Political and Economic Change 1920s- Present

Postwar WWI Economic Problems• Europe loses status as financial and credit center

– Europe in debt to each other and the US– The Bolsheviks had cancelled Russian war debts to France– Germany could not pay war debts

• US did not demand reparations from Germany, but did demand the repayment of debts from other Allies

• Europe’s infrastructure, (bridges, roads, factories, hospitals), had been damaged or destroyed by the war.

• US became less dependent of European production and was a major competitor.

• Slow postwar economic growth and an overall decline of economic activity lowered international demand for European goods.

New Roles for Government and Labor

• Prominence of labor during the war gave unions a greater role in national government.– Government could not ignore labor

– Wages fell after the War, but workers generally were paid better than pre-war conditions

– Collective bargaining agreements would remain

– Middle classes became more conservative and more concerned about Communism

The Soviet Experiment Begins

• The creation of the Soviet Union was the most important transforming event in post-WWI Europe.

• Existed from 1917 until 1991

• The Communists were neither a mass party or nationalists (less than 1% early on)

War Communism• The Bolsheviks rapidly developed authoritarian policies in response to

internal and foreign military opposition

• Controlled by Leon Trotsky and the Red Army

• formed the Cheka, a new secret police

• political and economic administration became highly centralized.

• Economic policy of war communism,

• Took control of all the major industries that included financial and transportation.

• Seized grain for the Red Army and city workers

• War Communism aided the victory of the Red Army over their rivals

• Created domestic opposition

• Strikes occurred in 1920 and 1921

• Baltic fleet mutinied

New Economic Policy

• Lenin’s strategic attempt to regain control– Private property tolerated- peasants could grow

food for profit

• NEP made the economy more stable– No consumer goods

• Caused disagreements in the Politburo (governing body of the communist government)

Stalin vs. Trotsky

• Lenin dies in 1924

• two factions emerged in struggles for leadership of the party

• Leon Trotsky and Joseph Stalin were on opposite sides

• Trotsky

• The “left wing”

• Urging agricultural collectivism, rapid industrialization, and new revolutions in other nations.

• Stalin• A right-wing faction

• Nikolai Bukharin as its representative and Stalin manipulating the group that called for continuation of Lenin’s NEP and slow industrialization.

• Stalin began to gain power • Mid-1920s, he supported Bukharin and denounced Trotsky for

his vision of international revolution, endorsing the doctrine of “socialism in one country.”

• Stalin defeated Trotsky and controlled the Soviet state.

Third International

• In 1919, the Soviet Communists founded the Third International of the European Socialist movement, known as the Comintern.

• In 1920, the Comintern imposed the Twenty-one Conditions on any Socialist party that wanted to join it.• Effort to destroy democratic socialism• Split every major European Socialist party• Divided the political left, and created a vacuum of power, (no

political voice) for right-wing politicians• led to the rise of Fascists and Nazis.

France

• After WWI- a new conservative government is elected

• Clemenceau loses bid for president– Versailles seen as too lenient– Clemenceau did not establish a separate Rhineland state

• New government wanted to security against Germany and Russian Communism– Few domestic reforms– Many changes in ministers

Great Britain

Economic Confusion

• 1918- British electorate expanded to all men above 21 and women above 30

• Disagreements between PM Herbert Asquith and David Lloyd George split the Liberal Party– George maintained a coalition between Labour and the

Liberal Parties

• British economy remained depressed in the 1920s– High unemployment– Government expanded insurance to unemployed workers,

widows and orphans• Did not create new jobs

The First Labour Government

• In 1922, the first Labour government in Britain was headed by Ramsay MacDonald.

• The Labour party was socialistic in its beliefs but democratic and non-revolutionary, • its rise in English politics caused the decline of the English Liberal

party.

• Macdonald had been against WWI• Macdonald’s plan for reform

• Social reform• Established the Labour party as a viable party

The General Strike of 1926

• Stanley Baldwin returned as Conservative PM– Government returned to the gold standard

• Hoped to stabilize the monetary system

• Set rate too high, raised price of British goods

• In attempt to lower prices- cut wages

• Coal industry most directly effected– 1926 went on strike

– Sympathetic workers from other industries joined them

– Workers lost argument, high unemployment made unions weak

• Government attempted to help workers with new housing and reforming poor laws.

