Economic and Business History: The World Economy During the Interwar Period

Economic and Business History UFV

20 21 12 21 22A Economic and Business History UFV Year: 1 Subject code: 7111 Prof. Damián Rubianes Universidad Francisco de Vitoria UFV MadridUnit 7: The world economy during the interwar period

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 2UNIT 7 ECONOMY AND MODERN WORLD

The World Economy During the Interwar Period (1918-1939)

Key Topics in Interwar Economics

7.1 The economic consequences of World War I. 7.2 The crisis of 1929. 7.3 The Spanish economy during the interwar period. 7.4 Modern companies in the first half of the 20th century. 7.5 20th century economic thought: Keynes and Hayek.

A CONCISE ECONOMIC HISTORY OF THE WORLD FROM PALEOLITHIC TIMES TO THE PRESENT [ Pdh Edelen Larry Neal | Rondo Cameron OXFORD Source: Teaching guide. Universidad Francisco de Vitoria UFV Madrid

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 3UNIT 7 ECONOMY AND MODERN WORLD

The World Economy During the Interwar Period (1918-1939) Overview

Economic Consequences of World War I

7.1 The economic consequences of World War I. 7.2 The crisis of 1929. 7.3 The Spanish economy during the interwar period. 7.4 Modern companies in the first half of the 20th century. 7.5 20th century economic thought: Keynes and Hayek.

Source: Teaching guide. Universidad Francisco de Vitoria UFV Madrid

A CONCISE ECONOMIC HISTORY OF THE WORLD FROM PALEOLITHIC TIMES TO THE PRESENT [ Pdh Edelen Larry Neal | Rondo Cameron OXFORD

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 4THE WORLD WAR I (WWI)

Industrialization and Imperialism Leading to War

The end of the 19th century was a fairly peaceful time for the industrialized world. - There were plenty of wars around the world, primarily in response to the new imperialism, but with a few exceptions, the Western nations were largely at peace. - The newly formed (1871) German Empire allied with the Empire of Austria-Hungary in order to balance European power and ensure peace. - Great Britain, France and Russia created Triple Entente in 1907 for mutual support in case of war or invasion. - Reasons for the increased tension were a heightened international rivalry that grew out of the new imperialism, an arms race in which Great Britain and Germany focused on building bigger and more powerful battleships powered by steam turbines, the idea that war would distract from domestic political agitation. To a lesser extent, a return to protectionism at the end of the 19th century (when tensions were high, blockading trade was a common diplomatic measure). These problems would lead to the outbreak of the first really modern war: World War I (1914 - 1918). - The spark that touched off the First World War brought into sharp relief the territorial rivalry between Austria- Hungary and Russia over control of the Balkans.

Universidad Francisco de Vitoria UFV Madrid

Source: "An economic history of the World since 1400", Donald J. Harreld

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 5THE WORLD WAR I (WWI)

Industrialization and Imperialism Leading to War Technologies

Consequences of Nationalism and Populism

World War I was the first large-scale war between industrialized powers. - New technologies came into play, such as tanks and steamships with heavy guns. World War I was also the first war to use airplanes for reconnaissance. And in ocean waters, submarines caused havoc for merchant ships and warships alike. The consequences of nationalism, populism and government and social media manipulation: - The German public had no real idea that its war machine was being beaten by Great Britain and the armistice, when it finally came, took most Germans by surprise. - Many of them felt betrayed and this feeling would have important repercussions over the next two decades ...

Universidad Francisco de Vitoria UFV Madrid

Source: "An economic history of the World since 1400", Donald J. Harreld

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 6ECONOMIC CONSEQUENCES OF WWI

The End to Free-Trade Policies

The pre-1914 world economy was dominated by Western Europe and the US. - Together with the vast land empire of imperial Russia gave them control of more than three-quarters of the Earth's surface and almost as large a fraction of the world population. - Economically, Europe and the US (without their empires) accounted for well over half of total production and trade. World War I put an end to the free-trade policies of the industrialized nations. - European empires exploited their overseas colonies with increased nationalist fervour. - Europe suffered a decline (due to the damage and destruction) in its share of world trade and production, yielding its edge mainly, though not exclusively, to the United States, the British dominions, and Japan.

Universidad Francisco de Vitoria UFV Madrid

Source: "A concise economic history of the World", Cameron, Neal. Ed. Oxford University Press.

