Europe and The Great Depression

1. Europe and The Great Depression C28 EQ: How do European states react to the financial collapse and subsequent depression of the early 1930s? What role does government play in each reaction?

2. Introduction The Great Depression re-disturbed the fragile political landscape of Europe in the 1930s Unemployment, low production levels, financial instability, and a major decline in trade due to tariff barriers brought unprecedented problems for which the electorate and politicians sought radical solutions Some of the radical results included the establishment of the Nazi party to power in Germany and the creation of the mixed economy the led to direct government involvement in the economy (no laissez faire conservatism) The victims of these moves were liberalism, rights and freedoms and general civility amongst people

3. The Financial Crisis Inflation of currency and increased prices caused issues in the post war era…Germany in particular was experiencing runaway inflation Reparations and war debts further muddied things…both France and United States demanded with open hands to be paid after WWI Governments literally had no choice in the end to extend increased control over credit (loans), trade (tariffs) and currency (standards), and those policies in effect caused more harm than good The US did step in with the Dawes Plan of 1924 to help ease the burden of reparations…Germany saw an increase of private capital and businesses…this was short lived, as over speculation of loans reached the US stock market contributing to the stock market crash of 1929 and the loss of capital through bad loans Eventually, through political wrangling, all reparations were effectively ended by 1932…but the damage was already done

4. Other Problems Agricultural consumer goods declined sharply during this time period, pretty much to lows they are today…wheat prices reached their lowest ever, good for consumers but bad for producers, and agriculture was still a HUGE sector of the economy for many nations…as a result, many farms in the western world collapsed as farmer could not pay their debts This problem was most evident in E. Europe where new democracies had sold/redistributed lots of land but because prices dropped and protective tariffs made grain trade difficult, profit was not to be had In the global market, the areas which solely provided agricultural commodities for industrial production could not afford to buy the finished products back from their imperial masters in Europe, since profit was also limited The demand for higher industrial wages also spiked the prices of goods, meaning people would become less likely to buy…this caused over supply of manufactured goods Though a great issue for Great Britain and the US, unemployment tended not to be a crisis for other European countries as each government found ways to secure jobs for their people (Socialism helped)

5. Great Britain: The National Government • The Labour party under the leadership of Ramsay MacDonald withdrew from the disastrous policies of the gold standard and free trade in the 1920s and at the direction of King George V (the stutterer), formed a coalition government (The National Government • The National Government took 3 steps to attack the depression • Balance the budget – raise taxes, cut benefits and lower government salaries • End the Gold Standard – Devalued the pound but made exports more buyable • Increased tariffs – free trade ended • The results of the National Government’s actions • Britain avoided the banking crises that struck other European nations hard • Britain was the first nation to restore its level of production after the 1929 crash • Interest rates lowered, causing a massive housing boom (construction) • None-the-less, Britain had a stagnant economy at the beginning of the depression and continued to have one throughout, also experiencing the highest rates of unemployment in Europe for the time

6. France and the Popular Front • France was not as fortunate…although the depression didn’t hit France until 1931, it lasted longer there • The crisis impacted the political process in France more dramatically as divisions increased between left and right wing factions…right wing factions protested the end of reparations payments and the general weakness of the Third Republican government (Stavisky Affair) • In February of 1934, a large demonstration of unknown purpose erupted in Paris…the result saw the replacement of the Radical ministry of Edouard Daladier …this caused the rise of a socialist-communist coalition • The Popular Front formed in July 1935 under the leadership of Leon Blum with the purpose of preserving the republic and press for social reform…his government took power in 1936…when strikes threatened his accession, he immediately brought together the unions and management and created an accord that brought higher wages, better working hours and paid vacations • Other policies of the Blum government included salary raises for civil servants, loans to small industries, government floors on wheat prices • However divisions still remained in France and the inability to alter currency issues caused greater conflict…Blum’s government was once again replaced by Daladier in 1938…in 1940, when it came time to defend the Third Republic, many did not (direct result for France’s fall to Germany)

7. The Rise of the Nazis In Germany, the depression not only weakened the Weimar Republic, it destroyed it! The coalition government of centrists and Social Democrats were doing just fine until the depression when they began to disagree on economic policies The Weimar government began an extensive use of Article 48 of the constitution which granted emergency powers to the chancellery and limited Reichstag involvement in central government actions…unemployment thus rose sharply in Germany with more than 6 million people out of work by 1932 The most dramatic change in government was seen through the rise of Nazi power…in 1928 , they only had 12 seats in the Reichstag…in 1930, they were up to 107…the Nazis used both terror and intimidation to gain influence but also speeches and rallies against the threat of Communism

