Pre-wwii Economies of The World

To get to the crux of a problem, one must first analyze its roots. In this case, the root of the problem lies in the conditions of the economies of the belligerents of the war before the war began and the events that caused turbulence in these economies and bought the world closer to war step by step.

The first economy I shall be analyzing is that of the country that is widely blamed for and branded as the cause of the loss, death and destruction caused by the War: Nazi Germany. Germany was a crippled nation after its defeat in World War I, with widespread poverty and the hyperinflation of its currency, the Reichsmark being the direct consequence of its belligerence in the past. To further dampen the German Nation’s already broken spirit, the countries who won the war demanded that Germany pays a massive US$33 billion as reparations to repair all the damage caused to western mainland Europe as a result of the War. This, coupled with the French occupation of the Saarland, an economically important district of Germany in 1920 meant that the German economy was nothing but crippled by the early 1920s. Inflation soared to such nightmarish levels that at one point of time one loaf of bread cost billions of Reichsmarks. If this was not enough in the German Economy’s list of woes, the Great Depression of 1929 further destroyed the economy’s production capabilities. However, the beacon of hope for the German people arrived in the form of the Nazi party, who in their propaganda speeches promised to fix the woes of the nation. These promises led to the German people, already in a mood of helplessness and desperation into voting for the Nazi party and its leader, Adolf Hitler becoming the Chancellor in 1933.

Hitler immediately set off to rebuild the economy and appointed the highly efficient Hjalmar Schacht, who already built up a reputation in the financial sector by working for multiple banks in the 1920s as Minister of the Economy. Schacht introduced his “New Plan”, which planned to drastically reduce imports and unemployment, increasing government spending to invoke consumer confidence and also forming good economic ties with other nations. Unemployment drastically fell from 6 million in 1933 to just 302,000 by 1939, in what was widely considered to be the Nazi “Economic Miracle”, achieved by a combination of increased government expenditure and vigorous propaganda that insisted on every working-age German contributing to the economy. However, unbeknownst to Schacht, Hitler’s plan was to strengthen the economy enough to be able to sustain a long war. When Schacht eventually found out Hitler’s intentions, he chose to resign in 1937 and was promptly replaced by Hermann Goering, who devised a “Four-Year Plan” to get the German economy ready for war within 4 years. Despite all the improvements made to the economy, the Nazi Government always spent more money than it made between 1933 and 1939, amassing a gargantuan government debt of almost 40 billion Reichsmarks.

To conclude, as Germany was the instigator of the war to come, it had to prepare its economy to withstand a war, and therefore made what would be considered as one of the best and fastest economic recoveries the world has ever seen.

The next economy I wish to talk about is the only other country in the world at that time that had a foreign policy just as aggressive as Germany’s: Japan. The Japanese economy experienced a boom in production during World War 1, but by 1920 investors predicted a hard landing for the economy after the boom, causing stock prices to plunge and broker banks to fail. Since 1921, the Japanese credit situation was not satisfactory at all and a number of Japanese firms were at the verge of failure. The Great Kanto Earthquake of September 1923 was a huge blow to the Japanese financial system and caused the destruction of much of Japan’s human and physical capital. There was a huge loss of the net amount of goods in circulation, the collapse of credit to the direct consequence of the destruction of property. The economic activities being conducted in the affected areas were immediately ceased, and this amounted to quite a lot as the capital city Tokyo was among these affected areas. Yokohama, a port city economically important to Japan as a means of sea trade, was utterly demolished, causing a further meltdown of the Japanese economy. A moratorium, a law to allow the legal stalling of debts, was imposed to give debtors time to recuperate from the earthquake. However, this was not enough as the bad debts incurred as a direct consequence of the quake eventually added on to the Japanese economy’s woes and built up to the Showa Financial Crisis of 1927, a precursor to the Great Showa

Depression that occurred between 1930 and 1931. The Japanese economy was utterly crippled in the 1930s, and this prompted Japan to take up arms against China in order to gain some resources of economic importance. They did this by creating an excuse to invade Manchuria in 1931, which was eventually conquered and turned into the puppet state of Manchukuo. The rest of China was also attacked, and the onslaught soon spiraled into the second Sino-Japanese War (1937-1945). The American position was not much better than the Germans or the Japanese. The Americans did not escape from the Great Depression either: unemployment in 1932 hit as high as 11.5 million people and the Gross Domestic Product of the country steadily falling over the course of 4 years, starting in 1929. The newly elected President, Franklin Delano Roosevelt proposed to implement a “New Deal”, which aimed to pull the economy out of the crisis. Although the deal was able to mitigate some of the effects of the Depression between 1933 and 1940, it could not put a full stop to the crisis. Estimates, taken right after the German invasion, indicated that the American economy was still deeply rooted into the Depression. However, despite this sub-par performance, America was still quite well prepared for war: The Government showed more involvement with the people as a result of the various programs constituted under the New Deal and the people were motivated by the thought that the Central Government was deeply involved in national affairs and assisted with new capacities and plans of the private sector.

Great Britain was one of the countries that suffered the worst from World War 1. There were countless human and material losses, with over 769000 people killed and 1.7 million wounded. Adding to this was the material cost of 7500 million pounds, and although the German Empire owed billions in reparations to Britain, Britain owed billions to the United States in loans as well, so reparations alone would not be able to pull Britain out of this situation. However, a depression occurred between 1919 and 1921, with more than 3 million citizens unemployed as a direct result. Though the economy did pick up between 1922 and 1923 events such as the General Strike placed the UK economy back into more trouble with frequent and unpredictable stagnations harming economic growth for the rest of the decade. Although the British Empire was at its territorial peak at this point in time with nearly half the world being its colonies, even this was not enough to quell its economic woes. By the late 1920s, economic performance had somewhat stabilized, but the UK lost its place as the world’s best industrial power to the united states, and there was an economic divide within the country, with the South being more prosperous and the North being engulfed in turmoil due to the ensuing poverty and rise in unemployment. By 1931, the UK had been overwhelmed by the global financial crisis and was forced to abandon its gold standard. Employment and profits across the UK took a dip by 1933, and most people were employed part-time. Unemployment remained high until the outbreak of the Second World War, where all job-seekers were enlisted in the Army. Other than this, the UK government had also severely cut down on military spending since the First World War, therefore rendering it unprepared for the future War.