The Great Depression: Alternative Country Responses

Figure 1.--The Depression in America is normally dated from the Wall Street crash (1929). The economy in rural America turned down years earlier. Here is a scene from the Ozarks in Arkansas during 1935 showing sharecropper children Source : Library of Congress--LC-USF33-006064-M1.

The rest of the world was also affected by the Depression. Britain and France also struggled with the economic down turn. The response in Germany and Japan was totlalitarianism, militarism, and finally war. The American answer to the Depression was President Roosevelt's New Deal. This and his leaderhip before and during World War II have lead some historians to classify him as the most important statesman of the 20th century. He was widely popular in America as through his Fire Side Chates, many Americans felt as though they knew him personally. He was at the time, however, and continues to be highly controversial as does the New Deal. The New Deal was criticised from both left and right. Many Americans on the left saw Soviet Communism as a way of avoiding such severe econmoic swings and maintain a more socially just distribution of wealth. Many young people, especially college students joined the Communist Party or front organizations. There was also support among immigrant communities, especially Eastern European Jewish immigrants. There was also opposition from the right. Important politicans like former President Hoover formed the Liberty League which assussed the President of trying to establish a dictatorship. Some on the right looked emnviously at European Fascists because of their suppression of unions and other discedents. Some even saw the German NAZIs and Itlalian Fascists as progressive. Especially impressive at the time ws the fact that they seemed to be putting people to work.


Franklin Roosevelt's program in America was called the New Deal and the many programs initaited help change the face of the United States: Social Security, the Tennessee Valley Authority, rural electrification, the Works Progress Administration (WPA), protection for union organizers, and many others. The conservative-dominated Federal Courts struck down WPA, but many New Deal programs endure to this day. The new president undertook immediate actions to initiate his New Deal. To halt depositor panics, he closed the banks temporarily. Then he worked with a special session of Congress during the first "100 days" to pass recovery legislation which set up alphabet agencies such as (Agricultural Adjustment Administration (AAA) to support farm prices and the (Civilian Conservation Corps (CCC) to employ young men. Other agencies assisted business and labor, insured bank deposits, regulated the stock market, subsidized home and farm mortgage payments, and aided the unemployed. These measures revived confidence in the economy. Banks reopened and direct relief saved millions from starvation. But the New Deal measures also involved government directly in areas of social and economic life as never before and resulted in greatly increased spending and unbalanced budgets which led to criticisms of Roosevelt's programs. However, the nation-at-large supported Roosevelt, electing additional Democrats to state legislatures and governorships in the mid-term elections. Another flurry of New Deal legislation followed in 1935 including the establishment of the Works Projects Administration (WPA) which provided jobs not only for laborers but also artists, writers, musicians, and authors, and the Social Security Act which provided unemployment compensation and a program of old-age and survivors' benefits. Roosevelt managed to achieve needed social legislation in a still very conservative country. His genius was in pursuing "nobel objectives within the tactics of the feasible". [Freidel]


Canada was one of the countries very severely affected. As in other countries, it was a major social and economic shock. Millions of Canadians were left unemployed, hungry and in to many cases homeless. Canada was one of the countries most sevely affected. This was primarily because Canada with its small population meaning small markt was dependent on export markets. This was the case for both its important agricultural sector and mining industries. The agricultural sector was also harmed by an extended drought. This was a norther extension of the American Dust Bowl. Industry was also harmed as people lost their jobs and could no longer buy consumer goods. As in the United States there were political and social conequences. The widespread need for assistance resulted in the adoption of government social welfare pograms, the appearance of populist political movements, and the adoption of a more active government role in the economy.


