Oct 27, 2020
folder_opencategory: History

Each historic period has crucial events, which changed the course of the history in many countries. Scholars discuss such events during decades and centuries as well as interpret them in different ways. The Great Depression starting in 1929 was one of the most important historic phenomena in the life of Germany, its capital, and the USA in the offered timeline of 1871 – 1933. The aim of this essay is to compare the Great Depression in Germany and the USA, its influence on both countries and to prove that the consequences of the economic crisis were more disastrous for Germany because of Hitler coming to power.

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Starting a discussion about the Great Depression in the USA, it is important to define the economic conditions that originated a deep financial slump in the country. Braun states that the origins of the Great Depression in the USA are still not clear (44). Crafts and Fearon give the details concerning the reasons the global economic crisis could begin in the USA. Firstly, starting from 1920, “Americans enjoyed a great consumer boom which was heavily dependent upon the automobile and the building sectors” (Crafts and Fearon 288). The prices for shares at the stock markets were cheap, and the consumers rushed to buy them. People even borrowed money to buy market shares. Industrial and agricultural overproduction became the triggers of the financial crisis as the enterprises of this sector produced more than the consumers bought (Crafts and Fearon). The official beginning of the Great Depression in the USA was the so-called “Black Thursday,” October 24, 1929, when the American stock market crashed.

The economic and financial status in Germany was complicated before the beginning of the Great Depression and this fact conditioned the ways for the crisis to deepen (Ritschl). Thus, Germany experienced a number of financial reforms and “went from being a massive capital importer during the Dawes Plan of 1924 – 29 to a sudden stop in its current account under the Young Plan of 1929/30” (Ritschl 111). Germany had to follow tight terms of separation payments. Moreover, the sum of its foreign debt was growing. Young Weimar Republic stayed passive and was not able to effectively prevent the crisis (Ritschl). Braun states that there were two basic conditions for the start of the Great Depression in Germany, namely “the disintegration of international economic relations” and the high level of monopolization of the industry (Braun 45). Crafts and Fearon note that the USA “was responsible for about 60 % of the international lending and about one third of it was already absorbed by Germany” (300). The German banks closed and were not able to give credits (Braun 46). The mentioned conditions in both countries were a favorable base for the start of the economic crisis. The USA forgot about the fact that any economic boom finishes sooner or later, and Germany was living in a complicated historic period with an economic policy, which could collapse any time.

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The next point of discussion is the devastating effects of the Great Depression on the citizens of the USA. The statistical data may greatly help to evaluate the real situation in the country during the Great Depression. Thus, Marcus and Kane state that in the period of 1929 – 1932, “fully 24% of workers were unemployed in the USA and many of those employed were working part-time” (2). By 1932, almost 12 million of Americans were left without work (Stuckler). Many of the employed were working part-time. The level of sales was insufficient for normal existence of business, and the asset values were quickly decreasing. “Farm income, on which one-fourth of the population depended, had fallen by a half” (Marcuss and Kane 30). Crafts and Fearon add that the US output fell by 52 % and real income by 35 %. The Dow Jones industrial index fell from 381 to 198, and many companies were bankrupted (Crafts and Fearon). People were dying of starvation on the streets, and many citizens committed suicides. However, the scholars still examine the ways some important health indices improved for the USA in the times of such a severe crisis. The discussion of the circumstances the infant mortality rate and tuberculosis infection spreading significantly reduced was initiated. Stuckler et al. claim that some newspaper articles of that period ran about “favorable weather conditions and the absence of some inevitable epidemics” (411). However, the scholars’ research revealed that “although the Great Depression was linked to rises in suicides, but falls in road-traffic fatalities across US states, overall the bulk of mortality changes was unrelated to the crisis itself” (Stuckler et al. 418). Therefore, world medical progress, changing of hygienic patterns but not the crisis itself could be suitable explanations of the improvement in health indices in the USA during the Great Depression. Therefore, the global economic crisis seriously affected the USA, and the process of the country’s reconstruction did not start until 1934.