Empire

• WWI gave British colonies the increased idea of independence and self determination– India

• Self determination movement started by Mohandas Gandhi,

• Started discussion with British government

• Gained right to impose tariffs to protect its own industry.

Economic and Ethnic Pressuresin Eastern Europe

• No successor states had strong economies– political independence slowed trade between them– Dependant on foreign loans – rural people in

industrialized world

• Ethnic groups sought power unchecked by politics; – minorities in each state wanted independence –– interwar economic/nationalistic problems would rise

again in 1990s; • breakup of Habsburg Empire similar to breakup of Soviet

Union, Yugoslavia and Czechoslovakia

The Great Depression

Economic Hardship

and Political Change

Toward the Great Depression

• Three factors combined for intense severity and length of Great Depression:

• 1) financial crisis from WWI and settlement

• 2) crisis in production and distribution of goods in world market

• 3) west European nations and US didn’t act responsibly and lead others

The Financial Tailspin

• Most of Europe emerged from WWI with inflation– demand for consumer and industrial goods

drove up prices, – Price and wage increases stopped after 1921,

but inflation remained haunted governments as source of political and social instability

Reparations and War Debts:

• France/US determined to get reparations– much of the money European powers got from

Germany went to US

– 1922, Great Britain announced it would receive reparations only to pay US;

– war debts made normal business, investment, and trade difficult and expensive for European powers,

– currency speculation drew funds away from capital investment

American Investments:

• 1924, Dawes Plan reorganized administration and war debts; – afterwards, private US currency flowed into Europe in short-

term loans

• 1928, this lending contracted as American money was withdrawn from Europe and put into New York stock market – US banks loaned customers money, – they invested in stock market: – huge amounts of money were lost in Oct 1929 stock market

crash, – little US money available for Europe

The End of Reparations

• Credit ran out, financial crisis struck Continent;– Kreditanstalt, major bank in Vienna, – collapsed May1931

• Germany couldn’t make next payment,

• Hoover announced 1-yr moratorium on all payments• French agreed to moratorium reluctantly;

– little alternative– Germany’s economy almost collapsed – Lausanne Conference in 1932 ended era of reparations

• 1933 debts owed to US settled

Problems in Agricultural Commodities

• Production and trade went down– less demand meant idle factories/fewer jobs– new wheat farming methods sent world wheat prices to record

lows: • good at first for consumers and bad for farmers• farm problems pressing in eastern Europe• new farms were inefficient – German farmers were major source of

support for Nazis

• Outside Europe– agricultural commodity producers had similar problems

• production had outstripped world demand• collapse in agricultural prices/financial turmoil led to

stagnation/depression for Europe: depression sustaining itself

Depression and Government Policy

• People with work always outnumbered people w/o work, – Feared they would be next,

• created social discontent

• John Maynard Keynes’ General Theory of Employment, Interest, and Money -1936 – orthodox economic policy called for cuts in govt

spending to prevent inflation – govt involvement in the economy increased rapidly from

west to east across Continent– furthered political experimentation

America: Causes of European Economic Crisis

• Black Tuesday, October 29, 1929• Stock Market Crashes• Panic follows• Run on the Banks• Banks Fail• US investment in Europe stops• 1/3 of Americans unemployed• Global Consequences

Great Britain

• Struggles to Recover from WWI– Merchant fleet was devastated– Sale of oversees investments to finance war– Production falls to 80% of prewar levels– New industries require renovation and capital

investment, little to be found.– Return to gold standard makes pound to

expensive, sales drop in foreign markets

Great Britain: A Nation Divided• Ramsey McDonald, Labour Party,

– Inexperienced Economic Advisors

• American trade and credit dries up

• Unemployment Doubled, Labour splits

• Conservative Landslide – The National Economy– Cut unemployment, balanced the budget, raised taxes

