HIST 1122 Lesson 66 – Europe & the Great Depression Part 1


Welcome back. We’re going to discuss Europe and the Great
Depression in this session. We’ll probably take a couple of short lectures
to do this. I suppose the best context for this is simply
capitalism or the market economy. It runs into the ditch here in the 1930s. It will have a worldwide impact. We’ll try to focus on Western Europe here. A number of significances – the worst economic
disaster in the modern era, second significance – this Great Depression is going to provoke
governments to become more involved in their national economies – depending on which side
you’re on, interference or participation. Significance – It demonstrates the interconnectedness
of the world economy, the linkage between the great powers and those colonized areas
of the world. Another significance – The Great Depression
is going to transform people’s outlooks. It makes visible the suffering, the unemployment,
the despair that, you know, much of this has already been there it was just much less visible. Now as we move into the ‘30s we have the
rise of national media, increasing governmental participation. So the misery at the bottom of the capitalist
system becomes more visible. Causes of the Great Depression – Well, it
begins in the United States and then moves to Western Europe, then into the rest of the
world. There are a number of economic weaknesses
in the 1920s, after the Great War. There’s a surplus of agriculture, for instance,
and of course, a surplus causes values to drop, so farm prices drop. This makes it harder to pay the mortgage. There’s a surplus of industrial goods. Again, when you have too much of something,
what happens to the price? It falls. If I make refrigerators and I’ve got a sales
staff over here and the people who actually build the refrigerators over here, but I’ve
got a warehouse full of refrigerators that I can’t sell – then I’m going to have
to lay off some of these salesmen and some of these workers. So unemployment increases and of course, these
people have less money to purchase stuff so there’s even less demand as we get more
and more unemployment you get less and less demand, and a further backlog of food or manufactured
items. People, especially in the United States, begin
to play the stock market with the attempt to get rich quick. People are what they call ‘buying on margin’
that is you borrow money from the bank to buy stock. You assume that stock value is going to increase
and when it reaches the desired increase you can sell it, pay back your loan, and then
pocket the rest as profit. What happens as you watch your stock values
daily and you see them ticking up, up, up and then they plateau, and then they begin
to drop. What do you do then? You sell your stock. Well, what if millions of people are doing
the same thing. Suddenly you have stock shares being dumped
onto the market in a great abundance. This causes their value to drop even further
and quicker, sort of a vicious spiral here of people going bankrupt. Now there’s another factor here that I should
mention. The United States had been financing the German
debt. When we talked about Versailles a couple of
sessions ago, we talked about those various consequences, breaking up of the empires and
creating new states. We talked about Germany being explicitly blamed
for the Great War. We called it the War Guilt Clause. I don’t think I mentioned that we also required
Germany to pay reparations to repair Western Europe that she had broken during the War. The United States finances this. Germany is broken and in revolution at the
end of the Great War; she has no money to pay anybody anything. So the U.S. finances these reparation payments. After the crash, the United States banks will
begin to withdraw from Germany and will begin to stop financing the German debt. Let’s talk about Germany in particular for
a moment. U.S. capital flees the country after the crash. German banks collapse. There’s runaway inflation; that is, the
money in your pocket is not worth what it was yesterday. I remember seeing a famous photograph of a
German gentleman, he’s walking down the street, he has a wheelbarrow that he’s pushing
and it’s full of deutsche marks, German currency. I don’t know if he can buy a beer or a loaf
of bread with that wheelbarrow load of deutsche marks, but it indicates the worthlessness
of the money, it simply has lost its value in this runaway inflation. So Germany defaults on its reparation payments,
and then of course, the United Kingdom and France, they default on the debts they owe
the United States, as a result of the War – so again, a vicious destructive spiral. In Great Britain, the shipping, and of course,
the British navy and merchant marines are the finest in the world; the shipping never
really recovers from the German unlimited submarine warfare during the Great War. Foreign investment declines as global capital
begins to move to New York instead of London. U.S. banks replace English banks as the main
lenders to other nations. British coal production declines as European
coal production increases. This increases competition obviously. Manufacturing suffers as colonial markets
close and European markets become more difficult to penetrate. Unemployment remains high. Major industries in England are protected
by tariffs, and of course, all the big great powers they begin to impose tariffs on imported
goods. In the United States we call it the Hawley-Smoot
Act or Tariff. These tariffs are designed to create a, to
impose an artificial tax upon imports. Hopefully, this will generate domestic manufacturing. What it does quite often is simply inhabit
trade since everyone imposes tariffs on imports. Let’s cross the channel again, and go back
to France. In France the economic situation was generally
good in the 1920s because the French government is busily rebuilding their country which had
been badly damaged as a result of the War. France is forced to industrialize, or rather
to modernize its industrial plan because of this. France, of course, keeps receiving and demanding
reparation payments from Germany to help finance the rebuilding and we will see, obviously,
German banks are going to go bankrupt. France received or took German territories
in the West. At the end of the Great War, the Versailles
Treaty awarded France the Saar and other parts of Western Germany. These are industrial, productive areas. Now France, after the crash, well international
tourism is going to decline, that accounts for a lot of money spent in France. There are less demand for French consumer
goods. Think about what people buy from France, generally
luxury items – French fashion; French furs; French perfume; French cognac; French champagne. When you think of France, you think of luxury
items and the demand for these things are going down. In France you have a series of short-lived,
ineffective governments unable to deal with this spiraling economic disaster. Less demand creates more unemployment, more
unemployment means that there are more people who can’t buy stuff which contributes to
even fewer, or less demand just compounded over and over. The more people you lay off the more people
you have that aren’t purchasing, and if we aren’t purchasing there’s no need to
make more stuff to sell if we can’t sell what we already have. Let’s cross the channel again, go back to
England. Here we see pressure from the workers. You see strikes and public demonstrations. Now you see demonstrations in the streets
and the police and the urban crowd are fighting with each other. Social unease, potential revolution – it
seems like society is on the brink. There’s a general strike in 1926 that shuts
the country down. The British people protest over what the government
calls its means tax, I’m sorry, the means test. What they’re doing here is trying to establish
some criteria by which the government can determine how much unemployment relief you
deserve, and of course, the common people regard this as sort of an intrusion on their
private lives and dignity, so this creates problems. Let’s go back across the channel to Germany. The Weimar Republic, that government that
governed during the 1920s, is increasingly viewed as ineffective and perhaps even as
illegitimate. We have political parties rising in Germany
on the left and the right. The communists on the left, this new Nazi
party on the right – both of these although they are in the opposite extremes on the political
spectrum, both the left and the right want to destroy Versailles and replace it. Welfare, social services, are further reduced
to cut costs. These reductions lead to more unrest – again,
this vicious spiral. The Germans begin to increasingly attack the
Versailles Treaty. They view Versailles as shackling Germany
and landing her in this terrible economic situation. The German debt reparations are attacked by
the German people – how can we afford to pay these reparations when we have problems
here at home? More strikes, more protests, increasingly
the governments are having trouble maintaining order. Let’s go back to France for a moment. The government here unable to effectively
deal with the economic crisis, the parties of the left and the right both demand action,
everybody wants a solution but nobody really has a solution. Again – demonstration, protest, riots, street
actions. In France, Prime Minister Daladier will resign
as a result of these, of this social unrest. So I’m going to stop there and give you
a little break and then we’ll come back and finish this discussion on the Great Depression
in Europe.

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