The Great Depression in England devastated northern industrial areas. Unemployment increased to 2.5 million and in some especially hard-hit areas, unemployed increased to a catrostropic 70 per cent. A quarter of the population eas reduced to a subsistence diet. There were signs of child malnutrition, including scurvy, rickets and tuberculosis. National Hunger Marches were organized. Soup kitchens prevented starvation and often has long quques. The British reponse to the Depression was charateristically different than in America, The British formed a coalition government known as the National Government. Ramsay McDonald who was a founder of the Labour Party joined with the Conservatives to form the National Government. Labour expelled him and Conservative leader Stanley Baldwin came to dominate the National Government. The British response to the Deprssion was primarily managed by the Conservatives. Baldwin aided by Neville Chamberlain who came to be seen as a brilliant chancelloe of the Exchecher. The Depression was not as severe in Britain as in America and the recovery came quicker. Baldwin and Chamberlain did not intervene in the economy as significantly as did Roosevelt nor did they resort to the social experimentation of the American New Deal. Some economists contend that this was the reason for the quicker British recovery. [Powell] This is, however, a matter of ongoing debate among economists. The British resonse as mananaged by Chamberlain consisted primarily of providing a 'dole' to every unemployed worker. The amount was very small, but provided for the bare necessities. There were no large-scale public works in Britain. Here the rejected John Maynard Keynes idea of borrowing money for public works. There was, however, large scale construction of public housing. The British built 10 times more public housing than the New Deal. The British natuioinalized the profits of coal mines to make sure there there were funds to assist impoverished coal miners. Chamberlain insisted on a balanced budget and increased taxes on the middle class. Chamberlain also kept the pound strong. There were several factors here, but overseas investments and money transfers were of some importance. [Hanby]


The impact of the American Stock Market Cash (1929) and resulting Depression arrived in France later than it did in Britain, Germany, and other European countries. France remained relatively prosperous for some time, primarily because it was not as tied to the American economy as Britain and Germany and the country was self sufficent in food production. France was, however, not imune. The first obvious impact was the disappearance of American expatriats from Paris who could no longer aford to live abroad. Finally the French economy began to feel the impact of the Depression (1932). Tourism declined sharply as Americans and other foreigners could no longer aford foreign trips. And tourism was an important industry. Exports also declined. Many important French exports (perfumes, wine, chese,and food and other high-end foods) were luxury goods that Americans and oithers could no longer afford. Orders were cancelled and prices fell. The overall impact was to serious reduce French export income. Unemployment increased to 15 percent and inductrial production declined 25 percent. Elections in 1932 brought to power conservative André Tardieu. He had campaigned one the threat of Communism. He formed a coalition government of conservatives and rightists. They opposed the New Deal style spending demanded by the left-wing parties for the unemployed and poor workers adversely affected by the Depression. The Tardieu Government was commotted to limit taxation, balance the budget and prevent inflation. It hoped to achieve revovery by replacing lost markets with increased trade with the country's colonies and restricting government spending. Tardieu Government wa also committed to the gold standard. His policies were in many wys similar to those of the Hoover Administration in the United States. Retaining the gold standard even after America, Britain, and Germany went off it, meant tht the France was overvalued which further impaired export sales. French businessmen saw a devaluation coming. Many sent funds abroad, further impairing the economy. The French economy did not decline further after the sharp 1932 decline, but it also did not recover. The econmy stagnated for 3 years. Unemployment and industrial production in 1935 were basically the same as in 1932. [Hill, p. 37.] The left-wing parties increasingly attacked the Government and charged it with a callous social outlook. Tardieu defended his policies and warned that the left-wing parties (Communists and Socialists) would bring further economic decline, anarchy and ruin. The end result ewould be the Popular Front.


The Depression played an important role in the NAZI sizure of power and in the image that Hitler built in Germany once he seized power. Tragically for Germany, the most serious period of the depression followed the New York Stock Market crash (1929) through Hitler's seizure of power (1933). The impact that the Depression had on Germany folded neatly into Hitler's political drive for power. Apparent economic improvements in Germany were an important element in Hitler's real popularity after seizing power. The view of the Hitler and the NAZIs in Europe was substantially different in Europe during the 1930s before Hitler launched World War II than it is today. It should be remembered that until Kristallnacht (November 1938) that NAZI actions against the Jews were not greatly different fom how Blacks were treated in the American South. In fact many NAZI racial laws were based on laws enacted against Blacks by Southern state legislatures. There were prominent Americans (Lindberg, Ford, and others) before World War II who were impressed with the NAZIs. Hitler was seen by many as the most dynamic leader in Europe. One reason for this was that NAZI policies essentially ended the depression by 1935. Many Germans had turned to the NAZIs in the earlt 1930s because of the Depression. The NAZIs expanded German labor programs, creating a National Labor Service must like the American CCC. The NAZIs seized control of the economy. German industrialists benefitted and soon learned that it was very dangerous to defy the Government. It might be argued that Germany under the NAZIs had the most controlled economy in Europe. Their major project was the construction of the Autobauns. The massive new armaments program was a major factor in putting Germans back to work. The German GNP was back to pre-Depression levels by 1935. NAZI policies made sure there was no longer wide-spread unemployment and destitution in Germany. The German people, however, were not better off. The benefits of the expanding economy was not brought to them in terms of more consumer goods, but rather a rearmed military. Many Germans, however, were convinced that they were better off. This was in part due to declinging product standards. It was also a result if the effectiveness of NAZI propaganda which emphasized the increased international respect with which Germany had achieved. [Hanby]


