Great Depression Impact

How did the Great Depression impact the League's work?1. What is a Depression?

In economic terms, a depression is a sustained period of severely reduced economic activity. A depression is often preceded by a recession, which is a short period during which an economy contracts (in other words, there is less economic activity than before). A recession is usually measured in quarters; if economic activity decreases for two or more quarters (for example, because businesses are hiring fewer workers or people are buying fewer goods), economists will declare a recession. While economies may recover quite quickly from a recession, sometimes the effects drag on or are impacted by other factors, which may lead to a depression.

A depression is therefore measured as occurring over a longer period, usually as three or more years of reduced economic activity. A depression also has more severe consequences, as you will see below.Unemployed men gather at a soup kitchen in Chicago in 1931

2. Causes of the Great Depression

In the 1920s, many countries experienced a period of prosperity as economies started to recover from the effects of World War I. This period also saw many social, cultural and political changes across the world. People were optimistic about the future after the horrors they experienced during the war. However, everything was not suddenly perfect, and problems remained. Even before the Great Depression hit in 1929, economic problems started to crop up in the USA:

In agriculture, farmers were producing more crops than people were able to buy. Other industries made the same mistake; in many cases, factories were producing far more goods than were needed, which meant excess stock that needed to be cleared out. Traditional industries, especially for handmade goods and textiles, railroads and shipbuilding, were being replaced by factories or becoming obsolete. This meant that many people lost their jobs, their income and therefore their ability to buy things. Governments weren't regulating banks and stock markets. Because profits had increased dramatically in 1928 and early 1929, lots of people were speculating on the stock market and land, which caused share prices to increase to an artificially high level in a relatively short amount of time. Shares did not reflect the actual value (the expectation of future earnings) of the business or goods they represented. The USA adopted a policy of protectionism, reducing their imports from other countries and making imported goods more expensive through taxes. This was intended to encourage the consumption of locally produced goods. Consumers found credit easy to come by, and as a result, debts were rising. 2.1 The Wall Street Crash

By mid-1929, share prices in the USA had soared to unprecedented levels, and the US Federal Reserve attempted to curb the unchecked price inflation by raising interest rates. However, higher interest rates meant that people ended up spending less money, including in the construction and motor vehicle industries, where there was much stock market speculation.

Experienced investors recognised that the economy was slowing down and that shares were overvalued. These investors started selling their shares in September 1929 because they anticipated that share prices will eventually drop. Other investors soon jumped on the bandwagon, and a massive sell-off was triggered that caused share prices to decline ever more rapidly. On 24 October 1929, as shares reached a critically low price, nearly 12 million shares were sold off in a single day. This day is known as Black Thursday. Not only did many people lose money, but the entire stock market crashed.

The rapid decline in share prices continued the following week on Black Monday and Black Tuesday (28 and 29 October), with millions of shares being sold off for a fraction of what they had cost to purchase. A slower decline continued until mid-November. The Wall Street Crash wasn't the only cause of the Great Depression, but it played a huge role in how the crisis unfolded.2.2 Consequences

The Great Depression was the worst economic downturn of the 20th century. Economists and historians continue to debate the causes of the depression, but most agree that a number of connected factors played a role. Regardless, the effects were devastating:

Many people lost all of their investments as a result of the stock market crash, which meant that people had much less money to spend. Factories drastically reduced their production levels and their staff, which meant unemployment rose. In 1929, the unemployment rate in the US was 3%. By 1933, that number had risen to nearly 25%. People who managed to keep their jobs often saw a cut in their wages. This was in part because there was more competition for jobs, and many people were willing to take anything rather than have nothing. Employers exploited the situation by cutting wages and increasing hours. Poverty, hunger and homelessness increased drastically. People were increasingly reliant on charity and relief schemes, but these schemes were also struggling from financial pressures. There were angry protests all over the US as people demanded more government assistance and better wages. On top of all this, there was a massive loss of confidence in the economy, and banks were refusing to lend money to businesses who needed help to survive. The US raised taxes on imported goods from other countries in an attempt to stimulate the local economy, but those foreign countries retaliated by raising taxes on American exports. The economic depression in the US started affecting other countries, and eventually most countries in the world experienced a depression in the period between 1929 and the late 1930s.3. Impact on the League

