The 1929 Crisis, World War I: Causes, Implications, and Political Shifts
The 1929 Crisis: Causes and Consequences
Origin of the Crisis
Causes
- Overproduction: During World War I, countries involved focused their production on the war economy. Other countries in the international market replaced them (U.S., Japan). When the war ended, traditional countries normalized their production, resulting in a surplus of products.
- Speculation: The U.S. economy saw speculation based on property and the stock market. Banks granted many loans to companies and used them to distort their accounts, pretending they had economic benefits. The whole capital invested caused increased interest rates and the ruin of many businesses as their claims could not be met.
- The Stock Market Crash: Black Thursday (October 24, 1929) saw a massive sale of shares, which led to the collapse of the value of companies and ruined investors.
Implications and Attempts at a Solution
There was an increase in unemployment. Once banks reduced their loans, it facilitated the expansion of the crisis. It spread rapidly worldwide for two reasons: the U.S. reduced its imports, and U.S. banks began to repatriate capital borrowed for the Dawes Plan. In the U.S., President Roosevelt launched a program called the New Deal, which required greater state intervention in the economy. The state invested in public works and agricultural subsidies to create employment. The League of Nations convened the London Conference (1933) to cooperate with all countries, but it failed as everyone defended their own interests.
Triumph of Political Extremism
In an atmosphere of public mistrust in democracy and traditional parties, extremist parties gained support and became radicalized. Many workers and peasants increased their support for the communist parties, and middle classes supported the extreme right. In almost all countries, there were fascist parties. In this environment, there was a wave of dictatorships: Portugal (Salazar), Austria (Dollfuss), etc.
World War I (1914-1918)
Countries at War and Phases of Conflict
It became a world war because it pitted the world’s major powers and their respective empires against each other, and because new countries joined the conflict. It lasted four years and had several phases:
The War of Movement (August 1914)
The German state had developed the Schlieffen Plan, which consisted of a large-scale surprise attack on France through Belgium, but the Germans were stopped. Russia launched a hasty attack on Germany, but it was unsuccessful.
Positions War (1914-1917)
The failure of the German offensive and defensive tactics (trenches, machine guns, etc.) exceeded the offensive capabilities of the armies, stabilizing the war. Allies attacked the secondary zones: Mediterranean, German colonies, Middle East. A parallel naval conflict developed.
The Crisis of 1917
This produced a change in the military situation for two reasons: the Russian Revolution and the United States entered the war, since it declared itself neutral but sold supplies to the Allies.
The Offensive of 1918 and the End of the War
Russia’s exit allowed Germany one last spring offensive, but the U.S. failed to support the offensive. The response was an Allied offensive. The central empires surrendered: first Turkey, then Austria, and finally Germany. In November 1918, it had ended.