Revision:The Great Depression and Economic Nationalism
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Causes of the Great Depression in the USA
- Overproduction
- Uncontrolled use of credit-buying (concealed over-production)
- Speculation
- Weak banking structure
- Uneven distribution of wealth
The Effects of the Depression in the USA on Europe
- Recall and refusal to renew short term loans
- The collapse of the German economy
- The system of international debts and reparation payments collapsed
- There had been an outflow of gold towards the USA / the Great depression magnified this unhealthy tendency
- Shrinkage in world trade
- Prices fell due to lack of demand / rapid rise in unemployment
- Social problems led to a rise in political extremism
- Led to the development of Economic Nationalism (promote recovery in ones own country at the expense of others)
Reasons for Economic Nationalism
- Isolationist policies of the USA who imposed heavy import duties which led to retaliation from European states
- Keynes promoted Gov. intervention and this tended to result in economic nationalism
- USSR was the only one not to experience the effects of the depression and this led to a belief in tight state control as the way of the future
- Failure to keep international agreements
- The rise of fascism which was highly nationalistic
Effects of Economic Nationalism
- Short term benefits to some countries, i.e G.B and German, but it is doubtful that there could have been long term benefits, but the outbreak of WW2 totally changed the economic scene
- Caused a further contraction of the volume of world trade (imposed imposition of tariff barriers)
- Contributed to deterioration in international relations
- Promoted Gov. intervention/management of the economy
- In the long term, world leaders came to recognize the importance of economic cooperation and institutions such as the IMF and the World Bank were established
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