Dr Manju Antil (Counselling Psychologist and Psychotherapist)

Despite the variability, the Great Depression affected every area of Europe. In the worst-affected nations, Poland, Germany, and Austria, one in every five people were unemployed, and industrial production plummeted by more than 40%. Trade levels between nations have also fallen. By 1932, the value of European commerce had plummeted to one-third of what it had been in 1929, and several of Europe's most recognised banking institutions and currencies were on the verge of collapse. By the end of the decade, there was some appearance of recovery, but it was neither total nor sustainable. If preparations for another war had not created demand and investment, the world would very certainly have experienced a second 'Great Depression' after 1937 

The downturn caused widespread unemployment and destitution throughout European society. As a result, domestic politics grew extremely volatile. In most of central and eastern Europe, like in the Weimar Republic, when leaders from moderate, centrist parties (Liberals, Conservatives, Democratic Socialists) failed to implement crisis-response measures, they were defeated by extreme groups on the Right and Left of the political spectrum.

In 1931, Britain attempted to counteract this trend by creating a National Government comprised of MPs from the Conservative, Liberal, and Labour parties in order to 'create national unity.' In the mid-1930s, France, Belgium, and the Netherlands saw comparable changes.

The Great Depression also harmed international relations. The severity of the crisis compelled countries to prioritise their national interests above everything else. By November 1932, every country in Europe had implemented or improved tariff and quota systems to prevent foreign imports from harming home industry and agriculture. The globe was now split into rival commercial blocs, which had serious ramifications for international peace. For Germany and Italy, economic nationalism was the first step toward establishing new empires. By 1935, it was evident that their nationalism was not limited to economics, as Mussolini and Hitler began to stake territorial claims in the Mediterranean, Africa, and eastern Europe.

By that time, it was also clear that the Depression had weakened other countries' ability to turn down similar demands. Britain and France felt vulnerable as a result of their economic problems. Diplomatic cooperation was also difficult in the midst of heavy economic competition, especially among nations like Britain, France, and the United States who had a similar purpose in safeguarding democracy and capitalism.

America as the ‘World’s Banker

The causes of the Great Depression may be traced back to the economic and political upheavals brought about by World War I. A lot of noteworthy developments occurred. The first was the rise of the United States as the world's leading economic power: the "world's banker." America had become the world's most powerful economy as a result of the Entente states' reliance on American loans to support their war effort and as a result of growing demand for American products across the world. As British economist John Maynard Keynes memorably put it, when America sneezed, the rest of the world acquired a cold.

The First World War and the Allies' demands for reparations from the vanquished Central Powers at the Paris Peace Conference strengthened the links between the European and American economy. In the 1920s, the United States became the primary supplier of loans for countries facing currency crises or general economic challenges. With the Dawes Plan, the Americans stepped in to help the Weimar Republic stabilise its economy in 1924, and private American investors contributed $4 billion to Germany over the following five years. During this period, German banks, companies, and regional government agencies were accustomed to using US money to smooth out any flaws in their economic performance. Indeed, Germany was hardly the only country to gain from American loans. Between 1924 and 1930, Europe as a whole got around $7.8 billion. However, when these American loans dried up, as they did substantially after 1929, the European economy's difficulties reappeared with a fury. What exactly were these issues?

Conclusion:

The globe as a whole struggled to recover from the Great Depression. Throughout the 1930s, foreign investment remained extremely low, making life especially tough for the world's poorer countries. Because of excessively high levels of trade protection, the amount of international commerce has likewise remained weak. European governments were also unable to escape the dread of financial turmoil and inflation. Government expenditure in most nations remained comparably modest as compared to the years before and after the Second  World War, and huge budget deficits were avoided with zeal. Indeed, European governments were unable to break the tendency of viewing practically all crises as pecuniary in nature. The form and degree of countries' adherence to the gold standard highlight the significance of policy decisions in the interwar economy's history, as well as the strength of domestic political goals in dictating economic policy.

During the Great Depression, countries all over the world faced very similar challenges, but each chose to tackle them on its own. Although there was discussion of the necessity for international cooperation, particularly among the 65 various countries whose delegates attended a World Economic Conference held in London in the summer of 1933, international cooperation amounted to nothing more than that: talk. Across Europe, administrations of many political hues chose to pursue economic rebirth in a national or imperial framework. Furthermore, by the mid-1930s, Germany, Italy, and Japan were using Britain and France's retreat into the empire to support their own ambitions for the empire.

Indeed, it was large-scale rearmament, both in Europe and the Far East and, after 1939, in the United States, that eventually absorbed surplus industrial capacity inactive since 1929.

Timeline

• ·         1922-23 Hyperinflation in Germany, Poland, Hungary, Austria; new currencies listed.
• ·         1924 Dawes Plan. Britain returns to the gold standard.
• ·         1927 World Economic Conference Geneva. First signs of recession in Germany.
• ·         Oct 1929 Wall Street Crash.
• ·         May 1931 Creditanstalt Crisis, Austria; controls on economy introduced.
• ·         July 1931 Banking Crisis, Germany; controls on economy introduced.
• ·         Sept 1931 Britain leaves the gold standard.
• ·         June 1932 Lausanne conference signals end of reparations. Britain adopts General and Imperial Tariffs.
• ·         April 1933 USA leaves the gold standard.
• ·       June 1933 World Economic Conference, London.