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The Great Depression that began in 1929 ushered in a number of important developments. Among the continuities from World War I were the decline of European hegemony and instability of Western democracies. New developments included Fascist governments in Italy, Germany, Spain, and Japan and a police state in Stalin’s Soviet Union. China continued to turn away from democratization, while new authoritarian regimes arose in Latin America. The economic depression and the resulting radical political forms led to World War II.
The Global Great Depression. The Great Depression had worldwide causes and effects. Reactions to this economic earthquake were varied. The most startling change in western Europe was the rise of Nazism.

Causation. The Depression’s roots were long. The effect of World War I on Europe’s economy had a ripple effect around the world. Farmers in the West and in the colonies in Africa and Asia overproduced, causing prices (and therefore income) to fall. Governments provided little guidance at this time. Nations that had loaned money insisted they be repaid; tariffs reached all-time highs. By the late 1920s, employment in key Western industries was declining.

The Debacle. When the New York stock market collapsed in October 1929, the wheels came off the world’s economic wagon. U.S. banks failed, taking their depositors with them. Banks in Europe followed, industrial production fell, jobs and wages were cut. This downward spiral continued from 1929 until 1933 when the economic bottom was reached. Economic disaster was not a new phenomenon, but this one was the longest lasting and most far-reaching because of the West’s unprecedented global reach. The Great Depression was an enormous social and political event as well. It revealed the fragility of nineteenth-century optimism. Popular culture took on an escapist theme. Western democracies came under pressure to take a stronger role in their economies. In the Soviet Union, Stalin’s determination to create an industrial society manifested itself in a brutal regime, yet he succeeded in his goal. In Japan, the worldwide economic decline led to a political crisis.

Responses to the Depression in Western Europe. In western Europe, the Depression revealed that the economic and political achievements of the 1920s were not permanent. Early governmental responses were generally ineffective. In many countries, the economic collapse heightened political polarization. The Great Depression led to one of two effects: an incapacitated parliamentary government or the overturning of parliamentary government. France and England provided examples of the first pattern; Italy, Germany, and Spain, the latter.

The New Deal. In the United States, the government offered direct aid to Americans in economic trouble in the form of the New Deal. The Social Security system, government economic intervention and agricultural planning, and banking regulations were all attempts to recover from the depression. Most importantly for Americans, the New Deal restored confidence in the economy and in the government. It also established a path for future governments, between the ineffectiveness of the English and French and the extremism of the Italians, Germans, and Spanish.

Nazism and Fascism. Fascism in Italy and Germany was a product of World War I. The movement’s advocates were often war veterans who attacked the apparent weakness of their countries’ parliamentary system. Fascist attacks on unions and on Communists pleased many in the upper classes. Although the movement started in Italy, it was in Germany that this movement became a major force in world history. Hitler made promises of a brighter future to many groups; in return, he sought not the democratic voices of many but instead the lone voice of the leader. Once in power, he established a totalitarian state replete with a secret police, purges of the opposition, strident nationalism, and an incessant attack on Germany’s large Jewish minority.

Hitler’s foreign policy was based on a preparation for war to avenge the outcome of World War I and to create an empire that stretched across Europe. Meanwhile, the international community did little to check him, appeasement being the coin of their realm.

In Depth: The Decline of the West? It is clear the West declined in power during the twentieth century. Various thinkers and leaders have commented on this trend. As in the classical civilizations, slow or zero population growth was a sign to some of a general decrease in vitality. Decolonization and loss of economic clout in Asia were other indicators. Many commentators used the theme of the cyclical nature of history, of the inevitable decline that occurs after a period of intense vigor. Others saw decay from within, bemoaning the lack of standards in the arts, for example. On the other hand, Western nations have shown an unprecedented ability to bounce back from adversity—the resurrection from the Great Depression, for example. However, past examples show it typically takes several centuries for decline to become fall.

The Spread of Fascism and the Spanish Civil War. East of Germany, Fascist movements arose in Hungary and Romania. Hitler expanded into Czechoslovakia and Austria. Italy’s Fascist dictator Mussolini attacked Ethiopia as the League of Nations and the rest of the world predictably did nothing. The Spanish Civil War was fought between those favoring a parliamentary republic and those who wanted Fascism. The U.S.S.R. provided some assistance to the republic. With help from Germany and Italy and with only verbal opposition from France, Britain, and the U.S., the Fascists won.

Economic and Political Changes in Latin America. The economic boom that began in the late nineteenth century faltered after World War I and was crushed by the Great Depression. Rapid population growth swelled the ranks of the rural and urban working class, creating a series of social problems.

Labor and the Middle Class. The rising importance of urban labor and the growth of an urban middle class led to political changes in some Latin American countries. Traditional elites forged alliances with the new, growing middle class, but this often led to opposition from the military, peasants, and bandits. Between 1914 and 1930, waves of labor unrest were met with brutal government oppression.

