The Great Depression

The event that dominated the world in the 1930s was the Great Depression. When studying the 1930s, it’s easy to focus on that one event and two countries in particular—the United States, where the Depression began, and Germany, where the effects were the worst. But at this time, there were approximately 80 other sovereign nations in the world. There were also huge sections of Africa and Asia that were still under the control of European powers. All of these nations and colonies were impacted by the Depression. But why would an economic crisis that began in the United States affect almost every corner of the world? The answer has a lot to do with the interconnectedness of global networks.

The Great Depression is a complicated topic, and it can be difficult to understand how it impacted so many people. Let’s start with a simplified version of how it impacted America.

When the market crashed in 1929, American banks, companies, and consumers lost a lot of money. But in this type of economy—with loans and interest—the lost money is not found by someone else—it’s gone. Every time a bank went bankrupt, people lost all of the money they had put into it. Without money to spend, people couldn’t buy much, which meant that businesses weren’t selling as much. As businesses lost income, they had to lay off workers. With unemployment increasing, even fewer people had money to spend. Also, with business slowing down so much, companies couldn’t pay back the money they had borrowed from banks. That brings us right back to more banks going bankrupt.

This downward spiral was, and still is, a natural part of the capitalist business cycle, but the stock market crash sped the process up dramatically. By 1932, thousands of banks and businesses had failed, and 24 percent of the American workforce was unemployed. The Great Depression was shattering the American ideas of opportunity and prosperity.

Impact On Other Countries

But the economy is a worldwide system. Almost every nation was affected by the Depression, with some feeling the effects more than others. One of the main reasons for the global economic downturn was that sovereign nations as well as colonized areas of the world were connected through global credit and trade networks.

Trade and credit

While the products were different from today, and they weren’t trading quite as much, global trade was the backbone of many nations’ economies. Much of this trade depended on credit. Banks would provide lines of credit to individuals and businesses in order to purchase goods. Borrowers would then repay the banks in installments. With so many people buying and trading on credit, the banking industry in the 1920s was operating in a credit boom. A boom is a good thing in most businesses, but a dangerous thing in finance. Once the stock market crashed and the unemployment rate increased, most people didn’t have money to buy foreign products or pay back credit loans. This meant that producers around the world weren’t selling as much and the banks weren’t getting a lot of their money back, beginning that downward spiral described above.

In addition, the U.S. government decided to place tariffs on goods coming into the country (imports). Tariffs (taxes on imports) are put in place to make foreign goods more expensive, so that consumers will buy products made in their own country. Since U.S. companies were doing so badly during the Depression, the American government thought that making foreign products more expensive through tariffs would help their economy. The problem was that other nations responded by putting tariffs on American goods, making them more expensive for consumers in those nations. This meant that businesses and farmers in all parts of the world were selling less overseas.

All of this led to a 40% reduction in trade between nations, a massive reduction in international selling and buying.

Demand for commodities

Most developing countries of Latin America, Asia, and Africa relied on selling raw materials to companies in Europe and the United States. Developing countries with little industry could still sell large amounts of zinc, tin, copper, aluminum, rubber, and wood, provided by their own land. Factories of industrialized nations, mainly in Europe and America, were the buyers who made goods from the raw materials. Also flowing into the developed countries from the developing ones were agricultural commodities, called “cash crops.” These included tea, coffee, sugar, and cotton. But during an economic downturn, demand for these items—both raw materials and agricultural goods— goes down. With decreased demand comes lower prices. This meant that workers, farmers, and peasants in these nations made less money.

For example, if people in the U.S., Britain, and France were buying fewer cars, auto makers didn’t need as many tires. Therefore, tire companies didn’t need as much rubber. Workers in Africa or French Indochina (later Vietnam)— where rubber plantations were a large part of the economy—would either be laid off or have their wages cut. The same thing happened in South America with copper. Cars, machinery, appliances, and electrical equipment all used copper as a component. As sales slowed down, the demand for copper decreased. At the world’s largest copper mine in Chile, production slowed and 66% of the workers were laid off. In both cases, people lost critically needed jobs, and already poor communities became much poorer.

These were just two of the ways that an economic collapse in one part of the world could impact many other areas. Workers and farmers from Oklahoma to Argentina, Liberia to Thailand, Italy to Australia found themselves in desperate need of income. In many cases, desperation turned to anger, then agitation, protest, and a desperate search for something better.

The rising popularity of communism and socialism

This type of protest had an intellectual foundation that produced the big ideas of this period: socialism and communism. These economic theories about distributing a society’s wealth—income, money, property, and possessions—more equally became increasingly popular, especially during the Depression.

During the 1930s, a much higher number of working people were unemployed and scared. Many parents were sending their kids to bed hungry each night. For many, anger took root in the fertile soil of desperation, and calls for socialist distribution of wealth seemed reasonable by comparison. When John D. Rockefeller died in 1937, his wealth was estimated at $1.4 billion, while the 25-cent minimum wage (for a 44-hour work week) amounted to $572 per year. With this kind of disparity, taking money and land from the wealthy and redistributing it to the poor sounded like a fair solution to their current problems. Socialist and communist parties gained membership across the globe, from Africa to Latin America, Asia and Europe to the United States.

Other global ideas—Eugenics

But not all of the “big ideas” of the 1930s were economic and political. A new philosophical movement began that was supposedly rooted in science. It was called eugenics, meaning “well born”. This was an appropriate label, for eugenics was about selective breeding to create societies of the smartest and most talented people. Basically, the idea was that smart, strong people were the result of the good genes they got from their parents. If only the “superior” people had children then the world would be a better place, right? Well, the other side of that idea was a belief that people with disabilities, disease, emotional problems, and mental disorders were “inferior” and should definitely not reproduce. As this ugly thinking developed, people also used race as a measure of what made someone superior or inferior.

Eugenics was used to justify inhumane acts, such as the forced sterilization of men and women who were deemed too inferior to have children. By the 1940s, over 60,000 people had been sterilized¹ in the United States alone. It’s most horrific application, however, was in Germany, during the Holocaust. There, the Nazis used the idea of racial and genetic inferiority to justify the attempted extermination of the entire Jewish population. They persecuted many others groups, including LGBTQ people, Jehovah’s Witnesses, minorities, and more.

Bringing the world together—Technology

Besides the new ideas of the 1930s, new technology was bringing people of the world closer together. Steam ships could cross the Atlantic in less than a week, so travel between Europe and the United States, at least for the wealthy, became more common. Similarly, passenger air travel was in its infancy, but gaining momentum. In the world of communications, the telegraph and the telephone helped to create new networks of exchange. Of course, our modern Internet creates the instant links to people all over the world, but these were major advances in their time.

And then came the radio. These amazing boxes were adorning family rooms in households all over the U.S., Europe, and major cities in Africa, Asia, and Latin America. While most programming in the 1920s was local, by the 1930s, there were many national broadcasts (meaning that people all over the country could listen to the same programs) and international news broadcasts were starting to occur. People could listen to eye-witness accounts and find out about world events as they were happening. Again, we’re used to it now, but imagine what a game-changer it was when this technology first arrived.

With ideas flourishing and these new means of communication and transportation moving people and ideas around the world, the 1930s saw global connections increase dramatically. This interconnectedness would soon take a violent leap forward, as the world was plunged into WWII, the most devastating conflict the word had ever seen.

1 When someone is sterilized, they can no longer reproduce.