The+Great+Depression

Back to Hist. 152 page =The Great Depression and the World at the Brink of War=

Instructions
Go to the next page to read the lecture = =
 * **Read** the lectures and sources, and be sure to read your textbook //The Heritage of World Civilizations// Ch. 30. There are some exercises in the body of the lecture. These are purely optional - just designed to help you to remember the terms in the chapter. A score will appear on the screen as you do them, but I will not recieve that and will not be recording these scores. The actual unit exercise is the one below.
 * **Unit Exercise**: Go to the "Tasks, Tests, and Surveys" link in the left hand menu bar. Click on that link, then choose "Chapter 30 Exercise". Complete this exercise by Sunday, Nov. 7, at 11:59 PM. Be sure NOT to use the back or forward buttons on your browser to navigate the assignment, and be sure to save all your work before you move from question to question.
 * I will grade these quizzes as soon as I can, and your scores will appear in the gradebook.
 * Answer my discussion question in "Discussions and Private Messages," under the category "Class Discussions," topic "Chapter 30 Discussion" by clicking on the reply link. Please answer this question by Sunday, Nov. 7, at 11:59 PM. Then use the reply link to respond by Wednesday, Nov. 10, at 11:59 PM, with constructive comments to a fellow student. You must complete both posts to get your 10 points for the weekly discussion.

Introduction
Many historians refer to the period between 1914 and 1945 as "The New Thirty Years' War." In many ways, this is accurate, because it does not assume that the problems and conflicts that caused, and were created within, the cauldron of the First World War were solved by the war's end. In fact, it seems more accurate to view 1918 and the events of the 1920's and 1930's as intimately related. World War I created many of the problems and strategies that World War II would be about. It is for that reason that I have chosen to begin my discussion of the Interwar period with the Treaty of Versailles, and close it with a look at the colonies of the countries who fought in the Great War. It seems clear, in hindsight, that the Treaty of Versailles was as responsible as the devastation of the war in causing the economic troubles that plagued the 1920's and '30's. Its unfair treatment of Germany, to be sure an aggressor nation, fueled the fires of nationalism and Nazism in that country from almost the moment it was signed. Its demands that Germany pay a completely unrealistic sum of war reparations led to the realization that one of the treaty's goals was to keep the Germans down in a hole so deep that they never could become a first rank power again. But France and England's need for the reparations money took on a life of its own. The faltering economies of these countries needed infusions of cash. This need led to the eventual occupation of the Ruhr mining district by France and Belgium. The German reaction to that occupation was to pay Ruhr workers NOT to work, and so to ensure that the French and Belgian occupiers lost money as well. This took up cash that would have been better invested in saving the economies of Europe. Thus it was the treaty, and the controversy it caused, that led to as much damage as the devastation and distrust created by the Great War itself. The treaty and the devastation alone did much damage, and were the overwhelming forces that led to a loss of confidence in democracy and the creation of totalitarian states in Europe and Asia. But another major cause of world-wide depression, lack of faith in democracy, and failure in collective security, was the repudiation by the United States of its own role as the creator and guarantor of collective security. The move of the U.S. toward political isolationism after 1919 was mirrored by the 1928 - 29 withdrawal from the international trade network as well. American withdrawal of the largest market on the planet, and the source of both loans and income for payees shut down the movement of capital across the globe so effectively that every major economy in the world, already struggling with the after-effects of the Great War, was hit hard by the lack of funds, and fell into its own great depression - all with the exception of the Soviet Union. The USSR actually improved its economy in the 1920's to some degree. These social and political stresses led in the late 1920's and 1930's to a repudiation of democracy in many states world wide. The United States with its lack of interest in the rest of the world politically, and after 1929 its inability to solve its own domestic economic crisis, actually appeared to many to discredit democracy. Democracy was too slow, went too many ways at once. It seemed democracy was unable to efficiently direct industrial development capital to the best industries, and unable to move its population to the extraordinary efforts that were needed to get a country back on its feet. While the United States suffered 24.5% unemployment, the USSR had 0%. The alternative seemed clear. A totalitarian regime that could command its economy might provide an efficient use of labor and capital that could revitalize a nation. Better, lack of democracy, and the autocratic power of totalitarian government made moral and political choices easy - the government could take care of the hard stuff, and citizens, as long as they were loyal, could simply work and bring home the pay check to enjoy life. The abuses that seem to be inherent in such regimes were not yet so widely known before WWII. Thus it seems that totalitarian government was not the collective psychosis of nations that it has often been portrayed to have been. Rather, to those on the ground at the time, it seemed a viable alternative to democracy - a modern solution to modern problems. As it turns out, that perception was inaccurate. These flash cards should help prepare for the unit exercise.

