Economic Crisis and the Rise and Fall of Democracy: 1918-1930s

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The Post-War Economic Crisis (1918-1923)

Europe faced a severe economic crisis after World War I, characterized by:

  • High levels of debt due to loans from the United States
  • A shortage of products resulting from the destruction caused by the war

Economic Recovery in the 1920s

The United States and Japan were the first countries to recover from the post-war crisis. The US, with its strengthened economy, provided loans and consumer goods to European countries, aiding their recovery. By the mid-1920s, the global economy experienced a period of growth and prosperity known as the Roaring Twenties.

The Wall Street Crash of 1929

On October 24, 1929, known as "Black Thursday," the US stock market crashed. The economic boom of the Roaring Twenties had created a bubble in the stock market. When the bubble burst, investors panicked and rushed to sell their stocks, leading to a market collapse and the onset of the Great Depression.

The Great Depression of the 1930s

The Wall Street Crash triggered the Great Depression, a decade-long economic crisis that brought an end to the prosperity of the Roaring Twenties. The depression led to deflation, business closures, bank failures, wage reductions, and soaring unemployment rates. Its impact extended beyond the US, affecting Europe and other parts of the world as international trade declined and living standards plummeted.

The Evolution of Democracy

Despite the economic turmoil, democracy remained the prevalent form of government after World War I. However, its trajectory varied across different countries:

Great Britain

The Liberal Party in Great Britain implemented measures to address unemployment but faced challenges with worker strikes demanding higher wages. The working class gained political influence during this period. In 1922, the Conservative and Labour parties replaced the Liberal Party in government.


Post-war economic problems in France led to numerous strikes. Despite political differences, democracy remained stable.


Following the fall of the Second Reich, the Weimar Republic was established in Germany. The economic crisis of 1929 fueled the rise of extremist and nationalist parties that opposed democracy.

United States

The US political landscape was dominated by two main parties: the right-wing, conservative Republican Party, which advocated for capitalism, limited government intervention, and opposed trade unions; and the left-wing Democratic Party, which also supported capitalism but favored government intervention in the economy and the existence of trade unions.

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