In 1929 a panic on the New York Stock Exchange introduced a
world-wide decline of business activities. International trade
and industrial production dropped sharply. Wages shrank, unemployment
rose, and widespread misery proved that something was wrong with
the economic system. The whole world felt the impact of this economic
dislocation but some countries suffered more acutely than others.
The effects of the Great Depression in the United States you are
no doubt familiar with by now. Here I will simply attempt to estimate
its influence on the world as a whole. This is a difficult task
because values and currencies fluctuated sharply and accurate
statistics are unavailable for many regions. Even when dependable
calculations on production and consumption were compiled, and
on prices, wages, and unemployment, such figures did not tell
the whole story. There is no yardstick for measuring human misery,
no formula for computing what the loss of a job, increasing privation,
and the necessity of asking for public relief may mean to a man
and his family. Still less is it possible to estimate what the
shrinkage of international trade meant to inarticulate millions
in Asia, Africa, and Latin America, who found they could not sell
their crops and raw materials in the declining world markets.
For the nations that felt its effects most severely the Great
Depression had the qualities of a nightmare. Some malign irresistible
force seemed to have seized control and all efforts to arrest
the decline appeared futile. Banks collapsed, factories closed
down, millions of workers were discharged from their jobs. The
disaster had struck without warning. No one could explain clearly
what had gone wrong; no one could foretell how much worse conditions
might become. These uncertainties produced a sense of helplessness
and despair.
The Great Depression left an indelible memory behind, particularly
among the people of the United States. Fears that a similar economic
collapse might overtake the world again still haunt millions of
people even yet. It is important, therefore, to judge the Great
Depression calmly in the perspective of history. It was a great
misfortune, but it was neither so ominous nor so mysterious as
some of the legends told about it suggest.
What people in America and Europe noted most inescapably about
the Depression was the reduction of their incomes. In addition
to millions of wage earners who were thrown out of work entirely,
millions more became part-time laborers. Even those who kept full-time
jobs often had to accept a reduction in wages. In the United States
the per capita income fell from about $700 in 1929 to some $400
in 1933. Most of the European people suffered in similar fashion.
Only Soviet Russia, which had almost isolated itself from the
rest of the world, escaped the effects of the Depression. But
the Russian people, especially in the Ukraine, suffered severely
for several years after 1929 from other causes. The forcible attempt
to establish collective farms brought misery and death to millions
of Russian farmers. (Note The Harvest of Sorrow by Robert Conquest).
A second effect of the Depression which filled many people
with apprehension was that international trade and manufacturing
shrank rapidly. In 1929 the estimated value of United States imports
and exports had reached almost ten billion dollars. By 1933 the
value had dropped to three billion. Furthermore, American industrial
output was cut in half.
The world as a whole, however, weathered the storm somewhat better.
Although prices dropped sharply and the "dollar value"
of international trade fell more than 60 per cent, the actual
decline in the cargoes shipped was about 25 per cent. World industrial
output likewise suffered less sharply than that of the United
States, falling about one-third in four years.
It is important to realize the statistics on the decline of national
income, of industrial production, and of international trade provided
a gloomier picture from 1929 to 1933 than the actual world conditions
warranted. The majority of the world's workers did not make their
living from industry or trade; they supported themselves through
agriculture. If the world world food supply had dropped 60 or
50 or even 25 per cent between 1929 and 1933, mankind would have
faced a much greater tragedy. It is true that the market prices
paid for agricultural produce dropped. But in the world as a whole
the number of acres cultivated and the amount of food produced
actually increased during the years of the Depression.
In 1933 the world acreage devoted to wheat, rice, rye, maize,
barley, and oats was larger than in 1929. Other crops, such as
potatoes and sugar, that furnish calories for human consumption
likewise rose. As six out of seven human being depend on cereals
for most of their nourishment this gain in agricultural production
was a matter of the utmost importance.
To humanity as a whole, therefore, the Great Depression brought
hardships but it did not bring acute disaster. There was no sharp
rise in deaths from starvation and disease. On the contrary, the
world death-rate declined in the 1930's, and life expectancy continued
to rise. These encouraging trends may be seen in the statistical
table compiled by the League of Nations. But these tables also
reveal certain negative effects in the 1930 for which the Depression
was almost certainly responsible. Although the world population
continued to drop, there was a perceptible decline in the world
birthrate in the 1930's.
