Unit 7: Economic Crisis and War in the 20th Century
While the Industrial Revolution brought great prosperity to many parts of the world, it also ushered in many new challenges. In 1914, tensions between capitalist powers spilled over into war, and the new weapons of the industrial age produced a horrific slaughter in Europe. After the war, industrial powers struggled to recover in a decade of economic highs and lows. The weak global economy collapsed in 1929, causing widespread unemployment in industrialized societies. The failure of the international community to maintain prosperity and peace led to the Second World War, which devastated Europe and Asia. After the war, the United States and its allies devised a new system for managing the international economy. In contrast, the Soviet Union and its allies pulled new satellite states into a socialist economic system.
In this unit, we examine the effects of industrialization on war and the effects of war on industrialization. We will also study the economic crises of the 1920s and 1930s and compare different recovery strategies.
Completing this unit should take you approximately 11 hours.
Upon successful completion of this unit, you will be able to:
- discuss how industrialization promoted imperialism;
- interpret the effect of industrialization on warfare to contextualize World War I as an industrial war;
- identify the main events of the Great Depression;
- describe the methods governments used to recover from the Great Depression;
- explain how the Marshall Plan shaped global politics and economics;
analyze the importance of the Bretton Woods Conference to the - restructuring of the world economy on U.S. terms; and
- critique the impact of the Bretton Woods on global industrial development.
7.1: Industrial Rivalry in Europe
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.
Read this chapter of Lenin's book, Imperialism, the Highest Stage of Capitalism, to understand the growing competition between capitalist businesses in the years leading up to 1914. Was World War I inevitable in light of this competition?
7.2: Imperialism and the Scramble for Africa
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.
Watch this lecture to learn how increasing industrialization led to a new type of imperialism in the 19th century and how that imperialism set the stage for the First World War. John Merriman describes the European colonial expansion that contributed to the start of World War I. In particular, he explores three key factors in the "new imperialism": religious proselytizing, profit, and inter-imperial political strategy.
Read this article to learn how the economic imperatives of industrialization led European nations to expand their imperial control into Africa. It features a "causes" section that discusses the impetus for each colonizing power's desire to partition a whole continent.
Watch this video on the nature and history of imperialism. In his analysis, Jeremy Hodges focuses on European imperialism toward Africa.
Read this article about the precipitating factors of European imperialism toward the rest of the world, including Africa. The export of violence would "come home to roost in 1914".
Read this article about American Imperialism around the turn of the 20th century. Although American expansion continued well into the 20th century, this era is arguably the one most marked by American imperialist ideas.
7.3: Industrialized Warfare
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.
Read this overview of World War I. One of the important areas it covers is the "social trauma" brought on by the war and the difficulty of recovery from the conflict.
Read this article about the technology of warfare during World War I. Although some of this technology had already been invented, it was the first truly mechanized war.
Watch this video about the mechanization of warfare. Note that this video includes disturbing images and may not be appropriate for all viewers.
7.4: The United States and World War I
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.
Read this overview of the period of the U.S. involvement in World War I. The account includes preludes to war and postwar instabilities and their effects.
Read this text about the period from wartime into the age of prosperity and decadence that followed in the 1920s. It also covers some different takes on social attitudes of the time. Feel free to read selectively for those.
Read this article about how World War I and its aftermath changed the global power structures. In particular, it elevated the United States into a world leadership role – although many Americans were hardly enthusiastic about its new position.
7.5: American Boom and Bust in the 1920s
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.During World War I, American farmers experienced a huge boom in demand and prices, which continued into the postwar time with relief efforts. Read this article about how the agricultural depression came about–and how suddenly it happened.
Read this article. Some people contend that the beginning of World War II ended the Great Depression, while others suggest it was the end of World War II that brought economic restabilization.
Read this article about the Great Depression in the United States. In addition to introducing the various causes, the text also covers The New Deal, a bundle of legislation that pulled the country out of depression and was arguably responsible for fully modernizing the United States.
7.6: The U.S. Economy during the Second World War
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.Read this article on the U.S. experience in World War II. In addition to covering many of the social aspects of the war, it also considers the U.S. entry and its experience in each theater of war.
Read this article on the origins of World War II. It provides a global perspective on the multiple causes and how each of the powers involved entered the conflict.
Read this opinion on the causes of the postwar "baby boom". Do you agree with this perspective?
7.7: Postwar Planning and the Bretton Woods Conference
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.
Read this article about how World War II changed Europe. These changes reached far into the future, and some affect the world order even today.
Read this article, which takes its name from John Kenneth Galbraith's book about the postwar economic boom and political culture. It was undoubtedly an unprecedented time in American history, but it ultimately did not quite match mainstream expectations.
Watch this explainer video about the Bretton Woods institutions. The original aim of these institutions was to help all nations reach a higher economic and social potential. They would see mixed results, but their impact on the global economy is indisputable.
Read this article about the breakup of the Bretton Woods System. However, it is worth noting that the institutions still exist; this piece is a critique of their economic policies.
7.8: The Marshall Plan
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.Watch this speech by George Marshall, the postwar Secretary of State. He lays out what would be called "The Marshall Plan". This is the inception of the plan that would change the course of world history.
Read this article about how the rebuilding of postwar Europe was split between the Marshall and Molotov plans. This split would form the basis of the Cold War, which would dominate the rest of the 20th century.
Unit 7 Assessment
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Take this assessment to see how well you understood this unit.
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