The Great Depression and the End of International Cooperation

The Great Depression and the end of international cooperation

THE GREAT DEPRESSION

AND THE END OF INTERNATIONAL COOPERATION

Many people say that the great depression started with the stocked market crash on October 1929.

But we will prove that it's not true and it leads people to mistake correlation with cause.

What we think of as the great depression did being after the stock market crash but not because of it.

The 1920s featured large-scale domestic consumption or relatively new consumer products, which was good for American industry. But much of this consumption was fueled by credit and installment buying which, it turned out, was totally unsustainable.

Meanwhile the agricultural sector suffered through the 1920s and farm prices kept dropping for two reasons. First, American farms had expanded enormously during world War I to provide food for all those soldiers and second, the expansion led many farmers to mechanize their operations. But the mechanization was expensive, and many farmers went into debt to fiance their expansion. And then a combination of overproduction and low prices meant that often their farms were foreclosed upon.

And the other signs of economic weaknesses appeared through the decade. Like by 1925, the growth of car manufacturing slowed, along with residential construction.

And worst of all was that noted left wing radical Hebert Hoover label “an organization of mad speculation” in the stock markets that began in 1927.

According to historian David Kennedy, “By 1929, commercial bankers were in the unusual position of loaning more money for stock market and real estate investments than for commercial Ventures “.

The truth is that the stock market and the great depression are not the same thing. A lot of rich people lost money in the market, but what made the great depression, the great depression was massive unemployment and accompanying hardship, and this didn't actually begin until 1930 and 1931.

The real cause was the weak banking system. Although the federal reserve system has been created in 1913, the vast majority of America's banks were small, individual institutions that had to rely on their own resources.

So in 1930, a wave of bank failures began in Louisville that then spread to Indiana,Illinois, Missouri and eventually Arkansas and North Carolina. As depositors lined up to take their money out before the banks went belly up, banks called in loans and sold assets.

Ultimately this meant that credit froze up,which was what really destroyed the economy. A frozen credit system meant that less money was in circulation and that led to deflation.

By the end of 1931, 2,294 banks had failed, double the number that had gone under in 1930.

CONSEQUENCES

The crisis had big consequences on the political landscape, at a national and international scale, but also the racial tension.

Indeed, the racial tension increases: the Blacks are more touched by the unemployment than the Whites in the USA, the indigenous more than the Europeans in North Africa. In Central Europe and especially in Germany the antisemitism is strengthen.

Also, it caused a major disruption of the political landscape. It unequally affects different population strata. The incomes of civil servants and pensioners fall more than private sector wages. But, it is hard to keep his job, and unemployment usually is not compensated.

The middle class (self-employed, pensioners and farmers) are also affected. For example, in France, commercial and industrial incomes fall by a quarter in 1931 to half in 1935. This situation creates serious problems: in the United States, the "hunger marches" with dead when the police intervened, as in the suburbs of Detroit. In Great Britain many demonstrations of unemployed are organized and even a mutiny of the fleet. In France, the riots of 6 February 1934 are related to the difficulties of the middle classes. Actually, even in fascist Italy, protests shook the regime and do allow the emigration of dissatisfied.

These disorders result of political instability. In democracies, existing teams are separated: US Republicans in 1932, French right the same year and again in 1936 after the riots of 1934 has given them power. Often the failure of economic liberalism arouses rejection of political liberalism: agitators and supporters of authoritarian solutions are readily heard - hence the weight of the leagues in France, the development of a British fascist party leader Oswald Mosley around and above in Germany, the groundswell that brought National socialism several million votes.

In Latin America, « coups d’Etat » bring the classic oligarchs related to US and populist supporters of independent development, admirers of fascist regimes.

These difficulties have an international influence. After the United States, all countries decide protectionist measures. Britain puts even end in 1932 to 86 years of free trade. The rich countries, with their gold (United States, Britain and France have 80% of world stock), their raw materials, their colonies, however, maintain normal trade and agree to avoid controls exchange.

Others choose autarky or advocating the conquest of markets by means of annexation. Even before Hitler, Germany, Currency fault, economically strong and bartered with rural countries of Eastern Europe and Latin America: in 1936 it is the first supplier in Brazil and Chile - and this facilitates the ideological contamination.

In other states, the control of markets through a colonial policy. Italy starts in the Ethiopian affair in 1935 (→