Ideology and Social Reform. By the 1930s, the failures of liberalism were becoming apparent in Latin America. Instead of creating its own identity as it had in western Europe and the U.S., the middle class linked forces with the traditional wealthy rulers and/or the military. Artists, intellectuals, and students complained about the system. Socialist and Communist parties arose.

The Great Crash and Latin American Responses. Its economic dependency and weak liberal regimes were made clear by the world financial crisis of the 1930s. Reform movements gained momentum. Corporatism, with its roots in Fascism, sought to create states acting as mediators between different social groups. The most successful example of political change came from Mexico, where land was redistributed and oil wells were nationalized.

The Vargas Regime in Brazil. Getulio Vargas established a corporatist regime in Brazil modeled on Mussolini’s Italy, but he backed the Allies in World War II. Much of Brazilian history since his death has been a struggle over his legacy.

Argentina: Populism, Peron, and the Military. Juan Peron emerged as the leader of a military-style government in Argentina, and forged an alliance with workers and industrialists at the expense of civil liberties. His program was couched in nationalistic terms, taking control of foreign-owned railroads and oil resources, but Argentina’s economy faltered anyway. He was exiled but returned briefly to power in the 1970s. After his death, the military took control again.

The Militarization of Japan. Although badly damaged by the Great Depression, Japan recovered faster than the West did, but in the context of authoritarianism and military expansion. Even before it happened in the West, military rule took over Japan. After 1936, a series of increasingly militaristic prime ministers were appointed, despite the wishes of the voters. By 1938, Japan controlled Manchuria, Korea, Taiwan, and a substantial part of China. An even wider reach of its empire was on the way.

Industrialization and Recovery. Japan made a full turn toward industrialization after 1931, and its economy responded. Production of iron, steel, and chemicals soared. Big companies offered lifetime contracts and activities designed to promote nationalism and hard work. The nation became self-sufficient in tools and scientific equipment, and the basis was set for more expansion that occurred later in the twentieth century.

Stalinism in the Soviet Union. A totalitarian state emerged in the Soviet Union beginning in the late 1920s. Under Communism, the largely independent economy avoided the Great Depression. Stepped up industrialization, abject worship of the leader, and a violently repressive police state marked a system very similar to Nazism. The experimental mood of the middle of the 1920s faded when Stalin acquired unquestioned power. He sought to make the U.S.S.R. an industrial society under full control of the state.

Economic Policies. Large, state-run farms called “collectives” were formed to replace private land ownership. To ensure cooperation, Stalin approved a policy of starving and murdering millions of peasants. Those who survived, planted and harvested, but not in the amounts Stalin had envisioned. For decades, agricultural production was one of the Soviet Union’s great weaknesses. The area of industrial production was a different story. The government ordered the building of massive factories and an extensive power grid, making the U.S.S.R. a world-class power in heavy industry. Consumer goods were not a priority to Stalin, nor to his successors. The top-down structure of the Soviet system led to considerable waste of resources.

Toward an Industrial Society. Incentives and nationalist fervor pushed workers to produce more. Cities grew rapidly. Welfare services, old-age pensions, and health programs were provided by the government.

Totalitarian Rule. Stalinism instituted new controls over many aspects of life. Artists, writers, and intellectuals who did not toe the line were exiled to labor camps in Siberia. “Socialist Realism” emphasized heroic images of workers and others. Free scientific inquiry was quashed. Many thousands of real and imagined opponents of Stalin’s vision were executed; many more were exiled within the U.S.S.R. The Politburo sycophantically followed his lead. In foreign relations, the Soviet Union was recognized in the West by the 1930s. Germany arose as a threat. After the West showed little interest in fighting Fascism in Spain, Stalin signed a nonaggression pact with Hitler and attacked eastern Poland and Finland in an early sign of Soviet conquest that became a hallmark of post-World War I foreign policy.

New Political and Economic Realities. The 1930s clearly changed the world balance that had existed since World War I. Germany and the Soviet Union reasserted their positions as powers to be reckoned with in Europe. Like Germany, Japan recovered to an extent from the effects of the Great Depression and became more militaristic in its outlook. The political tradition since the Enlightenment was called into question in western Europe and the United States. Revolutionary forces remained in Latin America and China. Movements against Western colonialism continued in Asia, Africa, and, in particular, the Middle East.

Global Connections: Depression and Retreat. The Great Depression promoted a wave of nationalist reactions and weakened global ties. Increased tariffs decreased trade; many of the countries dependent on trade with the West reacted with varying degrees of militarism and authoritarianism and yet, at the same time, economic isolation from the West. The world as it had been known was falling apart for the second time in a generation, and no one seemed capable of putting it back together.
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