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 7ECONOMIC CONSEQUENCES OF WWI

A Return to Protectionism

The economic costs of the war were enormous, especially in terms of physical destruction and countries' bankruptcies. Even more damaging to the economy, in the long run, than the physical destruction, the disruption and dislocation of normal economic relations did not cease with the war itself but continued to take its toll in the interwar period with economic intervention, direct controls on prices and production, blockades, countermeasures, and restricted international trade and relationships. The first years following World War I were a period of decline. Population loss, falling production, disruption of the volume of world trade, and the return to protectionism all contributed to shattered economies. To make matters worse, the huge debts that countries had accumulated to finance the war had to be paid off.

Copyecht by Underwood & Underteck. N. Y From Elliott Service Co. N.

Universidad Francisco de Vitoria UFV Madrid

Source: "A concise economic history of the World", Cameron, Neal. "An economic history of the World since 1400", Donald J. Harreld

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 8ECONOMIC CONSEQUENCES OF WWI

Debt, War Reparations, Inflation, and Fascism

The Versailles treaty reduced Germany's size and, most importantly, removed 75 percent of its iron ore and 25 percent of its coal mines. Not surprisingly, Germany's industrial production plummeted. Inflation hit much of Europe hard after the United States-now Europe's largest creditor-insisted on being repaid in full and as the German war reparations bill of more than $30 billion came due. This was a bill that Germany could almost never hope to pay. Unknown at the time, these problems created conditions that made a second world war more likely, as Keynes had predicted. At least partly as a result of the war, the 1920s and 1930s witnessed the rise of fascist dictatorships in Italy, Germany, and several other European nations, which also adopted novel forms of economic organization.

the ECONOMIC CONSEQUENCES of the PEACE John Maynard KEYNES Introduction by Former Chair of the Federal Reserve PAUL VOLCKER

Universidad Francisco de Vitoria UFV Madrid

Source: "A concise economic history of the World", Cameron, Neal. "An economic history of the World since 1400", Donald J. Harreld

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 9ECONOMIC CONSEQUENCES OF WWI

The Russian Revolution

Socialist and communist parties had been agitating throughout the industrial West for decades before the First World War broke out. - The socialists believed that revolution was the only way for social and economic change to come about that would be favourable to them. The Russian Revolution of 1917 was one of the most explosive political events of the twentieth century. - The violent revolution marked the end of the Romanov dynasty and centuries of Russian Imperial rule. During the Russian Revolution, the Bolsheviks, led by leftist revolutionary Vladimir Lenin seized power. - The Bolsheviks would later become the Communist Party of the Soviet Union.

Universidad Francisco de Vitoria UFV Madrid

MODERN CLASSICS 1-E МАЯ History of the Russian .. Revolution Leon Trotsky

Source: "An economic history of the World since 1400", Donald J. Harreld. History.com

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 10ECONOMIC CONSEQUENCES OF WWI

Centralization and Planned Economy

During the war, Lenin's communist government took strict measures (many of them continued for decades) that included: nationalization of all industries, a ban on worker strikes, confiscation and redistribution of peasant land, a ban on private enterprise, military-style control of the railroads, and a single party system. Logically, production in all sectors plummeted following the revolution and Russia's exit from WWI. In these circumstances, the state simply took over the economy. The result was a massive increase in state bureaucracy and increased centralization under Bolshevik leadership. A New Economic Policy favoured small private property and private enterprise but after Lenin's dead in 1924, Stalin rejected this economic liberalization in in favour of a carefully planned economy.

Universidad Francisco de Vitoria UFV Madrid

Source: "An economic history of the World since 1400", Donald J. Harreld

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 11ECONOMIC CONSEQUENCES OF WWI

The Communist Bloc

Stalin established the notion of five-year plans to control production and growth. The planned economy functioned so differently from the capitalist system of the other industrialized countries that the Depression of the 1930s had a very different character in Russia than it did in Western Europe. For a moment in time, it seemed as though the communist planned economy was able to avoid the kind of shocks that plagued the West-almost. The Russian Revolution paved the way for the rise of communism as an influential political belief system around the world and, particularly, Eastern Europe. It set the stage for the rise of the Soviet Union (USRR) as a world power that would go head-to-head with the United States during the Cold War.

Universidad Francisco de Vitoria UFV Madrid

Source: "An economic history of the World since 1400", Donald J. Harreld. History.com

ECONOMIC AND BUSINESS HISTORY | UFV | PROF. DAMIÁN RUBIANES | PG. 12