The Great Depression was the largest economic crisis of the 20th century, affecting nearly every country in the world. Globally, poverty, hunger, homelessness, and unemployment skyrocketed. The result was that most countries were less concerned with international affairs than they were with the crises they had to deal with at home. Funding for organisations like the League of Nations took a backseat to internal problems. At the same time, nations became more extreme and more aggressive towards each other; this was especially true of fascist and nationalist right-wing movements. These developments had a significant impact(opens in a new tab) on the League's ability to do its work.

3.1 Peacekeeping

The League of Nations already struggled to keep the peace during the 1920s. It relied on a policy of collective action to encourage its members to join the effort in preventing war. This process worked through moral disapproval, economic sanctions and military action. However, this became even more difficult as the Great Depression hit countries around the world. Let's consider the reasons why the League's work became more difficult under these circumstances:

As the Great Depression caused financial constraints in all aspects of society, governments were under pressure to cut budgets and reduce spending. Most governments were concerned with rising unemployment, suffering and poverty within their own borders, and therefore less concerned about what was happening in other countries. Due to budget constraints, most governments were not focused on rearming and equipping their militaries but rather on addressing the more immediate needs of the people. This reduced the League's ability to intervene militarily in any crisis because it had to rely on the militaries of its member states. World markets shrank, and this made the League's strategy of imposing economic sanctions on aggressors very unpopular. This is because sanctions often lead to economic problems that especially affect ordinary people, but also reduce a government's ability to address the problems faced by its citizens. Democracies were being replaced by dictatorships as people looked for alternatives to address the difficulties they faced under the pressure of the Great Depression. People were more willing to vote for parties that promised to take drastic or extreme actions. In Germany, Hitler came to power in 1933 by promising voters that he would destroy the Treaty of Versailles, which many still blamed for the hardships of the early 1920s and now became a scapegoat for the hardships of the Depression. Similarly, in Japan, the military took over governing the country and placed emphasis on trade to sustain Japan's economy. They were therefore looking for new markets and raw materials, and this led to an expansionist policy through which they tried to claim territory in China for economic benefit. Some governments - and especially those that turned into dictatorships - decided to rearm as a way to increase jobs and stability during the crisis of the Great Depression, even though this was in contravention of the terms of the Treaty of Versailles. 2. Humanitarian Work

The Great Depression also affected the League's ability to do humanitarian work around the world. Let's look at the reasons why:

The League relied on its member states to fund its activities. However, many governments were cutting their budgets and diverting money to social programmes that would benefit their own citizens. This meant that they could give less money to the League of Nations. The great powers, which were the League's biggest funders, were also hit hard and cut their aid to the League drastically. Less funding meant that the League could not spend money on humanitarian programmes to the extent needed. Less international cooperation meant that enacting humanitarian resolutions in practical ways became more difficult. The Geneva Conference1. Impact of the Great Depression

The League of Nations struggled to keep the peace during the 1920s, but nevertheless took on some duties that were successful, especially in its humanitarian work. On matters of peacekeeping, the League's primary goal, there were mixed results. Then, in 1929, the Great Depression started in the USA and soon spread to other countries, making the work of the League even more difficult. Although it continued to provide humanitarian aid, the job of peacekeeping became challenging as governments cut their financial aid to the League and dictatorships became increasingly common.

Due to these hardships, nations were more aggressive in their foreign policies, which created a significant obstacle to the League's work. By 1939, the League could not prevent the outbreak of World War II. It met in 1939 and then only again in 1946, after the war had ended, after which the League was superseded by the United Nations. Three major events during the 1930s demonstrated the limitations of the League: the Disarmament Conference, the Manchurian Crisis and the Italian invasion of Abyssinia.

