Wednesday, August 18, 2010

Economic Factors and The Great Depression Essay

Economic Factors and The Great Depression Essay

The economic success of a country, in a sense, defines the wealth, living standards, and conditions of its general population; and in turn marks whether the country itself stands among the world as an industrial power.

In a country where the economy is stable and thriving, the population tends to be happy of their government- giving the government the credit of securing the success of its economy.

On the contrary, in a country where the economy is instable and on the verge of collapse, the economic recession causes the general population to be discontent of their government’s initiatives – and if the people’s attitude of such a society has grown to a level of extreme dissatisfaction, political unrest will erupt as the unhappy population takes to the streets.

In contrast, these factors are exactly what happened during the Great Depression of the 1930’s and it too is a major factor to why Nazism and figures such as Hitler and Mussolini were able to seize political power.

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To define the economic situation of the 1930’s and how in respond to the economy war erupted, we must look back through history 20 years before the year 1939 (to which Britain declared war on Germany after Germany failed to respond to an ultimatum over the invasion of Poland) to the year 1919- the year to which the Versailles Treaty was signed.

Though the Great War ended, it came at a huge cost as both France and Britain had suffered heavy casualties, France was literally wiped clean as it suffered catastrophic damages, these factors led their leaders Clemenceau and Lloyd George to seek vengeance and in turn influenced the creation of the Versailles Treaty.

The humiliating, punitive clauses of the Versailles Treaty were to cause much problem to the defeated Germany; it literally crippled Germany’s economy as a huge reparation fee was laid.

By mid-1920’s a financially exhausted Weimar’s Republic (the government set after the Versailles treaty) was heavily dependent on foreign investments, especially that of Americans, to maintain its policies and uphold the treaty.

But a major problem was to come- it was proving impossible for the Weimar’s Republic to improve social and living standards at home yet at the same time to meet with the international agreement; as conditions worsened, a hyperinflation struck during the 1920’s and everyday living standards such as food and clothing rose to a ridiculous high. People lost their savings and anger of the impotent government and its lack of initiatives to improving conditions led a great attention towards political parties of both extreme left and right; communism and the Nationalist Socialist Workers’ Party (NAZIS) led by Adolph Hitler attracted a great amount of attention.

Further more the American investments were in the form of short-term loans- which could be withdrawn at any time if desired. This meant that if say a crisis of the Wall Street stock market crash, investors had the legitimate right to demand their money to be returned immediately.

‘Black Thursday’ of 1929, nothing Germany prepared for was ready for what came next. It plunged the world into chaos, as the worst Economic Depression in history saw millions of people around the world unemployed, in the Germany of 1933 more than 6 million Germans were unemployed that is an astounding 43% of the population.

This is mainly because as the Wall Street crashed in 1929, investors lost huge amounts of money and some big businesses (particularly banks) that have previously invested in Germany or abroad wanted their money back to meet the debts at home. There are also other factors such as at the time the Keynesian Policy to manage an economic depression was not adopted by many countries, as the government tackled their crisis in the old fashioned way by cutting spending, setting up tariffs- this was ultimately to worsen the Depression as international trade could not be managed at the ‘fluent fashion’ as before the crisis.

It is said that the economy is an inexact science, even more unpredictable on a global scale.

The world economic crisis which began in 1929 brought severe hardship to millions of Germans, persuading many of them to look to the Nazis for salvation. Hitler shared the rising discontent with the Weimar Republic and understood the popular desire for law and order. Through propagandas and using his prodigy as an energetic and powerful speaker, Hitler in 1933 took power in Germany and began the Third Reich.

Once in power, Hitler suspended the German constitution and gave himself unlimited power. To make Germany strong again, Hitler knew that he had to ignore the Treaty of Versailles and spend government money to create public work. All aspects of the Third Reich were controlled by the NAZIS- schools, news, even films were used as sources of propaganda to spread nationalism, rearmament increased.

In an economic sense, Hitler did the right thing by government spending which did in turn created jobs, and the Third Reich loved him for his initiatives. Hitler’s rearmament spending stimulated the German economy as unemployment in 1933 dropped from 6 million to 2.9 million in 1935.

The successful hosting of the 1936 Berlin Olympic games also increased Hitler’s popularity and the German people began to place faith in the NAZIS’ doings.

As the fragile German economy was stabilized by 1937 and Germany was once again a military power, Hitler turned his views to war, his plan? To make only the pure Germans the Aryan or master race of Europe.

Political factors
The rise of Hitler happened in a time of great political instability, the Depression hit hard in most industrialized nations and crippled the world’s economy. The policies and initiatives adopted by many democratic countries were only to deepen the Depression.

There was in many countries fear of communism and widespread unemployment.

Karl Marx and his ideals of communism, promised a worldwide revolution of the working class, and as the Depression hit most bourgeoisie countries it was seen, by communists, as the final collapse of capitalism. As the discontent and conditions of the working class worsened, the dictatorship of the proletarian was imminent….

For countries such as Britain, the Third Reich was seen as a counter, an extra ally, against Stalin and the USSR. Communism was number one on top of the fear list than the NAZIS.

There was also a sympathetic understanding to Hitler’s movements, Germany had been harshly treated by the Treaty of Versailles, Hitler’s aggression was therefore understandable and, to some extent justifiable.

As British Prime Minister Neville Chamberlain followed a policy of appeasement (giving in to demands), the Third Reich expanded its territory to Austria, the Sudetenland in western Czechoslovakia, and the Rhineland by 1938.

The Munich agreement signed on the 29th of September 1938 allowed Hitler to take the Sudetenland. At Munich Hitler persuaded Chamberlain and the French Prime Minister Daladier that Sudeteland was his ‘last territorial ambition’.

When Chamberlain returned home to announce ‘the famous paper’ he said that ‘I got the impression that here was a man who could be relied upon when he had given his word.’ History proved Chamberlain wrong.

So why had Chamberlain stood so firmly on appeasement from 1936-1938? Despite warnings, noticeably by Winston Churchill that Germany was preparing for war?

The answer lies in the fact that Chamberlain belonged to a generation which had witnessed the slaughter of millions of young men in the First World War and for him another war almost unthinkable.

Until 1939 when he saw how he had been mistaken, and witnessed the true extent of Hitler’s goals. Chamberlain officially declared on the 3rd of September of 1939 that Britain was at war with Germany, two days after the German invasion of Poland.

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