HIST363: Global Perspectives on Industrialization

Several factors helped catapult Europe into World War I. Although Gavrillo Princip's assassination of Archduke Franz Ferdinand in 1914 provided the initial spark, competition among the European powers for colonies was a primary cause, such as disagreements that erupted over Morocco and the Congo among Germany, France, and Britain.

Russia's Vladimir Lenin had described imperialism as the last stage of capitalist development. The colonies had become a valuable source of natural resources and a market to sell finished consumer products. Combined with militarism, ethnic discontent, and a complex web of military alliances, the European leaders created a tense atmosphere that resulted in the outbreak of war in 1914.

Military leaders at the time tragically failed to realize the technological changes during the Industrial Revolution. The mechanization of warfare and mass production of new weaponry created a military stalemate where millions of soldiers and civilians were killed and maimed. The industrialization of warfare had rendered traditional military strategies and tactics obsolete and useless. The generals refused to understand this and led what was supposed to be a quick and relatively bloodless conflict into one of the bloodiest events in human history.

When World War I broke out, the United States initially vowed to remain neutral. Most Americans did not want to enter the war either, feeling it was more of a European matter. Two factors ostensibly changed the U.S. stance on nonintervention: The sinking of the Lusitania, a British ocean liner carrying 128 Americans (among many others), and the Zimmerman Telegram, which suggested that Germany might have been seeking an alliance with Mexico. The U.S. officially entered the war in 1917.

In the United States, the Great Depression (1929–1933) was an unintended consequence of the booming economy that followed World War I, the so-called Roaring 20s. The postwar prosperity, and social changes that came with it, made Americans believe the economy would continue to grow and expand forever: the laissez-faire capitalism and the government of Adam Smith were the new norms. Speculation in the stock market, buying and selling stocks on margin, the proliferation of debt, and a lack of government regulation created the perfect conditions for an economic collapse.

When the stock market crashed in 1929, the Hoover administration relied on outdated economic ideas that suggested it should keep government involvement to a minimum. As the economy spiraled downward, Hoover could not restore confidence in the economy or the government's ability to stabilize it.

Following his election in 1932, President Franklin D. Roosevelt took an active role in restoring economic confidence. Roosevelt increased government spending following his belief in Keynesian economics. John Maynard Keynes (1883–1946), a British economist, believed the government should pump money into the economy to stimulate activity, promote business growth, and pay off the deficit once prosperity returned. Between 1933 and 1939, Roosevelt and Congress worked to jump-start the economy by enacting the New Deal, a series of programs, public work projects, financial reforms, and regulations.

Roosevelt created new agencies and programs to bring about recovery and imposed new regulations on the stock market, banks, and businesses. These policies were beginning to have positive results, but the outbreak of World War II and mobilization for war created the most dramatic economic improvement. U.S. industries profited enormously from increased sales to Britain, other Allied forces, and the U.S. government when it entered the war in 1941. As a result, the United States emerged from World War II in 1945 as an economic and military superpower.

While multiple factors led to World War II, economic realities in Europe played a considerable role. Germany was reeling from the impact of military defeat in World War I. The excessive war reparations the Treaty of Versailles imposed caused great economic hardship and resentment among the German people. Rampant inflation devalued Germany's currency and led to social strife and political conflict. These conditions set the stage for the rise of Adolf Hitler and the Nazis, who promised to redress the grievances, fix the economy, and make Germany politically and militarily great again.

The eventual outbreak of war in Europe and U.S. involvement after Japan attacked Pearl Harbor led to rapid mobilization and the increased industrialization of the U.S. economy. The United States not only sold munitions to its allies but was able to meet the challenge of fighting a war on two fronts against Germany and Japan.

At the end of World War II in 1945, the allied powers resolved to avoid repeating their mistakes following World War I. Participants at the Bretton Woods Conference (1944) began establishing a new global financial system that would create a new system of foreign exchange, prevent competitive devaluations of currencies, and promote international economic growth. They created the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) to help countries rebuild and develop local economies which had been decimated during the war.

In 1948, the U.S. Congress enacted the Marshall Plan, which would provide more than $15 billion in funds to countries in Europe that needed help to rebuild. Historically, the parties losing a conflict had been saddled with rebuilding afterward – a conventional term of peace that had arguably allowed Adolf Hitler to rise in the wake of the punitive Treaty of Versailles. In a dramatic departure from that practice, the fund provided food relief and aid for the physical reconstruction of war-torn Europe.

The Russians and Soviet Bloc countries refused to participate in the plan. Russia claimed responsibility for rebuilding the region instead, thereby creating the Soviet Bloc sphere of influence and igniting what would come to be known as the Cold War.