Post-WWI Economic Crisis and the Great Depression
Post-World War I Economic Problems
After World War I, significant economic problems arose. Germany was accused of being morally responsible for the conflict and was required to pay reparations. France and Britain owed money to the US for their participation in the war. This created a chain of debts owed to Germany, Britain, France, and the United States.
Germany was unable to recover economically and did not pay. In 1923, the French occupied the Ruhr because of Germany’s failure to pay reparations.
The key was the economic recovery of Germany. France and Britain believed that Germany needed to recover economically to pay its debts.
Situation in the US
- Accumulation of gold
- The USA detached itself from what was happening in Europe
Key Objectives:
- The US did not ratify the peace treaties.
- It did not participate in the League of Nations.
- American protectionism: The US protected itself and adopted an isolationist position.
This imbalance was reflected in monetary disorder, which deviated from the gold standard.
Economic Situation in the US
In the US, a concentration of wealth created a false sense of prosperity, focused on consumer speculation and, to a lesser extent, on the productive sectors. This stage opened up mass consumption in the US. The worst part of this stage was that it gradually became credit-based consumption. The two main sectors were automobiles and electricity.
Speculation began to drain money from the productive sectors. Two details are important:
- The banking system was very different from the current one. There was a Federal Reserve, along with large, medium, and small banks.
- Speculation was very easy; to buy stocks, one only needed to pay 10% of the total value of the action.
Insider: Price increases without a corresponding increase in value.
In 1925, speculation was at its strongest. Two clear examples are the real estate bubbles in New York and Florida. The value of production decreased, and money flowed to the speculative circuit. This caused the stock market crash, which ruined investors. The banking system collapsed, companies produced less, and people went on strike.
International Plans and Crisis
- Dawes Plan: The US lent money to Germany.
- Young Plan: Another money recovery plan.
Germany was sinking and dragging France and England down with it. The North American crisis became a global crisis, leading to the crisis of the 1930s.
There were four models for addressing the crisis:
- Scandinavian model
- English model
- US model
- German model
The New Deal
The New Deal was a set of laws developed by Roosevelt. These included:
- NIRA (National Industrial Recovery Act): National law for industry.
- AAA (Agricultural Adjustment Act): Law for agricultural adjustment.
- Banking Act: Law regulating the banking system.
- TVA (Tennessee Valley Authority): Authority for the Tennessee River Valley.
The illegality was imposed on individual freedom. Freedom is a root of religious expression.
Speech: Freedom of speech, freedom of expression.
We are in a position to defend the economy and freedom of expression.
Second New Deal
Birth of social assistance measures; the unemployment allowance was born, which has an economic logic.
Colonial Solution: Create a protected economic area between the metropolis and its colonies. This achieves three things:
- A place to send the population.
- Cheap raw materials.
- A market to sell goods.
- The Scandinavian solution was government intervention.
- The German solution was based on the triumph of:
- Strengthening the army.
- Promoting the arms industry.
Details: Hitler created a circuit in Germany in such a way that the state guaranteed money. He also created the figure of blockades.