2. The World Disarmament Conference

World War I highlighted the dangers that an arms race held. In the years before the war broke out, the German Empire started expanding its navy in order to compete more effectively with the British Empire in their quest for imperial expansion. Both Britain and Germany therefore tried to build as many battleships called dreadnoughts as they could, and many other countries started building these ships as well. Historians generally agree that this naval arms race was one of the main causes of the outbreak of World War I.When the war ended in 1918, peace treaties with Germany and other defeated countries was drawn up. Under the terms of the Treaty of Versailles and the Covenant of the League of Nations, all defeated nations had to disarm, and there was an implicit understanding that the victors should also reduce the size of their militaries. However, the latter was not officially part of the terms of the Treaty, although it was in the Covenant of the League of Nations. To clear the issue up, the League of Nations organised the Conference for the Reduction and Limitation of Armaments, a.k.a. the Geneva Conference, in 1932 to address the escalating issue of global military expansions. The main objective of the Conference was to avoid another world war by negotiating agreements that would lead to a balanced reduction of armaments, thereby fostering international peace and security. Thirty-one nations attended the Conference, including the USA and USSR. It lasted until 1934.

However, the conference encountered several significant challenges. Differing national interests and security concerns made it difficult to reach a unanimous agreement. Additionally, the absence of robust enforcement mechanisms raised questions about the effectiveness of any potential agreements.

It soon became clear that disarmament would be a difficult goal to reach since the nations all distrusted one another. France was willing to disarm only if Britain and the US offered a guaranteed alliance in the event of another war with Germany, but neither were willing to do so out of fear that this would only drag them into another world war. The USA was worried about Japan's military ambitions after the Manchurian Crisis of 1931, while Japan had left the League of Nations in the aftermath and refused to participate in any negotiations. Czechoslovakia and Poland were worried about their proximity to Germany, and the Soviet Union was too preoccupied with internal problems to pay serious attention to the Conference. In addition, the leader of the Soviet Union, Joseph Stalin, was concerned that anti-communist forces may attempt to invade the USSR in an attempt to overthrow the communist government, and so was instead focused on building up and modernising the Red Army. Germany was led by Adolf Hitler, who wanted nothing more than to destroy the Treaty of Versailles and make Germany a great power once again. In the end, it was their fraught relationship with Nazi Germany that caused many of the nations to hesitate on committing to disarmament.

2.1 Hitler withdraws Germany from the League of Nations

In 1933, Adolf Hitler became Chancellor of Germany and gained complete control of the government in a short span of time. At the Geneva Conference, Hitler refused to commit to disarmament for two reasons:

He wanted to destroy the Treaty of Versailles, which he viewed as a disgrace and a humiliation for Germany. His ideas about German superiority extended to the military, and he planned not to disarm but to rearm the country. Hitler's presence at the Conference therefore caused tensions with the other nations; he argued that France wasn't serious about disarming and therefore it was unfair to ask Germany to do the same. Then, in 1933, Hitler stormed out of the Conference and refused to participate any further. He also withdrew Germany from the League of Nations. This essentially stalled any possibility of progress on the issue of disarmament. In 1935, Hitler announced openly that Germany would violate the terms of the Treaty of Versailles by rearming, triggering a new arms race.

2.2 The failure of the Geneva Conference

The Geneva Conference continued into 1934 but was ultimately ended by the failure(opens in a new tab) of negotiations to bring about viable agreements for disarmament. Historians have identified several reasons for the failure of the conference:

Distrust between the nations involved in the conference which made them unwilling to disarm.

The rise of Hitler, his hatred for the Treaty of Versailles, and the withdrawal of Germany from the League of Nations.

The ongoing impact of the Great Depression, which had ld many nations to invest in rearmament as a way to recover their economies and reduce unemployment and poverty.

The highly unstable political climate in the early 1930s and the rise of fascism, which brought with it the threat of war.