– Macdonald replaced by Conservative Neville Chamberlain

– Regional differences, based on industries

– Abandoned the Gold Standard, Pound Fell

• Leads to a Gradual Recovery

• Rise of the Welfare State

France• Generally had recovered from WWI

– Maintained high tariffs – Plunged France into the Depression

• Conservative Government Fails– Radical Government replaces them

• Stavisky Scandal almost leads to civil war– New Coalition of Middle Class and Working Class

unite to combat Fascism

• The Popular Front (Leon Blum) – Raised Taxes, Cut Spending, Recognized Unions,– 40 hour work week, raised wages

Germany- the Nazis

• Depression and Political Deadlock– Weimar Republic hit hard by the Depression

• Coalition government could not decide on economic reforms• Hindenburg appointed Heinrich Bruning as chancellor

– Governed under emergency decrees

– German unemployment rose– Situation benefited the extreme political parties

• Nazis gained seats in Reichstag

Nazi Economic Policy

• Destroyed unions– Strikes became illegal

• Limited private exercise of capital• Allowed private property and capitalism• Government controlled prices and investment• Created government projects to stimulate the

economy– Built the Autobahn– Government farms– Prepared the military for war

Italy: Fascist Economics• Began in 1920’s “Battle of Wheat”

• Corporatism – Industrial Syndicates

– Planned Economy

– Government Arbitrators

• Corporations– Unified common industries

– 22 Corporations

– Corruption, increased oversight

– Shift to War Economy 1935

Stalin’s Soviet Union

• Central Economic Planning• Rapid industrialization

– Five Year Plans– Gosplan (State Planning Commission)

• Massive investment in infrastructure• Supported by widespread propaganda• Collectivization, assault on the Kulaks

– Cost- Millions of innocent lives

Urban Struggles and Growth

• Peasant flight to the cities– 12 Million migrate to the cities– Housing Shortages – Lack of consumer products

• The Great Purge– The Soviet Holocaust– Stalin’s Paranoia, targets all enemies

• Achieves rapid economic and industrial growth

Post WWII Era

Marshall Plan

• Economic Aid plan to rebuild Western Europe– Created by George C Marshall– Only requirement to work together for mutual

benefit• Invited the USSR and other communist governments• Finland, Czechoslovakia- willing to join• Poland, Hungary interested- USSR forbid them

– 1949 Soviets and Eastern Europe• Form Council of Mutual Assistance (COMECON)- integrate

economies

Stalin – Post WWII• 1947- International meeting of all communist parties

– Formed the Communist Information Bureau (Cominform) • Dedicated to spreading Communism world wide• Officially ended cooperation with noncommunist parties

• February 1948- Stalin expelled Democratic members of Hungary’s government– Included Jan Masaryk- son of Czech founder– President Benes forced to resign– Hungary completely controlled by Soviets

• Required other E. Europe countries to follow– Caused by Josip Tito freeing Yugoslavia from the Soviets – Stalin wanted to stop other countries from following

Post-War Germany

• West and Soviets differed on postwar treatment and economic policy– Russia dismantled German industry in the East– Americans rebuilt industry in the West

• Didn’t want to economically support Germany

• No rebuild- chaos and communism

– Soviets feared a strong Germany

Khrushchev Domestic Policies• 1953-64- retreat from Stalinism

– Wanted to reform Soviet system– Intellectuals freer

• Solzhenitsyn (One Day in the Life of Ivan Denisovich)

– Reformed economy• More consumer goods, • Removed restrictions on agriculture

– Reforms caused grain shortage

• 1956- Secret Speech– Attacked policies of Stalin and the crimes of purges– Started to remove Stalinist officials– Seen by E.European leaders as easing of restrictions

Cold War: Brezhnev and Gorbachev

• Supreme Soviet from 1964-1982• The Brezhnev Doctrine: USSR will

intervene in all communist countries in the name of preserving the revolution

• Brezhnev Stagnation: Economic Recession, Ignored basic economic problems

Gorbachev• Communist economic problems plague the eastern

bloc (Poland)

