The Great Depression

The Great Depression

Political Impact of the Great Depression

 

The poverty and misery among the working class due to the Great Depression stirred up fears of social revolution and Communist influence among the middle class in industrialized countries. In many European countries military dictatorships arose to maintain order and to fight Communism. Industrialized countries with a long tradition of Liberal government avoided social revolution during the Great Depression and maintained their democratic forms of government, but underwent sweeping reforms, which resulted in the development of the so-called “Welfare State.”

 

Learning Objectives

  • Analyze the worldwide reactions of nations to the global depression.

 

Key Terms / Key Concepts

Corporatism: a 20th century political ideology which sought to organize society into corporate groups based on their common interests, such as agricultural, labor, military, business, scientific, or guild associations

Estado Novo: the "New State" in Portugal; was Roman Catholic, anti-Communist, and dedicated to preserving Portugal's overseas empire

Fascism: a form of radical authoritarian nationalism that came to prominence in early 20th-century Europe; the belief that liberal democracy is obsolete and that the complete mobilization of society under a totalitarian one-party state is necessary to prepare a nation for armed conflict and to respond effectively to economic difficulties

Iron Guard: the name most commonly given to the far-right movement and political party in Romania, from 1927 into the early part of World War II; was ultra-nationalist, antisemitic, anti-communist, anti-capitalist, and promoted the Orthodox Christian faith; members were called “Greenshirts” because of the predominantly green uniforms they wore

Welfare State:  a form of government in the 20th century that uses its power to tax and spend to provide a "safety net" for its citizens negatively impacted by a capitalist economy

 

The Rise of Fascism across Europe

 

The conditions of economic hardship caused by the Great Depression brought about significant social unrest around the world, leading to a major surge of fascism and, in many cases, the collapse of democratic governments. The events of the Great Depression resulted in an international surge of fascism and the creation of several fascist regimes or regimes that adopted fascist policies. Fascist propaganda blamed the problems of the long depression of the 1930s on minorities and scapegoats. Fascist governments often blamed nations’ problems on “Judeo-Masonic-Bolshevik” conspiracies, left-wing internationalism or “communists”, and the presence of immigrants. According to historian Philip Morgan, “the onset of the Great Depression…was the greatest stimulus yet to the diffusion and expansion of fascism outside Italy.”  Yugoslavia, Romania, Hungary, and Portugal were among the nations that dealt with strong fascist movements during this time.

 

Hungary

 

In 1920 Conservative Anti-Communists in Hungary organized a National Assembly and announced the re-establishment of the Kingdom of Hungary. France and the United Kingdom, however, strongly opposed the restoration of the former Hapsburg king Charles, so the National Assembly appointed a Hungarian aristocrat and war hero, Miklos Horthy to be "Regent" of the kingdom. Horthy continued to serve as head of state until 1945 and enjoyed support from conservative Roman Catholics, aristocratic landowners, and the Hungarian middle class that were opposed to the Communist threat. Hungarian fascist Gyula Gömbös rose to power as Prime Minister of Hungary in 1932 and attempted to entrench his Party of National Unity throughout the country. Gömbös created an eight-hour workday and a 48-hour work week in industry, sought to entrench a corporatist economy, and pursued claims to territories belonging to Hungary’s neighbors.

 

Romania

 

With the onset of the Great Depression, the king of Romania, Carol II, assumed dictatorial powers with the support of the army due to the threat of Communism The fascist Iron Guard movement in Romania gained political support after 1933, securing representation in the Romanian government. An Iron Guard member assassinated Romanian prime minister Ion Duca. The Iron Guard was a far-right movement and political party in Romania, from 1927 into the early part of World War II. Its supporters were ultra-nationalist, antisemitic, anti-communist, anti-capitalist, and promoted the Orthodox Christian faith. Iron Guard members were called “Greenshirts” because of the predominantly green uniforms they wore

 

Yugoslavia

 

