The 1920s and 1930s: Economic Crisis and Recovery

The 1920s: International Landscape

The early postwar years were characterized by:

• A lack of international cooperation.
• Protectionist policies.

The Dawes Plan, implemented in 1924, aimed to improve the European economy, specifically by normalizing the German economy through:

• Stabilizing the German currency.
• Regulating the payment of war reparations.
• Having Americans help revive the German economy.

Germany created a new currency.

U.S. Economic Growth: Features

• Increased production and lower prices.
• Promotion of new industrial sectors.

The Situation in Europe

• France: Industrial growth.
• United Kingdom: Economic stagnation.
• Germany: Crisis until 1925, followed by subsequent recovery.

The Crisis of 1929

Causes

• Crisis in the industrial and construction sectors.
• Increased stock market speculation.
• The rise of the stock market did not reflect the actual state of the economy.

The Stock Market Crash

On Black Thursday, 13 million shares were offered for sale without any buyers. The value of the shares plummeted.

Consequences

In the U.S., the crisis led to:

• Destruction of savings.
• Decreased consumption and investment.
• Collapse of the financial system, with thousands of banks closing.
• Massive business failures.
• Increased unemployment.

The crisis spread globally, with the following consequences:

• The United States withdrew its investments from Europe, causing the European economy to sink.
• Countries implemented protectionist barriers, hindering international trade.

The Great Depression of the 1930s

First Steps

• Failure of deflationary policies.
• Increased protectionism and failure to reach an agreement between countries to tackle the crisis collectively.

National Policies

The U.S. and the New Deal

In 1933, Democrat Franklin D. Roosevelt became President of the United States during a severe economic crisis. Roosevelt launched a program of state economic intervention known as the New Deal. Between 1933 and 1938, a series of measures were adopted to combat deflation, revive the economy, and create jobs:

• A program was launched to clean up the banking system.
• A program of heavy investment in public works was undertaken to revitalize the economy and create jobs.
• Attempts were made to reduce agricultural production to raise farm product prices and rebuild farm incomes.
• Big business was favored in the industry, eliminating competition, increasing prices, and stimulating investment.
• Employers were forced to accept social improvements:
  • Fixing of a minimum wage.
  • Limitation of working hours.

Old-age pensions and disability insurance were created, laying the foundations of the welfare state. While the New Deal helped stop the worst effects of poverty, it could not fully restore production levels, and unemployment was not completely eliminated.

United Kingdom

• Increased protectionism and trade agreements with the colonies.

France

• Public works program to promote employment.
• Working arrangements to improve the living standards of employees.

Germany

• State control of the economy.
• Autarky (an economic policy where a country produces everything it needs using its own resources, without resorting to imports).
• Promotion of public works and the armament industry to eliminate unemployment.