Causes of Totalitarianism, 1929 Crash, and the New Deal

The Rise of Totalitarian Regimes (1920s-1930s)

The appearance of totalitarian regimes was driven by several factors:

Causes of Totalitarianism

• Political Instability: Colonial conflicts and political and economic rivalry triggered great conflicts and war. The model of the State faced two competing systems: the absolutist model and the democratic model.
• Fragile Democracies: The new European states that emerged from peace treaties adopted the democratic system. However, these new democracies were fragile and quickly became dictatorships.
• Economic and Social Crisis: After the First World War, the European economic system was destabilized. Governments were ineffective in resolving social or economic conflicts, leading to:
  • High unemployment
  • Monetary inflation and rising prices
  • Scarcity of food

The 1929 crisis caused a great economic depression and global poverty. Political tensions and social weakening undermined less consolidated democratic systems. The most significant examples of totalitarian states were Italian Fascism and German Nazism.

Economic Imbalances Leading to the Great Depression

Despite the climate of euphoria and confidence in the capitalist system, especially in the U.S., several economic imbalances prepared the deep crisis experienced in the 1930s. The most important imbalances were:

• Growth in new productive sectors.
• Oversupply generating high unemployment and pockets of poverty.
• Low wages.
• Inflation and monetary instability, stemming from the First World War.

The Stock Market Crash of 1929

The First World War caused a fundamental change in the economic system: overproduction. Quantities greater than necessary were produced, leading to accumulated stocks. Companies were forced to reduce production. Financial speculation was seen as the fastest way to profit by buying stocks at low prices to sell later at a higher price.

Black Thursday and Panic

On October 24, 1929, a high number of shares were put up for sale in New York. The absence of buyers generated a wave of panic among shareholders. The rapidly falling value of the shares resulted in a stock market crash that ruined many investors.

The New Deal Response (1933–1937)

President Franklin D. Roosevelt implemented the New Deal between 1933 and 1937, a set of measures designed to overcome the economic depression of the thirties. The proposal was based on state economic interventionism and government regulatory action. Key economic measures included:

• Dollar devaluation to encourage exports.
• The revival of industrial production.
• Raising wages to promote consumption.
• Rising prices to generate profits for companies.
• Grants to distressed banks to recover the banking system.
• The fight against unemployment and generating wealth through recovery programs.

The recovery did not conclude until after the Second World War in 1945.