• Gorbachev and Perestroika– Attempt at Economic Revival

– Glasnost: A Communist Debate

– Easing of political and economic restrictions

1989 New Constitution and Elections– Gorbachev’s economic policies fail but he opens the

door for future democracy. – Brandenburg Gate Speech

The Fall of the USSR• Gorbachev recognizes the need for reform• Eliminates the Single Party State• Republics wage a “War of Laws”• Gorbachev allies with the conservatives, Bad

Move!• August 1991 the Conservatives attempt a coup

and place Gorbachev under house arrest.• The People Speak: the largest protest in the

History of Russia, The Communist Party disintegrates

• Yeltsin gains favor• December 1991, under a revised constitution

the Soviet Union ceases to exist: The Cold War is Over!

Yeltsin and Putin• Yeltsin- First president of Russia

– Opposed by Parliament• 1993 -He suspended it

– Parliament tried to lead uprisings– Military supported Yeltsin

• Oct 4 1993- Yeltsin ordered tanks to stop rioters- established his authority

– West supported him

• December 1993- New constitution• 1994- War with Islamic province of Chechnya

• 1990s – Process of dismantling Soviet economy and government– Created small groups of very rich individuals

• 1998- Yeltsin replaced by Vladimir Putin– Renewed war on Chechnya– Supported US in Afghanistan in 2001– Has sought to regain central control over independent states

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Welfare States

• William B. Beveridge – British thinker who believed if medical care, old-age pensions, and other benefits were available to all, there would not have to be a redistribution of income

• Britain becomes first welfare state under Labour Party’s Clement Attlee, who creates the National Health Service after World War II

• France and Germany do not follow suit until the 1970’s

Resistance to the Welfare State• Three economic states in Europe since World War II:

– Reconstruction from 1945–1950– 1950s to late 1970s – period of economic growth– Inflation in the late 1970s to a period of low growth and high

unemployment from the 1990s to the present

.

Margaret Thatcher – British prime minister wanted to make British economy more efficient and competitive

Privatization of industriesCutting the power of trade unions

Welfare assistance in Europe to help the sick, the injured, the unemployed, and the elderly, meet resistance for higher costs and taxesEven left-of-center political parties in Europe have curbed welfare benefits

Communism in Western Europe

• Disillusionment with communism – (four events)– Stalin’s purges– The Spanish Civil War– Nazi-Soviet Pact of 1939– Soviet invasion of Hungary in 1956

A Consumer Society

• Western Europe has enjoyed a vast expansion of consumer goods and services

• People in Eastern Europe, seeing the success of the West, became discontented and helped bring down communism

European Unification

• European Economic Community – members known as the Common Market (1957) out of the European Coal and Steel Community– Goals– Elimination of tariffs,– Free flow of capital and labor, – Similar wages and benefits for workers of all countries

• Original six members – (France, West Germany, Italy, Belgium, Netherlands, and Luxembourg)

• 1973 – Great Britain (despite protest from France), Ireland and Denmark become members

• 1982 – Spain, Portugal and Greece apply to join

• Norway and Sweden refuse

• European Union – 1993 – Treaty of Maastricht turns the EEC into the European Union with a common currency for twelve of the member nations – the Euro– Membership in union rises to twenty-five countries in

2004

– Many former Soviet bloc countries need economic aid from the Union

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Discord in the Union

• Proposed European Constitution of 2004 involved a bill of rights and complex economic and political agreements between nations, transferring considerable power from individual nations to a central power

• France and the Netherlands defeat the treaty, while Britain postpones voting on it

• Several factors contribute to the Treaty’s defeat:– Gap between European elite and voting public– Stagnant economies– Small European nations felt ignored by Britain and France– Many nations believed the Euro put them at an economic disadvantage– Reluctance to cede national sovereignty and authority to a bureaucracy– The controversy over possibly admitting Turkey a poor, mainly Muslim state to

the Union

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New Financial Crisis

• Key Events of 2008:– Russian invasion of Georgia– Worldwide financial crisis

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