8. It’s Springtime for Hitler! • President Hindenburg tried to avoid at all costs giving any power to Adolf Hitler despite the increase in Nazi representation in the Reichstag…Hindenburg went through a revolving door of appointed chancellors (Bruning, von Papen, von Schleicher)…the inevitable could not be avoid as fears of a civil war in Germany mounted…Hitler was appointed chancellor on January 30, 1933 • Hitler had a great coalition of many branches of German society…he had the civil servants, farmers, war veterans, and most importantly, the youth (only the Roman Catholic Church was not at his back) • Several events/methods empowered Hitler • In February of 1933 the Reichstag was burned by a communist…this allowed Hitler to issue Article 48 and arrest communists • In March 1933, the Reichstag passed the Enabling Act giving more emergency powers to Hitler and allowing his Nazis to seize offices, banks and newspapers and the outlaw of all other political parties in Germany • Hitler also conducted internal purges of the Nazi party, effectively removing all of his rivals • Finally, the death of Hindenburg in 1934 allowed Hitler to combine the offices of President and Chancellor

9. It’s Springtime for Hitler! The central focus of Nazi power (and Hitler’s) were the creation of a police state and the use of the SS (Schutzstaffel)…led by Heinrich Himmler, it was responsible for carrying out the purges and ensuring security nationwide The next obvious target of the Nazi party were Jews…Jews were first excluded from any government positions…there was also an attempt to enforce a public boycott of Jewish businesses but this was not popularly supported In 1935, the Nuremberg Laws removed citizenship status for German Jews…Marriage and relations between Jews and non-Jews was outlawed On the nights of November 9 and 10, 1938, 1000s of Jewish businesses and synagogues were burned or vandalized in an event that became known as Kristallnacht (the night of broken glass)…Jewish businesses had to repair all damages themselves as the Nazis had revoked paying insurance reparations for Jews

10. Nazi Economics Despite the social and political shortcomings of Hitler, his economic policy was brilliant Terror and intimidation brought unity and sacrifice from the people…businesses and factories had unions eliminated (strikes were outlawed) and the government took care of all negotiations (no real collective bargaining)…warmongering also helped revive Germany’s declining industrial sector…the end of the Versailles stipulation of no military expansion in 1935 gave Hitler the ability to re-arm and rebuild his army, navy and air force (Luftwaffe) The government allowed private property and private capitalist enterprise but all decisions about wages and prices were at the discretion of the state Hitler also instituted a system of public works that saw massive building projects (mostly monuments and government offices, including his bunker), canals for transport and highways (autobahns)

11. Italian Fascist Economics • The Italian Fascists also instituted several economic experiments that proved to be not so successful • Syndicates • Formulated as a planned economy where labor and management were forced by the government to negotiate and settlement differences quickly • On the negative, labor unions and laborers lost more power as management profited more from this arrangement • Corporations • 22 were established as groupings of types of industry • The result was increased corruption…owners were directed by government officials as to what specifically to produce in these groups • Subsequently, Italy eventually went in the direction of militaristic imperialism and invaded Ethiopia in 1935…this move increased taxes and created greater economic separation…in the end, Italian methods proved to be more disastrous than prosperous

12. Policies of the Soviet Union • Russia DID NOT experience the Great Depression of the 1930s mainly because its economy was in a self-sustaining, self-contained position (Russia had no global connections) • Two Economic policies dominated Stalin’s Soviet Union • Rapid Industrialization • Stalin used 5 year plans to expand Russian industry through the rapid production of iron, steel, electricity, machine tools and tractor manufacturing (for agriculture) • Labor was recruited from all walks of Russian life and rapid urbanization occurred as new cities sprung up around factories • However, industrial output favored military production…very few consumer goods were produced • Collectivization • Under the policies of Lenin’s NEP, kulaks (new farm land owners) prospered…however, food shortages still occurred • Stalin pursued a process of herding peasants onto state owned farms to provide greater food output at the same time eliminating kulaks

13. Policies of the Soviet Union Stalin reversed previous policies about interacting with communist parties outside of Russia…the Comintern interacted/cooperated with the Nazi party (made pact w/Hitler that was infamously broken) and Fascist party Internal opposition rose to Stalin’s changes, so he reacted in the best way he knew how…PURGE…Stalin moved forward with the assassination of several key political opponents…the use of Siberia as a gulag for political dissidents increased…Anyone who resisted his will was sent to labor or re-education camps Stalin also used purges to remove “older revolutionaries” and focus on a new, younger generation of Russian of whom he can easily control and manipulate