Unsurprisingly, at the end of the Second World War, the Allied powers started planning a new order of international finance and trade at the Bretton Wood Conference. Indeed, such plans reflected the Allied powers’ common understanding that the war in Europe and Asia had economic, ideological, and political causes. The major powers which responded to the Great Depression of the late 1920s and early 1930s by implementing mostly protectionist policies believed such measures had heavily contributed to the outbreak of war. A combination of a weak designed peace system and an unprecedented economic crisis inevitably led to an increasing deterioration of international relations. In fact, in 1931, a transitional period which Arnold Toynbee refers to as “annus terribilis”, compromises which had given prospects of hope for a new beginning in European affairs in the 1920s began to undo. Firstly, this piece will examine how the Great Depression and economic protectionism created a hostile pre-war environment as they fostered nationalist and imperialist ambitions and undermined the capacity of liberal democratic powers to unite in preventing aggressions. Finally, it will argue that the crisis cannot be looked as solely responsible for World War II as it also exacerbated old existing problems in the international framework.
To a certain extent, the Great Depression set the world on the road to war. First of all, the economic slump which struck the world economy in late 1929 was followed by economic nationalism contributing to the deterioration of international relations. Economic nationalism exhibited itself in trade protectionism and beggar-thy-neighbor policies and resulted both problematic and dangerous. According to Robert Boyce, after the suspension of the pound sterling, Britain intended to tackle its economic problems through a combination of “unilateral external action (protectionism) and imperialism.” Although the failure of the largest Austrian bank “the Creditanstalt” technically caused the world trading system to collapse in the summer of 1931, Britain’s abandonment of the gold standard accelerated the shift away from multilateralism and towards Autarky. Indeed, within days, Denmark, Finland, Norway, and Sweden allowed their currencies to depreciate relative to gold as they shared trade and financial ties with Britain. Similarly, Eichengreen mentions a “protectionist avalanche”, as from the third quarter of 1931 to the third quarter of 1932 World trade volume fell 16 percent. The general loss of interest in international affairs resulted in weakening the international order established after the First World War. Thus, the Great Depression did play a role in bringing the Second World War.
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Furthermore, the economic crisis and economic protectionism led hostility to manifest itself with the rise of fascist and militarist adventurism. Indeed, Japanese forces began the subjugation of Manchuria in September 1931 at the height of the international economic crisis. The depression was tending to create large economic blocs but in particular, China’s rise of nationalism threatened Japan’s major outlet of trade and American immigration restrictions closed Japanese’s doors for expansion. Similarly, Mussolini’s invasion of Ethiopia had its origins in the economic crisis. In fact, between 1929 and 1931 Italy was suffering from a decline of trade and an economic output down by over 20 percent in current prices. Thus, Mussolini exploited domestic propaganda in presenting Ethiopia as the solution to Italy's population problem and economic wealth. Also, to some extent, the League of Nations failed to deal with the Abyssinian and Manchurian crises because of the Great Depression as its members were more worried about their internal affairs.
In Germany, Adolph Hitler took advantage of the economic crisis and succeeded in recruiting frustrated unemployed people for his National Socialist Party. Indeed, Zara Steiner highlights how the Great Depression “opened the way for the right-wing, nationalist, anti-republican elite to take power and to create, as they had always wanted, an authoritarian regime”. Although Hitler primarily accused the Versailles Treaty of enslaving Germany with its reparations and damaging its economy, he also incriminated the international finance capital which he believed was Jewish-dominated, and blackmailed Germany. Perhaps Hitler’s beliefs that Germany had to create its proper empire by seizing “living space” in Europe (concept of “lebensraum”) and later, his decision to invade Poland may have resulted from the effects of the Great Depression.
On top of that, the Great Depression hit countries at different times poisoning relations between liberal-democratic powers and undermining their capacity to unite in preventing or resisting aggression. The idea that the economic crisis drove Western countries apart from another is crucial because it obscured the real militarist and fascist threats. The three creditor nations: Britain, France, and the United States discredited each other’s actions and policies. For Britain, the Franco-Belgian occupation of the Ruhr in 1923 was a real proof of French militarism. In the 1930s, when anxiety about the American economy was increasing, France and Britain regarded each other as a threat to their survival as great powers. Hence, it was only after France’s GDP returned to pre-Depression levels in 1939 that France and Britain concluded military agreements with Poland. Yet, at that time it was too late to stop Hitler. In sum, the Great Depression modified the European landscape for the rest of the decade by destroying currencies, trade, creating mass unemployment throughout the world, bringing down governments, and scarring the lives of the people who survived it. Notwithstanding, it was not exclusively responsible for the decline of internationalism that followed.
