was also a shortage of consumer goods and high levels of inflation, particularly notable in post-war Germany.
- Investment speculation: People speculated by buying shares, aiming to make large profits over short periods, contributing to market instability.
The Great Depression (Late 1920s-1930s)
At the end of the 1920s, a series of problems in the US caused a major economic crisis known as the Great Depression. This crisis lasted until the end of the 1930s.
Causes of the Great Depression
- Overproduction: American industry produced more goods than the population needed. When companies couldn’t sell their products, they went bankrupt and had to close.
- Falling Consumption: When companies closed down, people lost their jobs and stopped spending money. Rising unemployment reduced demand for consumer goods and the raw materials used to make them.
- The Wall Street Crash: When the share prices of many companies listed on the stock market began to fall, investors panicked and tried to sell all their shares. As a result, share values fell dramatically, and in October 1929, the New York Stock Market crashed.
Global Effects of the Crash
The effects of the crash soon spread to Europe and other parts of the world because the US asked other countries to repay the loans they had received after the war. As a consequence, consumption decreased in Europe, and companies there went out of business as well. Wages fell, and unemployment increased. In addition, some banks collapsed because many people panicked and withdrew all their money.
The depression also had a negative impact on international trade because many countries adopted protectionist measures in response to the crisis. In many countries, there were protests against the government and against the capitalist system.
Rise of Authoritarian & Totalitarian Regimes (1920s-1930s)
In the 1920s and 1930s, authoritarian dictatorships came to power in many countries. These sometimes evolved into totalitarian regimes.
Types of Regimes
- Left-wing Authoritarian Regime: Came to power in the USSR as a result of the Russian Revolution. The Communist state was anti-capitalistic and aimed to establish a classless society.
- Right-wing Authoritarian Regimes: Came to power in Italy (1922) and Germany (1933). These regimes were extremely pro-nationalist and were opposed to both communism and democracy.
Shared Characteristics
Authoritarian and totalitarian regimes shared several characteristics:
- Politics: Power was concentrated in the hands of a supreme leader and one ruling political party. Propaganda was used to spread the party’s message and glorify the leader. There were no free elections, and other political parties were prohibited.
- Economy: The state intervened in and controlled the economy.
- Society: The state limited rights and freedoms. Repressive measures were used against people who opposed or criticised the regime. Political opponents were arrested, imprisoned, and deported.
- Foreign Policy: These regimes pursued expansionist foreign policies to gain new territory and access to raw materials.
Stalinism in the USSR
After Lenin’s death in 1924, Joseph Stalin became the leader of the USSR, developing a totalitarian regime known as Stalinism.
- Stalin controlled all branches of the government and the army. People who opposed Stalin’s regime were executed or sent to prison camps (Gulags) in Siberia.
- The economy was planned and controlled by the state. Stalin introduced a series of Five-Year Plans, which aimed to achieve rapid industrialization and economic development. Key industries such as iron, steel, and mining were nationalised. In agriculture, a collectivisation policy took land from private owners and used it to establish state-controlled collective farms (kolkhozes).
- In theory, the Soviet Union was a classless, communist society. However, there were enormous social differences between the ruling elite (nomenklatura) and the rest of the population, who often suffered from shortages of food and basic items.