Lecture 30 -- The Great Depression--European Dictators--American New Deal
The Aftermath of Versailles: The Versailles settlement created great discontent in Europe, especially for Italy and Germany. But many lesser nationalities weren’t happy with the settlement either. These resentments and the economic problems induced by reparations shaped 1920s and 30s European politics.
Towards the Great Depression in Europe: Three things led to the Depression—a fiscal crisis caused by the problem of reparations and war debt, a crisis of production and distribution of goods in the world market, and the failure of any nation to offer strong leadership to overcome the crisis. (Heritage, p. 903)
The Fiscal Crisis: France demanded reparations. The US wanted its war loans repaid to it by its allies. Germany’s reparations were used by Europe to pay its debts to the US.
1923: In 1923, France declared Germany was not meeting its payments. French troops now occupied the manufacturing district known as the Ruhr. The Weimar Republic responded by calling a general strike in the Ruhr. France sent in its own people to run the area so it could collect its money. Britain turned against France for this and inflation resulted.
Dawes Plan of 1924 and Young Plan of 1929: American backed plans to refinance Germany’s war reparations. The Dawes Plan provided loans to Germany, got France out of the Ruhr, and set up revenues to support Germany’s payments. When these payments proved too large, the Young Plan refinanced the plan so Germany could adjust its payments from the normal fixed amount in bad times (only 1/3rd the ‘normal’ payment absolutely had to be paid each year to avoid a default.) Unfortunately, the Great Depression wrecked the Young Plan. Further, it cut off the flow of American loans to Europe.
The Fall of the Kreditanstalt: The main bank for Germany was the Kreditanstalt, which collapsed in May 1931. Hoover responded by giving Germany a one year moratorium on payments. The 1932 Lausanne Conference essentially abandoned reparations.
The Agricultural Crisis: In the 1920s, market demand for Europe’s goods was outraced by production, producing smaller prices. Grain production was increasingly efficient, causing grain prices to fall from overproduction. At the same time, industrial goods were rising in cost. Farmers struggled to survive. Outside Europe, similar problems arose with other farm commodities. This meant these nations could afford less European goods. This then dragged down industry into the mire of economic collapse.
Depression and Government Policy: Though most people kept their jobs, the shadow of insecurity hung over everyone and most governments had no idea what to do about this insecurity (which encouraged people to not spend and thus fed the collapse of the market) or about the other economic problems. Voters wanted action, while governments tended to see this as just part of the natural boom/bust cycle of business. In some countries, coalition governments ensued. In Britain, the Labor party and the Conservatives formed a National Government coalition (which also included the now dwindling Liberal party) from 1931-35, followed by Stanley Baldwin’s Conservative ministry. Neither proved very able to deal with the Depression, though provisions were made for eventual Home Rule for India. In France, the Popular Front of Radicals, Socialists, and Communists governed from 1936-9, addressing labor problems. The 1936 Matignon Accords established the right to strike and collective bargaining, mandated 12 days of paid vacations and a 40 hour work week, and raised wages.
The Soviet Experiment: The Russian Communist Party would rule the Soviet Union from 1917 to 1991. Unlike other dictators of this period, the Russian Communists, led by Vladmir Lenin, seized power by violent revolution and years of civil war. Unlike the Facists, the Soviets supported a collective economy and a trans-national ideology which could be exported to other nations. Indeed, the Soviets were effectively missionary, required by their own ideology to spread their ideas to other nations, for the proletarian revolution was believed to be both inevitable and something to be actively facilitated.
War Communism: The Soviets had to fight for survival in their first years against reactionary forces (‘The White Russians’). War Communism was designed to help fight the civil war. The Red Army, under Leon Trotsky (1879-1940) and the secret police (Cheka) fought the White Russians, while the government took control of the banks, transport facilities, and heavy industry and also forcibly requisitioned grain for the armies and cities. However, many Russians were fed up with this policy by the end of the war in 1921. Strikes and mutinies ensued. And it had become obvious that the Revolution was not going to spread around the world any time soon.
The New Economic Policy (NEP): Vladmir Lenin now introduces the New Economic Policy. While the government kept the ‘commanding heights’ of business seized in the war, farmers and other businesses were now allowed considerable economic freedom. By 1927, economic production had returned to 1913 levels and the farmers were prospering along with small businesses.
Stalin vs. Trotsky: The NEP was controversial in the Communist party; after Lenin’s death in 1924, a struggle for the future of Russia began. Trotsky faced off with Joseph Stalin (1879-1953), general secretary of the Communist Party since 1922. Trotsky called for acclerated industrialization, the voluntary collectivization of farming and bringing the revolution to other nations. The conservative Communists (among them Stalin) called for continuing the NEP and slower, careful industrialization. Stalin, a master of bureaucracy rather than oratory or ideology, had the brutality to rise to the top. Stalin argued ‘socialism in one country’, that Russia had to focus on Russia, not on pushing revolution elsewhere. By 1927, he drove Trotsky from power and by 1929, Trotsky was exiled from Russia. Stalin now was master of Russia.