Yugoslavia briefly had a significant fascist movement called the Organization of Yugoslav Nationalists (ORJUNA); ORJUNA supported Yugoslavism (the unity of all “Southern Slavs”: Serbs, Croats, Slovenes). The Kingdom of Serbia after 1918 became the "Kingdom of the Southern Slavs" or Yugoslavia as Serbia annexed former territories of the Austro-Hungarian Empire, Croatia, Slovenia, and Bosnia-Herzegovina, along with the tiny principality of Montenegro. This new state was quite diverse and included Serbian Orthodox Christians, Roman Catholic Croats and Slovenes, and Bosnian Muslims. Forging a sense of unity was a difficulty task.  ORJUNA also supported the creation of a corporatist economy, opposed democracy, and took part in violent attacks on communists. The group was opposed to the Italian government due to Yugoslav border disputes with Italy. ORJUNA was dissolved in 1929 when the King of Yugoslavia, Alexander, banned political parties and created a royal dictatorship; ORJUNA supported the King’s decision.

 

Portugal

 

In Portugal, a former economist, Antonio Salazar, emerged as military dictator in 1932, following the military overthrow of Portugal's First Republic in 1926 (Portugal had deposed its last king, Manuel II in 1910). Salazar's envisioned an Estado Novo ("New State") that was Roman Catholic, anti-Communist, and dedicated to preserving Portugal's overseas empire in Africa (modern Angola and Mozambigue). Salazar remained in power in Portugal until he fell into a coma in 1968 and died.

 

The Welfare State

 

Industrialized countries with a long tradition of Liberal government—such as the United Kingdom, France, and the United States—avoided social revolution during the Great Depression and maintained their democratic forms of government, but underwent sweeping reforms, which resulted in the development of the so-called Welfare State. In the 1930s John Maynard Keynesa British economiststudied these economic developments and these government policies. He determined that governments could effectively regulate a market economy through taxation and government spending (i.e., public works projects such as roads and dams), which put cash into the hands of the masses and thereby promoted consumer spending and economic growth. According to Keynes, governments should go into debt to pay for government spending that boosts the economy. Keynes's economic theories would become the basis for government policies among industrialized countries for decades following World War II.

In these industrialized states, the government used its power to tax and spend to provide a "safety net" for its citizens who were negatively impacted by the economic downturn. A market economy continued to operate in these states, but governments taxed upper income citizens at a higher rate than those with lower incomes, and then regulated the economy by providing financial support and assistance to those with lower incomes. For example, in 1936, the Popular Front in France—a coalition of Liberal, Socialist, and Communist Parties—won elections under the leadership of Léon Blum, who was a Socialist; afterwards, they passed laws to mandate a 40-hour work week and a minimum wage. Additionally, they recognized the right of labor unions to represent workers and go on strike.

In the United States, the Democratic Party, under the leadership of Franklin Roosevelt, won control of the government in elections in 1932, and proceeded to pass a whole series of laws, which became known as The New Deal. The Social Security Act, passed in 1935, mandated that all employers pay into a fund to provide pensions for the elderly, as well as provide unemployment insurance. The Wagner Act of 1935 recognized the right of workers to organize unions. The Fair Labor Standards Act, established in 1938, instituted a minimum wage. By the end of the 1930s, Roosevelt and his Democratic Congresses had presided over a transformation of the American government: Before World War I, the American national state, though powerful, had been a “government out of sight.” After the New Deal, Americans came to see the federal government as a potential ally in their daily struggles, whether finding work, securing a decent wage, getting a fair price for agricultural products, or organizing a union. 

 

photograph of a group of people
Unemployed men queued outside a depression soup kitchen opened in Chicago by Al Capone. February 1931. Wikimedia.

 

The population of the United Kingdom suffered less than other countries from the impact of the Great Depression due to the earlier passage of the National Insurance Act in 1911. This act mandated that employers pay a tax to the government to provide unemployment insurance for their workers. Consequently, when unemployment rates skyrocketed in the United Kingdom due to the Great Depression, unemployed workers still received an income from the government. As government debts mounted, the United Kingdom in 1931 went off the gold standard, so that the government could print paper money to pay its debts without this currency being backed by government gold reserves.

 

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