Inter-War Economic Period and the Great Depression

The Inter-War Economic Period and Crisis

The inter-war period was characterized by a clash between countries promoting private initiative, countries where dictatorships triumphed, and countries where the proletariat and fascism were emerging.

Economic Stages (1920-1928)

Between 1920 and 1928, there were three distinct economic stages:

• Economic Boom: Due to the conversion of war industries and reconstruction.
• Stabilization: The United States provided credits to European countries for reconstruction.
• Expansion: New industries and production methods emerged.

Factors Leading to the 1929 Crash

Towards the end of the 1920s, a series of factors led to the crash:

• War Debts: Physical destruction caused by wars was recovered through credits, leading to debt.
• Shift in Power: A transformation in the ranking of world powers occurred during the war. New powers like Canada grew economically because countries at war had converted their industries to wartime production and had to buy other products from these new countries.
• Overproduction: When the war ended, the old powers resumed production, but countries like Canada continued producing, causing overproduction.

Global Spread of the Crisis

The role of the United States as the creator of loans to Europe helped spread the crisis worldwide.

Impact on Different Groups

• Banks: Banks lost money invested and from loans granted. Small depositors wanted to withdraw their money, causing a suspension of payments.
• Small Entrepreneurs: They faced challenges with production methods and markets.
• Workers and Peasants: Reduced production and decreased sales led to unemployment.

The crisis internationalized due to relations with the U.S.

US Responses to the Crisis

Hoover's Initial Plans

U.S. President Hoover launched plans characterized by:

• Lowering production costs.
• State purchase of agricultural surpluses.
• Suspending private debts.
• Reducing governmental costs.
• Reducing unemployment through the construction of public works.

The New Deal Under Roosevelt

Roosevelt's New Deal included:

• Limiting agricultural production.
• Industry agreements with employers (e.g., controlling production/prices).
• Reducing unemployment with public works.

Keynesian Economic Ideas

In the late 1930s, Keynes argued that spending was necessary to overcome the crisis.

Collapse of International Relations

Between 1937-1938, international economic relations collapsed due to strained political relations and reduced trade.

Marches and protests occurred and were suppressed.