Stalin’s Revolution: Some Russian farmers, the Kulaks, had become quite prosperous (about 5% of farmers) and many more were doing well. Efforts by farmers to manipulate farm prices helped cause Stalin to change policies. Stalin unleashed a second revolution.
Agricultural Policies: In 1929, agents were sent to seize hoarded wheat to end grain shortages. Farming was now to be collectivized and the Kulaks wiped out. But the peasantry fought back, wiping out over 100 million horses and cattle (1929-33) so they couldn’t be confiscated and collectivized. As many as 10 million peasants were killed to break the resistance. Famine was the result in 1932 and 33. The state retained control over the farm equipment placed on the new collective farms. In 1928, 98% of farmland was held in private farms. By 1938, 90% of all farmland had been collectivized. The amount of food handled by the government had risen 40%, allowing it to dominate food supply. However, producing enough food to feed the cities would be a long-term problem.
Five-Year Plans: The point of collectivization was to increase the efficiency of agriculture so as to feed the cities and free up labor for industry. The Five-Year Plans which dictated growth plans were successful in producing huge growth: Russia’s industrial production increased 400% from 1928 to 1940. The main emphasis was on production of iron, steel, coal, transport, and heavy industry. The plans were set up by Gosplan (The State Planning Commission), setting production goals and how they would be met. By 1940, workers were as regimented as farmers. The success of these plans was crucial to Russia surviving World War II. Many non-Russians were stunned and uncritically impressed by this. They failed to see that millions of Russians had died or been imprisoned to accomplish the industrialization of Russia.
The Purges: Around 1933, Stalin began to worry about a backlash against himself for his new policies. The result was the bloody Great Purges. On December 1, 1934, Stalin had Sergei Kirov, the party chief of Leningrad (the renamed Saint Petersburg) assassinated, then used the death as an excuse to round up and imprison thousands. Between 1936 and 38 many high Soviet officials were put on public trial, made to confess to crimes, and killed or imprisoned. Thousands were executed, imprisoned, or sent to work camps with no trial. The army was purged next, including many heros of the Russian Revolution. Most of the old members of the party were now gone and only Stalin loyalists remained.
Soviet Sympathizers: Communist parties existed around the world, and many non-Communists sympathized with various aspects of the Russian experiment. Many would-be egalitarian utopians looked to Russia for a model of how to create a more equal society. For those in the colonies, Marxism offered hope for their liberation. The Soviet Union welcomed and trained anti-colonial leaders of every stripe.
The Fascist Experiment in Italy: The term ‘facism’ derives from Benito Mussolini’s Italian Fascist movement. (Mussolini: 1883-1945). The Fascist governments were anti-Marxism, anti-semitic, anti-democratic, and anti-parliament. (Heritage, p. 911.) They rejected the French revolution and liberalism. They sought to overcome class conflict by playing up submission to a powerful leader who embodied the general will of the people, rather than the petty group interests of party politics. They were single party dictatorships which sought to crush all dissent.
Rise of Mussolini: The Fasci di Combattimento (Band of Combat) was founded in Milan in 1919; Benito Mussolini, a former Socialist, was its leader, the Duce. Mussolini had supported Italian entry into World War I, causing him to break with the Socialists. He had been a school teacher, newspaper editor, and soldier. Mussolini was a political opportunist, rather than an ideologue.
Discontent: Many Italians were unhappy with the state of affairs after the war; government was very unstable and most felt the war had not benefited them as much as they had hoped. Social turmoil also wracked the nation. The Socialist and Catholic Popular Party, both oriented towards the working classes and peasants, were unable to cooperate, paralyzing government. Many feared a communist revolution.
Opportunism: Originally supporting the lower classes, Mussolini reversed course to ally himself to the middle and upper classes, who wanted order more than justice or democracy. The Fascists formed squads which attacked Socialists, strikers, and peasants who tried to seize unused lands. By 1922, Fascists controlled much local government in Northern Italy. As the movement grew, the Fascists staged an October 1922 march on Rome. The King, Victor Emmanuel III (1900-1946), panicked and refused to authorize using the army on them. He then caved in and made Mussolini prime minister.
The Fascists in Power: On November 23, 1922, the King and Parliament gave Mussolini dictatorial power for a year to ‘restore order in the lower ranks of government.’ (Heritage, p. 913). Over the next few years, Mussolini quickly consolidated his power; by 1926, he could freely rule by decree and all other parties were dissolved. In 1929, in the Lateran Accord of 1929, the Catholic Church and the Facist party made peace. The Pope was now recognized as ruler of Vatican City and Catholicism became the state religion of Italy.
German Democracy and Dictatorship
The Weimar Republic (1919-1933): This was the democratic government of Germany, born out of the revolution which overthrew the German Empire. The 1918 Armistice and the 1919 Versailles Treaty, however, permanently tainted the republic and its Social Democratic leadership for many Germans. The necessity of meeting Versailles obligations dragged down the economy and the Republic’s prestige. The Weimar Constitution guaranteed the vote to all and civil liberties, setting up a legislature, the Reichstag, directly elected by the people. The President was also directly elected. Proportional representation was used, making it easy for small parties to gain seats. The President appointed the Chancellor, the head of the Cabinet, and could remove him. Article 48 allowed for Presidential rule by decree in an emergency. Violence and disorders plagued its first five years.