Indeed, to another extent, the Great Depression only aggravated old problems that existed well before 1929. Historians such as Zara Steiner believe that the 1930s was just a 'different global context' in which the search for solutions to the old problems of European stability and security persisted. Moreover, many believe that the global economy was already on the downhill before the Wall Street Crash in 1929. Today, historians tend to avoid the term 'Roaring Twenties' as it gives a false impression that all Americans were prosperous. In reality, many Americans suffered deeply after the First World War. By the mid- 1920s, American house prices reached the highest point and US farm prices plunged as a result of a declining demand and glut of farm products. In Europe, the industrial production of both Britain and France started falling by mid-1928. Thus, “it seems that the Wall Street crash was a symptom of problems in the global economy, rather than the underlying cause of them.” Hence, Economic historians such as Mr. Eichengreen have shifted their focus on the structure of the world financial system before 1929 stressing the malfunctioning of the International Gold Standard currency system which caused both the Great Depression and its impediment towards recovery. The Gold standard was disrupted by World War I which made balanced trading difficult as nations spent more money than they had in their treasuries and still had debts to pay off. Besides, while Britain and Germany suffered from periodic balance-of-payments problems (a result of their overvalued currencies), the United States and France initially gained in the 1920s (they hold their currencies to a very low value).
Also, the First World War imposed a significant indebtedness on the nations of Europe which borrowed more than $10 billion from the United States. The United States emerged from the war as the world’s biggest economic and financial power and the world became increasingly resentful and anxious about US economic dominance. Besides, instead of lowering import duties, the United States adopted the high Fordney-McCumber Tariff in 1922 which made it even harder for European Nations to repay their debts. In the 1920s and during the Great Depression of the 1930s, Democratic Powers attempted some initiatives to alleviate the crisis, with the Dawes plan in 1924, and Briand's plan in 1929. Yet, besides economic problems, the world was facing security and political ones that were all bound-up together.
Economic problems did not solely disrupt the international order. Indeed, to borrow the Zara Steiner’s term, European policymakers faced a 'triple predicament' in the 1930s: a financial crisis, security anxieties about disarmament, and a challenge to internationalism and extra-European cooperation. When the League Assembly opened in 1931, delegates debated whether priority should be given to international disarmament (political action) or immediate economic action; however, most believed these problems were interlinked. The Assembly met in the middle of a “moral depression almost as serious as the economic depression” (Times’ observation) as the post-World I era and the nature of the Treaty of Versailles were coinciding with the Depression. The League of Nations’ failure to successfully address the disarmament issue severely harmed the international political order. For instance, Stimpson’s proposal for a one-third reduction in arms at the Disarmament Conference in Geneva in 1932 further alienated democratic powers from each other. Overall, both the international political system and the international economic system, what Robert Boyce calls the “dual crisis” eventually led to the Second World War.
Finally, the Great Depression alone cannot justify why so many in the leading powers endorsed nationalism over liberalism. At the end of the Great War, European nations were politically unstable, and many became increasingly attracted to the idea of a “new order” that would eliminate the weaknesses of the previous one. Thus, totalitarian groups such as socialists and militant nationalists emerged promising to rebuild society with a centralized government. Indeed, Italy was the first country to embrace a radical ideology when Benito Mussolini and his National Fascist Party took power in 1922. Both Italian Fascism and German Nazism emerged in a post-world one and Treaty of Versailles era; an era of national frustration and economic and political instability.
To conclude, this essay has investigated the importance of the Great Depression in bringing the Second World War while considering political, ideological, and structural problems in a post-World I era. The first part of the essay can be summed up by Frederic Bastiat’s often assimilated quotation: “When goods don’t cross borders, soldiers will.” as economic protectionism during the Great Depression led to a trade war and destabilized international relations. The moral and human impact of the Second World War was of such significance that Historians urge to understand the causes of the war and to make sense of the world crisis of 1931 to 1941. The Great Depression was perhaps what linked the First World War with the Second one creating a sense of continuity. Yet, as Gerhard Weinberg suggests, Hitler’s concept of “demographic revolution in the world” made the Second World War an “entirely different type of conflict” breaking the line of continuity between the two wars.
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