In spite of the different political and economic situations in the USA and Germany before the beginning of the Great Depression, some of the industrial and consumer spheres, as well as population groups, equally suffered in both countries. The facts of the economic crisis in Germany correlated with the mentioned data concerning the USA confirm this statement. Thus, Braun notes that in Germany, “the production of consumer goods declined by 18% between 1929 and 1932” (47). The US international trade dramatically reduced. In contrast, the German foreign trade was at a favorable level even in the period of the Great Depression. It brought significant surplus. However, it was not enough to compensate the country’s debts. The agricultural income of Germany during the years of crisis changed from 11.7 thousand million to 7.3 thousand million (Braun 45). The difference was significant but not as great as the reduction by half in the USA. The unemployment level in Germany was relatively equal to that in America since the number of unemployed people gradually grew from 1.9 million in 1929 to 5.6 in 1932, and by 1933, it reached the critical value of 6 million (Braun 45). Braun notes that the real figure was even greater (46). There were much more people not officially registered as unemployed. Both Germany and the USA sought to solve the issue of unemployment through the wages cuts and some short-time working positions not to leave people without work completely though it did not help. A specifically German phenomenon noticed by Ritschl was that “in spite of emerging mass unemployment, real wages and unit labour costs continued to increase in Germany during 1929 – 32” (130). The industrial workers in Germany were the best-paid blue collar workers in Europe in the period of the Great Depression though the level of unemployment in this sphere was high. Hitler coming to power together with his Nazi Party cannot be omitted in this paper. That event took place in the times of the Great Depression in Germany and influenced the history of not only the USA but also the entire world (Fest). Actually, there has been a long confrontation between German Communists and Nazis. However, Hitler had not ever been supported as strongly as he was during the Great Depression. It was definitely the right moment for him to come to power. Hitler commented that he had been inspired to create the bright future for Germany, and he knew what to offer to the people who were in despair (Fest). “The program Hitler outlined rejected everything: it was anticapitalistic and antiprolitarian, revolutionary and restorational” (Fest 270). He made desperate Germans think that he was not guilty in the position the country was at that time and that it was correct to criticize the existing regime (Fest). The Great Depression in the USA forced economic scholars and policy makers to search the methods of solving the financial crisis and correlate the healthcare improvements with the nations’ economic problems. In Germany, the global crisis resulted in the fact that the Germans voted for the tyrant who started the WWII.

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A significant issue related to the Great Depression is the way Germany and the USA sought to manage the economic situations in the countries and the lessons they received. Ritschl states that Germany will never forget the way its disastrous deflationary policy resulted in the development of the Great Depression: “Germany’s deflationary policy was an early case of an international stabilization program having run into trouble” (135). It was a failure to try to balance the budget. The author adds that the dominant reason of the crisis transmission was “real wage rigidity: though nominal wages did fall, producer prices declined faster, with direct effects on labor demand and indirect effects on investment” (131). The Nazis were chosen mostly by the middle class Germans who were afraid to stay unemployed forever. According to Ritschl, the economic crisis of 1929 in Germany brought the country the lessons concerning “international repercussions of a large economy defaulting” (132), importance of protectionism, and the breakdown of the fixed exchange rate schemes. The USA chose another policy to tackle the crisis though it turned to be a failure, as well. Thus, the mistakes of the monetary policy equally related to omissions and commissions led to the fact that the Federal Reserve could not perform its main function as a lender and made the crisis even deeper. Moreover, in 1929, the USA had a badly-regulated banking system and no federal deposit insurance (Crafts and Fearon). The strategies the USA used during the period of the Great Depression demonstrated that to prevent any economic slums, the country should follow the main policy of reducing the excessive risk-taking. In case of having a crisis, the authorities had to make the corresponding steps to manage it to reduce the negative effects (Craft and Fearon). Therefore, the policies chosen for the USA and Germany in the critical economic period to ease the life of people and solve the state issues were different and mostly mistaken. The crisis management showed some positive effects in 1933 only. The states took the corresponding measures not to repeat the same mistakes in the conditions of the current economic crisis. However, nobody can state which strategies could be ideal for the period of the Great Depression (Crafts and Fearon).

Conclusion

In conclusion, it is important to note that the period of global Great Depression had negative impacts on the USA and Germany. The country of its origin did not manage to find the correct solutions at once. The Great Depression in Germany resulted in the victory of Hitler and his Nazi Party in the state. Both countries experienced starvation, mass suicides, and total unemployment. The economic scholars have analyzed the errors committed by two powerful countries during the Great Depression, and hopefully, these lessons will be useful for them to prevent economic slums or to find a recovery for existing critical situations.

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