Depression and Dictatorship, 1919–1939

From "the war to end all wars" to the next war

In 1919 many people hoped the League of Nations would keep the peace. Twenty years later, the world was at war again. What went wrong? Historians point to three connected forces: a world economic crisis, the rise of dictatorships that rejected liberal democracy, and the failure of collective security.

The Great Depression: a global crisis

The 1920s looked prosperous in some countries, but the foundations were weak. Germany paid reparations with borrowed American money; farmers around the world produced more than they could sell; prices for crops and raw materials were already falling.

• In October 1929 the New York stock market crashed. American banks failed and called back their loans, including loans to Germany and Austria.
• Countries tried to protect their own industries with tariffs. The U.S. Smoot-Hawley Tariff (1930) raised duties sharply, and other countries retaliated. World trade shrank dramatically.
• Countries that lived by exporting commodities suffered badly: Brazil (coffee), Argentina and Canada (wheat), Chile (copper and nitrates), Malaya (rubber), the Gold Coast (cocoa). In colonies, people still had to pay taxes in cash while crop prices collapsed.
• By the early 1930s, millions were unemployed in the U.S., Germany, Britain and Canada.

Governments responded in different ways. U.S. President Franklin D. Roosevelt's New Deal (from 1933) used public works and new social programs. The British economist John Maynard Keynes argued (in 1936) that governments should spend more during a slump. Several Latin American governments, such as Getúlio Vargas in Brazil (from 1930), began building their own industries to replace imports. In Germany, the crisis helped bring the Nazis to power.

Stalin's Soviet Union

After Lenin died in 1924, Joseph Stalin outmanoeuvred his rivals, including Trotsky. From 1928 he launched Five-Year Plans to industrialize at breakneck speed. Steel, coal and electricity output grew enormously, and the USSR avoided the Depression's unemployment.

The cost was terrible. Stalin forced peasants into collective farms. Peasants who resisted were labelled kulaks and deported or shot. Grain was seized for the cities and for export. In 1932–1933, famine killed millions, especially in Ukraine (where it is called the Holodomor) and Kazakhstan; you will study the Holodomor in Genocide and Crimes against Humanity.

In the Great Terror of 1936–1938, the secret police arrested party members, army officers, intellectuals and ordinary people. Soviet records opened in the 1990s show that about 680 000 people were executed in 1937–1938 alone. Millions more were sent to the Gulag, a vast system of forced-labour camps.

Fascism in Italy and Germany

Fascism was a new ideology that grew out of the First World War. It glorified the nation and war, rejected democracy, liberalism and communism, and demanded total loyalty to a single leader. Fascists kept private property but put business under state direction.

• Italy: Benito Mussolini's Fascists marched on Rome in 1922, and the king made him prime minister. By 1926 Italy was a one-party state.
• Germany: The Weimar Republic survived hyperinflation in 1923, but the Depression destroyed it. Adolf Hitler's Nazi Party blamed Jews, communists and the Treaty of Versailles for Germany's troubles. Hitler became chancellor on January 30, 1933, and within months had banned other parties, crushed trade unions and opened the first concentration camps for political opponents. Nazi ideology was built on racism and antisemitism: it claimed a hierarchy of races and wanted Lebensraum (living space) in Eastern Europe.

Historians use the term totalitarianism for states such as Stalin's USSR and Nazi Germany that tried to control every part of life: politics, the economy, culture, education and even private thought, using propaganda, secret police and terror.

Militarism in Japan

Japan was hit hard by the Depression, especially its silk exports. Army officers and nationalists argued that Japan needed an empire in Asia for raw materials and markets. In September 1931 Japanese army officers staged an explosion on a railway near Mukden and used it as an excuse to seize Manchuria, setting up the puppet state of Manchukuo. When the League condemned this, Japan simply left the League (1933). In July 1937 a clash near Beijing became a full-scale invasion of China.

Collective security fails

• Ethiopia, 1935–1936: Italy invaded Ethiopia, using poison gas. The League imposed weak sanctions that did not include oil. Emperor Haile Selassie appealed to the League in Geneva in 1936, warning that if it did nothing, smaller nations would be next. Italy took Ethiopia.
• Spain, 1936–1939: General Francisco Franco led a military revolt against Spain's elected Republic. Germany and Italy helped Franco; the USSR helped the Republic; Britain and France stayed out. About 1700 Canadians volunteered for the Republic. German planes destroyed the Basque town of Guernica in 1937. Franco won in 1939.
• Hitler's expansion: Germany rearmed, sent troops into the Rhineland (1936), annexed Austria (the Anschluss, March 1938) and demanded the Sudetenland from Czechoslovakia. At Munich in September 1938, Britain and France agreed. British prime minister Neville Chamberlain said he had secured "peace for our time". In March 1939, Germany took the rest of Czech lands.
• August 23, 1939: Germany and the USSR signed a non-aggression pact with a secret agreement to divide Eastern Europe. On September 1, 1939, Germany invaded Poland.