Modern World History

The Inter-war Years

At first sight the interwar years seem no more than a succession of crises with war inevitable from the moment Hitler came to power in Germany. And yet, during the 20's, there were genuine hopes that disarmament might bring about an era of peace when disputes between nations could be solved by international diplomacy. People growing up in the 20's looked forward to a new era: the first in which modernity seemed to promise a better life for all.

Then came the Great Depression of 1929. Wars are generally followed by a period of economic recovery when people everywhere are trying to make good the damage caused by conflict. The international economy had grown steadily during the 20's. The increase in world trade was largely financed by banks in the USA; as a result the value of shares on the American stock exchange had increased enormously. Little of this increased value was related to actual profits; much more was added through the buying and selling of shares themselves. Then, as orders for goods began to fall off businesses which had borrowed money found they were unable to repay it. Some went bankrupt. Suddenly more people wanted to sell shares than to buy them; shares prices began to fall as investors rushed to dispose of their holdings before prices fell still further. The market went into freefall (the Wall Street Crash). Banks which had lent money to bankrupt businesses found themselves unable to meet their customers' demands for cash. Millions lost their savings overnight as the banks themselves went into liquidation.

The Depression quickly spread to Europe. With Americans as its principal investors the German economy was particularly badly hit. Unemployment rose steeply, drowning out the voices of moderation and bringing Hitler back to the centre stage. Only massive government spending could stabilise the situation. In America Franklin D Rooseveldt's 'New Deal' got the unemployed working again on government projects. With money once more in their pockets they could afford to buy and others could dare to invest. Gradually confidence returned and with all countries beginning to re-arm from 1936 onwards there was plenty of work to be done.