When people feel increasingly insecure and view the future
with deepened apprehension, they are less likely to marry and
less eager to have children whom they may find it impossible to
support. During the period of the Great Depression and for some
years afterwards the world birthrate averaged about one-tenth
lower than it had during the "prosperous" 1920's.
A decline of one-tenth in the birthrate may not seem very significant.
It meant that during the 1930's there were about three less births
per year for each thousand people than there would have been if
the birthrate of the preceding decade had continued unchanged.
By 1930 the global population had reached two billion, so a drop
of three per thousand in the birthrate meant some six million
fewer babies were born in a year.
It meant that, between 1930 and 1940, approximately 550 million
babies were born into the world instead of perhaps 600 million
that might have been born if there had been no Depression. Fifty
million human beings is a total greater than all the soldiers
and civilians killed in both world wars.
When the Great Depression is judged by its effect on the birthrate
it takes on the shape of a massive calamity. It is possible to
argue, of course, that the decline in the birthrate after 1929
was not due to the Depression at all but to other factors. But
no other factors appear to provide a more adequate explanation.
If the statistics that are available may be trusted, the global
birthrate fell steadily between 1930 and 1935, when the Depression
made its effects felt most acutely, remained low until after 1940,
and then began to rise again in the midst of World War II. In
other words, the Depression seems to have had a more unfortunate
effect on the birthrate than the turmoil of a world war did.
The dislocation of trade and industry, the falling prices,
and the rising unemployment that came with the Depression forced
statesmen and economists to seek remedies. But the experts could
not agree in their diagnoses of what was wrong or what measures
would prove most effective in restoring prosperity. Each nation
sought to improve its own condition and some of the selfish measures
adopted by individual governments made world conditions worse.
Why this was so becomes clearer when the programs followed by
the leading states are examined.
On June 20, 1931, President Herbert Hoover proposed a moratorium,
a suspension of payments on intergovernmental debts for one year.
But the Depression had grown too serious and involved for any
simple remedy, and Hoover's proposal failed to arrest the decline.
The spread of financial confusion, constricting the flow of
world trade upon which Great Britain depended for prosperity,
forced the British government to abandon the gold standard in
September, 1931. The pound sterling immediately fell 20 to 30
per cent in value. For the British this result was not entirely
a loss, for their debts could now be paid in devaluated pounds;
and the reduction in wages made British manufactures relatively
cheaper and therefore more welcome on the international market.
Eighteen months later (April, 1933) the United States likewise
abandoned the gold standard, although the major share of the world
gold reserve was in this country. Soon the currencies of all the
leading nations were unhinged from any fixed value, and the unpredictable
fluctuations of the dollar, pound, franc, mark, or lira added
a further hazard to discourage businessmen from the risks of international
commerce. Without fixed policies, respect for contracts, and a
stable unit of money with which to reckon costs and prices, traders
could not negotiate or bankers calculate the prospects of a project
or the worth of securities.
All of these factors, which were at once causes and effects, increased
the disastrous fall in world commerce after 1929. For that year
the total international trade within Europe exceeded $11 billion
(1929 dollar value). Trade between European and non-European countries
reached $15 billion. Five years later foreign trade within Europe
had shrunk to $4 billion (1929 dollar value), and European trade
with the rest of the world to $5 billion.
So sharp a reduction in the value of international transactions
could not fail to bring ruin or unemployment to millions. The
economic prosperity of all the leading nations was very largely
dependent upon the profits of manufacture, transportation, banking,
and insurance, and upon the dividends from money invested in these
lucrative activities. The Depression had repercussions which struck
at all classes, for with factories idle the output of the mines,
the crops from the fields, and the cargoes from distant quarters
of the earth all declined.
In countries like Germany and Italy, where the average income
of the workers and their per capita wealth were about half that
enjoyed by Englishmen or Frenchmen of equivalent station, the
loss and hardship were naturally more pressing. Social unrest
impelled all governments to experiment with panaceas which promised
to bring temporary relief to a critical situation. The widespread
suffering, the mood of bewilderment and anger that stirred the
masses, and the demand from the destitute and the unemployed that
their leaders find a remedy, must be kept in mind by the student
who wishes to understand this clamorous decade 1929-1939.
