5: 1929 - Crisis of Capitalism, Crisis of Democracy Flashcards
main causes of the economic collapse of 1929?
excessive production, limited consumption - overproduction
- increases in productivity and labour productivity but mismatch between productivity and wages
- resulting crisis of overproduction
collapse of world prices
- economies relying on specific commodities paid a price
US as insufficiently diversified
- big concentration in certain key sectors so when they were hit, consequences felt much more harshly by the whole economy
speculation and financial bubble
- poorly regulated system of investments
lack of control/regulation on banks
- small banks overexposed with limited reserves began to fail because of risks linked to financial speculation
insufficient institutionalisation
- no institutionalisation of global trade, economic systems, transatlantic systems that relied heavily on American liquidity/capital
the US as a non-hegemonic hegemon in 1929
indispensable actor that was unwilling to accept the responsibility alongside hegemony
limited/highly insufficient commitment to the international role
country set the precedent and was the key source of liquidity
choices were decisive in opening a decade of trade contraction, protectionism, monetary isolationism, etc
US reaction to 1929 crisis
underestimation initially
little attention to international-global reverberations
- initially orthodox austerity measures adopted (interest rates increased and grew significantly)
- monetary tool made things more complicated and made it more expensive to have access to desperately needed liquidity
unwillingness to forgo WWI debt
- key creditor especially of France and the UK
- tight connection with Germany since debtor countries would ask Germany to pay them
- vast majority in domestic public opinion unwilling to cancel debt
protectionism
- high tariffs and other non-tariff duties so many products could no longer access the American market
- opening of a global protectionist race
financial orthodoxy
- de facto deflationary policies
impact of the 1929 crisis on the international system
unstable flow of capital
- contraction of liquidity, high interest rates which led to capital and liquidity shortage
- idea that capitalism was entering a phase of in-exitable crisis
perceived crisis of capitalism and with it, democracy
- fascination with authoritarian alternatives
economic and political nationalism
- isolationist in that major powers formed trade/monetary blocs centred on themselves with few other members
weakness of the main agent of stabilisation (US)
- defective and abdicated natural role
limits of the post-WWI order that the 1929 crisis revealed and amplified
excessive punishment and only partial reintegration of Germany
- eventually reintegrated with full American commitment and involvement
- US capital and liquidity instrumental in the stabilisation of Europe
- US took the burden of providing Germany with liquidity, an economic restart, paying its reparations and restructuring
- partial reintegration because it relied on a commitment, involvement and an un-institutionalised presence
US indispensable but not committed
- fundamental US liquidity/capital suddenly disappeared post-1929
interdependence
- stability of Europe vital for US economic interest but depended on US economic involvement and investments
- stabilisation of fragile German democracy dependent on their re-involvement which was dependent on US capital
league of nations depended on commitment of member states
- many member states progressively decided not to work with the league or boycotted them (Japan being the first to leave)
scars of WWI like the minority question
- issues of former colonies and mandate systems
- redrawing of the map of Europe where empires collapsed to be replaced with nation-states
most visible failures of the post-WWI international order in 1929
disarmament
- collapse of disarmament in Geneva 1932-1934 which fulfilled much less than expected but produced major agreements where countries accepted to destroy part of their fleet
world trade
- protectionist/autarkic solutions
- US pulled out of the world economic conference which then ended in failure since they were unwilling to assume world responsibilities (followed by collapse of the gold standard)
international institutions and law
- limits led to delegitimisation of legal institutional tools devised and created in the 1920s to manage key problems (minority rights, mandate systems, etc.)
failures of the post-WWI international system in terms of trade in 1929
debts/reparations
- rigidity of the US met with rigidity of France vis-à-vis German reparations needed to pay French debt, but also a good leverage used against Germany
radical and extreme protectionism
- possibly began in the US
- contraction of world trade by 70% in 1933
end of the gold standard
- used to be a symbol of financial stability, good and effective governance
- key tool for commercial and financial exchanges
- collapse as a consequence of the crisis further radicalised the crisis
lack of a hegemon and lender of last resort
- inability of the US to be hegemonic
- system depended on American financial resources which disappeared/vanished
autarchy and protectionism
- response was nationalist and not multilateral collaborative internationalism
how do we explain the crisis of democracy?
multiple legacies and unresolved issues of post-WWI settlement
- geopolitical revisionism often founded on real discriminations of national minorities
- geopolitical revisionism justified and fuelled by legitimate grievances
failure of democracies and capitalism to provide basis security
- sometimes led to collapse, and popularity of non-democratic/authoritarian options/solutions
anti-communism/anti-radicalism
- made authoritarian terms acceptable
nationalist/protectionist reaction
- protectionism being a form of economic nationalism
main revisionist powers aimed at undermining the status quo in the 1930s
Japan
Italy
Germany
how to explain the aggressive rise of Japan in the 1930s?
imperial hegemonic ambitions before the 1930s
created a new situation on the Asia Pacific that had long been dominated by the US
discriminated against in the league of nations and the various agreements on disarmament of the 1920s
weakness of China as a threat and possibility
internal divisions, role of the military
- divisions between civilian liberal internationalist elite and more radical nationalist military elites
the Manchurian crisis as a failure of the international system in 1931
occupation and transformation into a puppet state/vessel by Japan
weakness of the league of nations
- report produced but no military intervention or severe measures
ultimate passivity of the US and Britain
eventual resignation of Japan from the league in 1933
- first step that led to a full-scale invasion/occupation of Japan in China and the beginning of WWII in Asian chronology
set precedent for other revisionist powers like Italy and Germany
what were Italy’s plans/goals in the 1930s?
Mussolini wanted to be a kingmaker in continental Europe
challenge British hegemony/permanence in the Mediterranean and wanted to build a new empire
invasion of Ethiopia in 1935
- brutal colonial war, unconventional weapons and chemical weapons used as never before
multiple inconsistencies
birth of Italian power hindered by sanctions imposed from league of nations which were ineffective but still solidified consensus around Mussolini in Italy
- for the sanctions to work, the country being sanctioned had to be deeply integrated in the global economic order
why was Germany the most dangerous and radical revisionist power in the 1930s?
an actor that could destabilise the system and would eventually destroy it
geopolitical centrality
- centre/heart of Europe
- could destabilise and dismantle the post-WWI security order and security architecture
major industrial power
- most advanced industrial and technological state at the time in Europe
ability to destabilise the system and destroy the status quo
radicalism and biological racism of Hitler’s regime
possibility/ability to exploit the issue of minorities/nationalities
weaknesses of opponents and fears of communism/USSR
examples of German revisionism in the 1930s
decision to abandon the league of nations in 1933
rearmament and universal conscription in 1935
- heavy investment in weapons and arms
remilitarisation of the Rhineland in 1936
why was the Spanish civil war a crucial prelude to WWII?
civil war with global meanings and reverberations
ideological choices between Germany/Italy and USSR
non-intervention and appeasement
- anticipation of WWII
- led several countries to opt for a self-defeating position of non-interference, non-intervention and de facto appeasement of the fascist regime
volunteers and international brigades
