Economic Consequences After World War I

The economic disruption that national economies suffered after the war prevented a return to normalcy. On the contrary, it produced different phenomena that ultimately influenced the development of the crisis. These were motivated by the following factors:

• Industrial and agricultural overproduction.
• Monetary disorders.
• The U.S. hegemony after the war.
• Differential economic growth of new industries.

Overproduction

The imbalance between production and consumption caused overproduction, a crisis where the former is greater than the latter. Consequently, prices fall, factories close, and unemployment increases. This was a common phenomenon between 1914 and 1929. The cause lies in the increased industrial and agricultural production in countries such as the U.S., Japan, Brazil, and Argentina. When industries in other countries were destroyed, some were replaced by those in the countries mentioned above.

Monetary Disorders

The post-war period was characterized by national policy anarchy, monetary confusion, and the inability of states to solve money problems.

This was due to abandoning the monetary system. This system was abandoned after the war, using hard currencies like the dollar or the pound instead to support the gold backing of broadcast notes. The war debts that Germany had to pay its rivals also blocked reconstruction and economic growth due to a lack of liquidity.

American Hegemony

After the war, the U.S. confirmed its increased power as an industrial and financial world leader. Before the war, Britain and other countries bought more than they sold but offset these commercial losses by charging interest on loans and credits from British and French banks. The U.S. sold more than it bought, earning high income from interest on credits to other countries, which made it difficult for debtor countries to repay their loans to the U.S.

Uneven Growth of New Industries Compared to Traditional Ones

These differences caused strong imbalances and the need to convert old industries, which became real burdens for the affected countries.