The International Crisis of Capitalism
Western Europe in the 1920s
1919-1924 was a period of instability. In post-war Germany there were two causes of instability for the Weimar Republic: opposition to Versailles terms and reparations bills. Rathenau and Rosa Luxemburg were assassinated and inflation became hyperinflation. Where once $1 could buy 4.2 marks, not long afterward it was buying 1800 marks, and in late 1923, $1 could buy 4.2 trillion marks. This hit the German middle class very hard and extremists began to have much more influence, especially in Saxony and Bavaria.
Dawes Plan on German reparations which effectively for lower payments and the provision of (U.S.) loans to Germany as well as the Locarno Treaties and Kellogg-Briand Pact ushered in a period of stability between 1924 and 1929.
These treaties allowed Germany to be in a prominent position within the League of Nations and affirmed the border with France. They also promised aid in the event of military trouble with Germany to neighbouring countries like Czechoslovakia and they renounced war as an instrument of foreign policy. There was no provision for disarmament or use of war for defense.
USA in the 1920s
1919 to 1923 was, too, a time of imstability in the US. There were strikes (for example: the Seattle general strike), the “Red Scare,” and general disillusion left and right. The Red Raids of 1920 affected 32 cities and resulted in 4000 arrests and 550 deportations.
1923 to 1929 was a time of “normalcy”, of prosperity. There were lots of consumer products, and advertising. GNP rose from $70 billion in 1922 to $100 billion in 1929. Unemployment never got above 3.7%.
Great Depression
The Great Depression started in October 1929 with the stock market crash. This was a symptom, not the cause. There were several causes for the Greta Depression:
Why did a U.S. problem become global?
There had been a change in U.S. status, from debtor to creditor, so they were owed money by other countries. When they called in these debts though, the countries were unable to pay because of the US policy of protectionism (tariffs). They didn’t let anyone else sell things in America, and so they were’nt able to earn the money to pay them back.
Solutions?
Some measures taken to combat the Depression included: dropping the gold standard and deficit spending (“prime pumping” or Keynesian economics) in things like welfare systems (an example of which was the New Deal).
The “real” end of the Depression was World War II