The grandiose national programs, the inflation of the currencies,
the mad chauvinism preached by European leaders, were in part
dictated by the exigencies of the Depression. It was almost inevitable
that politicians who could not conquer the economic ills should
distract the attention of discontented and angry electors by seeking
some minority as a scapegoat for the general misery, or by pointing
abroad at some foreign rival as the cause of national frustration.
It is important to note, too, that in countries which had no long
discipline in the methods of democratic self-government, there
was a general readiness to look to the government or to a strong
and dictatorial leader for a solution to the crisis. In countries
where democracy was more firmly rooted and free economic enterprise
had flourished more sturdily the individual citizens recognized
that recovery must depend very largely upon their own energy and
their own constructive efforts.
None of the many plans proposed by statesmen and economists to
stimulate the return of world prosperity by conferences, proclamations,
cancellation of debt payments, or manipulation of currency rates,
produced the result desired. In every state, therefore, the leaders
turned to measures which might aid in solving their local problems
and bring about recuperation in their national economy.
The world was too large and complex for legislators to prescribe
a program for world recovery, even if they could have agreed upon
one; and although the rapidity with which the Depression spread
from continent to continent proved that all trading nations were
interdependent, they were not cooperative but competitive in their
policies. It was therefore of little use to plan measures or promulgate
rules for international application, because no real agreement
or control or enforcement was possible in a world where each nation-state
might adopt a course that weakened its neighbors and nullified
any general program for world recovery.
Nations which contained within their political frontiers the raw
materials most vital for their economic well-being were fortunate.
The United States possessed varied and abundant resources and
the population formed a domestic market which could absorb the
output of the mills and the farms.
The British Empire-Commonwealth, with colonies and possessions
and self-governing Dominions in every clime and continent, could
likewise plan to revive its economic life within a framework of
"imperial preference." Soviet Russia, where all foreign
trade was a monopoly of the state, had its own economic program,
its own resources, and its own industrial, agrarian, and social
needs to satisfy. Self-sufficient states, especially the United
States and Soviet Russia, might restore order within their own
borders and meet their own needs even if the rest of the world
drifted into economic anarchy. But many countries were largely
dependent upon one or two products which they must sell in the
world market, on coffee or tin or nitrates which they produced
in abundance but could not consume themselves.
For industrialized states, such as Germany and Japan, which had
highly developed manufactures to produce and sell, the dislocation
of trade and the division of the world into jealously guarded
preserves caused increasing difficulty. The ingenuity of their
chemists might produce synthetic substitutes for some of the raw
materials which they could no longer import. But unless they could
achieve complete self-sufficiency (and very few countries could
find all the commodities needed within their borders) these states
had to export in order to pay for imports, and they could not
export to areas which some other power had sealed against them
by raising an insurmountable tariff wall.
When their attempts at economic penetration were frustrated,
businessmen could hardly fail to remind themselves that the situation
might be improved if their government could secure control over
the area they desired to exploit. Nations which lacked a large
colonial empires were easily persuaded that this lack exposed
them to undue restrictions and hardships.
In Rome, Berlin, and Tokyo the industrialists, the statesmen,
and the militarists all recognized that a war of conquest might
offer the most obvious solution to their immediate problems. That
such a program might prove costly and tragic in its ultimate effects
they understood; but they were realists, the pressure of events
and the clamor of the people compelled them to offer some positive
program, and they craved power. A bold armament campaign might
mean increased taxes but it also meant that the government would
have large sums of money to spend. Expanded orders for weapons
and equipment would assure activity in the heavy industries.
By calling additional classes of conscripts for army training,
the government could reduce unemployment and provide itself with
trained and obedient soldiers who would break a strike or repress
internal disorders. Whether a war came or not, military preparedness
was the most persuasive argument a dominant party or dictatorial
clique could invoke to justify the arbitrary acts, extraordinary
expenditures, and illegal usurpation of power practiced by all
the totalitarian dictatorships.
It was recognized by thoughtful men everywhere that the "planned
recovery" instituted by the German, Japanese, and Italian
governments as a means of escaping from the Depression was a threat
to peace. The existence of a powerful army is in itself a powerful
argument for using it. Armament programs, moreover, are always
competitive, and even in the less militaristic countries some
part of the revenue voted for economic recovery was turned to
increased production of arms. As unemployment declined and armaments
mounted, it began to seem as if preparation for war was the most
certain cure for an economic Depression. This grim enigma led
one writer to ask the disturbing question: "Is modern industry
then, a sick giant which can rouse itself only to kill?"