The economic doctrine of the Corporate State (Stato Corporativo) was formulated in the Labor Charter (Carta del Lavoro) was approved by the Fascist Great Council on April 21, 1927. The most important economist that collaborated with the Fascist regime was Alberto Beneduce (1877-1944). He was born in Caserta, near Naples, As a young man he joined the Socialist Party and became a deputy in Parliament. After 1922 he strictly collaborate with the Regime, but never joined the Fascist Party. He guided the Italian economy from 1926 and in the time of the Great Depression. Beneduce's concept of the Corporate State was influential among American New Dealers. That influence can best be seen in the National Recovery Act (NRA). The NRA blue eagle was seen in stores and businesses throughout the United States in the early years of the New Deal. The NRA was, however, struck down by the Supreme Court. Historians and ecomists differ about the Fascism corporate experience. Most contend that the experience miscarried because of the authoritarian nature of the Fascist regime. Here it is often difficult to separate antipathy to Fascism from purely economic assessments. We are unsure about unemolyment and industrial production trends in the 1930s. One reader suggests that the state bureaucracy was a problem. Mussolini invasion of Ethiopia (1935) brought about an international embargo, but not all countries complied. Mussolini's subsequent decession to join Germany in World War II (June 1940) oroved and unmitigated disaster. The Italian people who had not fulkly recovered from the Depression were plunged into poverty by the cost of the War and the military reverses which followed.


Potentially Japan could have been among the countries most severely affected by the Depression. The country had very limited natural resources and had to depend on export earnings to buy essential imports like oil and scrap steel. The country was the most industrialized in Asia, but silk was still an important part of the national economy and the silk industry was facing growing competition even before the Depression began. The country's growing population and inability to feed itself was also creating problms. Thus the decline in export markets was a shock to Japan. The country was, however, to quickly adjust. Korekiyo Takahashi was appointed Minister of Finance (1931). He is generally credited with economic policies that enabled Japan to rapidly emerge from the Depression. He abandoned fiscal orthodoxy and and a balanced budget. One author believes that fiscal expansion and to a lesser extent yen depreciation was especially important in helping to turn around the economic decline. As a result the Depression essential was ended in Japan (1932). Japanese industrial output expanded significantly during the 1930s. Some authors blame the Depression on Japan's military expansion. Here we are so sure. It was not the Japanese civilian Government that ordered the invasion of Manchuria (1931) and China (1937). Rather it was Army units acting essentially independently. Theur motivation ppears to be xenephobic nationalism, but perceived economic benefits could have also been important. The Depression had exposed Japan's economic vulnerability, both in obtaining natural resources and on foreign markets. The invasion of Manchuria and China as well as the subsequent attack on Pearl Harbor were designed to both obtain natural resources and secure markets.


Soviet Union

The Soviet Socialist economy was not affected like the Western capitalist states. There were no long lines of unemployed nor factories closed down and employees laid off. [Wells, p. 960.] This seeming success of the Soviet system attracted the envey of many intelectuals, unemployed workers, and socially minded people in the West. Rarely noted by those enfatuated with Communism in the 1930s was that the standard of living of most Soviet citizens was below that even of Americans on the dole. It is true, however, that the missery of those unemployed and or evicted was avoided by the Soviet system. The political horrors of the system were not fully understood at the time.


Fridel, Frank. Franklin D. Roosevelt: Launching the New Deal (Little Brown: Boston, 1973), 574p.

Hanby, Alonzo. For the Survival of Democracy.

Hill, Kim Quaile. Democracies in Crisis.

Myung Soo Cha. "Did Korekiyo Takahashi Rescue Japan from the Great Depression?" Discussion Paper Series No. a395 (Institute of Economic Research, Hitotsubashi University. August 2000).

Powell, Jim. FDR's Folly: How Franklin D. Roosevelt and the New Deal Prolonged the Great Depression. Powell's book is a popular summary of a number of economists who have challenged prevailing opinions on the New Deal.

Wells, H.G. The Outline of History: The Whole Story of Man (Double Day: New York, 1971), 1103p.


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Created: 2:57 AM 1/30/2006
Last updated: 10:07 AM 5/2/2019