The Ruhr Crisis and Inflation: Post war deficits and the need to make reparation payments (by printing paper money) generated inflation. By 1921, the Mark was valued at 64 to the Dollar. In 1923, Germany was unable to make its full reparation payments and Belgium and France occupied the Ruhr. Economic freefall ensued with massive inflation. Savings, pensions, and investments were wiped out, though wages tended to keep up; for once, the middle class suffered more than workers.
Hitler’s Early Career: Adolph Hitler (1889-1945) was a failed artist who had been a German soldier in World War I. He absorbed rabid anti-semitism at home and anti-Marxism during World War I. His war heroism (leading to promotion and a medal) gave him a new sense of purpose after years of drifting. He moved to Munich and joined the National Socialist German Workers’ Party (the Nazis, 1920-45), an anti-semitic, nationalist party. The party defined socialism as the subordination of economic activity to the good of the state. The government would not directly control businesses, but would direct them for the national good. The main appeal of the party was to the lower middle class, squeezed between Socialist unions and powerful businessmen. The Nazis organized bands of thugs, the SA (Sturm Abteilung) under Captain Ernst Roehm (1887-1934). It was a paramilitary organization which spread terror for the Nazis. Its existence showed the weakness of the Weimar Republic. In 1923, Hitler, the Nazis and World War I general Erich Ludendorf attempted a coup in Munich (the ‘Beer Hall Putsch’), which failed, leading to Hitler being sent to jail. During his few months there, he wrote Mein Kampf (My Struggle), which became the Nazi manifesto.
The Stresemann Years: Gustav Stresemann (1878-1929) was the leader of the German People’s Party. In 1923, during the Ruhr crisis, he was appointed Chancellor at the head of a coalition of left, center, and center-right parties. Working with bankers, he created a new German currency (1 trillion old Marks got you one new Mark.) He then worked to suppress left and right wing disturbances. He then became Foreign Minister from November 1923 to his death in 1929. In 1924, he helped negotiate the Dawes Plan, gaining French withdrawal from the Ruhr. That same year, conservative monarchist Field Marshal Paul von Hindenburg was elected President. Conservatives now seemed reconciled to the republic and Hindenburg obeyed the constitution strictly. In the late 1920s, Germany now prospered. This strengthened the republic. In foreign affairs, Stresemann adhered to Versailles, though he sought to get better terms. He hoped to regain lost territories in Eastern Europe.
Locarno: The Locarno Agreements of October 1925 grew out of his efforts. France and Germany agreed to accept the post-war border between the two. France agreed to withdraw its troops from the Rhineland in 1930 and to allow Germany into the League of Nations. Foreign minister Austen Chamberlain for Britain, Aristide Briand for France, and Stresemann for Germany all got the Nobel Peace Prize in 1925 and 26. In 1928, the Kellogg-Briand Pact was signed by sixty-two nations, renouncing war ‘forever’. This was an empty gesture.
Depression and Political Deadlock: It was the Great Depression which would kill the Weimar Republic. In 1928, a coalition of the Social Democrats and the centrist parties was in power, but it divided over how to face the Depression. President Hindenburg appointed a new Chancellor, Heinrich Bruning (C: 1930-2), leader of the Centre Party, whose goal was to end the reparation payments. This would require a policy of tight credit and a rollback of all wage and salary increases. This was hugely unpopular with everyone and he was unable to build a coalition in the Reichstag, forcing him to rule by decree. Unemployment rose to 6 million by 1932. Economic weakness aided the extremist parties in Parliament. The election of 1930 gave the Nazis 107 seats and the Communists 72. The Nazi stormtroopers swelled in numbers as they absorbed unemployed men, hitting nearly 1 million by 1933. Nazi political support rose and their enemies on the left were ruthlessly crushed.
Hitler Comes to Power: In 1932, Hitler ran against Hindenburg for President, scoring a third of the popular vote. Hindenburg now fired Bruning and replaced him with Franz von Papen. He and his very right wing cronies had great influence over Hindenburg. But they needed popular support to form a proper right wing government and only Hitler could provide this. In July 1932, the Nazis scored 37.2% of votes for the Reichstag, scoring 230 seats. Hitler refused a coalition unless he became Chancellor. Hindenburg refused and a November election reduced the Nazis to 196 seats. Von Papen was now replaced by General Kurt Von Schleicher as Chancellor. He tried to forge an alliance of trade unions and conservative groups, panicking everyone. Hindenburg ended up being persuaded to make Hitler chancellor and von Papen Vice Chancellor. On January 30, 1933, Hitler became Chancellor. Farmers, war veterans, and the young had played an especial role in bringing Hitler to power, along with divisions among the right.