**Stalin's Solution: Interwar Russia**
In 1924, when Lenin died, he expressed concern that Joseph Stalin, at that time General Secretary of the Communist Party, could not be trusted with his power. Stalin was able to have Lenin's warning suppressed, and by 1928 was clearly the supreme power in the Soviet Union. With absolute power in his hands, Stalin set about changing Lenin's revolution to meet his own goals – not all of which were consistent with Marxism, or even with the needs of the majority of Russians. Stalin used total control of the political, ideological, military, legal, and economic apparatus of the state to build the Soviet Union into a superpower by 1945, but the costs, in lives, money, and morality, were stunningly high. Russia has paid, and continues to pay dearly for Stalin's modern solutions to modern problems – perhaps chief among which was, for Stalin, the question of how Stalin could get and keep absolute power. After 1921, following the successful victory of the Red Army in the civil war that followed the revolution, Lenin came to realize that Russia was far less ready for revolution than even he had thought. One of the chief costs of the war, the revolution, and then civil war was an unemployment rate of near 85% in Russia and its sattelites. This was combined with continuing hunger and disastrous harvests. Lenin decided that the first order of business was to get the USSR back on its feet economically, and that the sacrifice, temporarily, of a few principals would not hurt the revolution in the long run. In 1921 he instituted what he called the New Economic Policy (the NEP). This program offered farms and small businesses the opportunity to produce their goods for market, not for the state, and to sell them at market price. Any profit gained from such ventures was theirs to keep. In order to be fair, and produce incentive, the NEP allowed salaries incentives for workers in major industries of which the state retained control. The NEP worked beautifully between 1921 and 1928. Production rose, unemployment dropped. The level of Russian industrialization, which stood in 1921 at 1/7 of its prewar capacity, increased rapidly, and the economy recovered well. State farms and state-owned industry was required to operate according to capitalist principals, including the goal of showing a profit. While Lenin's NEP was successful in restarting the Soviet Economy, it made many good communists very nervous, for it was an abandonment of many of their most cherished economic pricipals. Among those dismayed by the NEP was Joseph Stalin. When Stalin came to power after Lenin's 1924 death, one of his first moves was to dismantle the NEP, and replace it with his own, more socialist, centrally planned system for recovering from the depression Russia had experienced. Central to Stalin's plan, as it had been to Lenin's, was the idea of class warfare. That is, Lenin, and Stalin, like Marx before them, saw the revolution as a struggle of the working class (proletariat) against the factory owning class (bourgeoisie). This struggle would be violent, they all believed, because it involved fighting for ownership of products and the means of production – the keys to control of the society. The NEP had, as Lenin expected, caused serious problems in the conduct of this class war. The ability to own land and small and medium business immediately created a large number of new members of the bourgeoisie – those who owned the means of production, and used labor to operate it. Thus the very group that the revolution had sought to destroy was recreated by the NEP. Further, as farmers, who had incentive to produce, grew more and more product, the prices for farm goods fell through the floor. On the opposite side, while privately owned businesses did well, and even decreased prices, the major industries, including finance, steel, heavy industry, etc., remained under state control, and their costs of production, due to the higher costs involved in overhead for the state, and difficulties getting supplies of raw materials, went through the roof. This meant that manufactured goods saw an overall price increase between 1921 and 1928, while farm products saw a decrease. This obviously created an income gap between farmers and workers. The problem became so large that the average Russian seems to have been more aware of the differences between farmer and worker than between proletariat and bourgeoisie. In short, the very goal of the revolution was in danger because of the refocusing of the class war in such a way that the exploited classes – farmers and workers – were divided against each other rather than united against the bourgeoisie. Stalin's solution to this problem was to get rid of the NEP, and substitute for it a number of policies designed to cause the peasants and the proletariat to identify with each other against the bourgeoisie. In order to get rid of the NEP, however, and institute his policies, Stalin needed to have the power to make the decisions. He thus began in 1924 to maneuver politically so that his power would be unchallenged, even by the party itself. His first strategy was to use his unglamorous job as General Secretary of the Communist Party as a way to distribute favors to people in the party seeking jobs and influence. He could provide jobs, and job security, and in return he received the loyalty of those he helped. This job was far less exciting and intellectually rewarding than that of his chief rival, Leon Trotsky, but offered far more opportunities to cultivate connections. Stalin was a master of this game, and soon had become a member of a coalition that forced Trotsky out of the Soviet government, and even out of the country. Stalin then jumped ship, joining another power coalition against his erstwhile colleagues, and pushing them out of power as well. Finally, he betrayed the last two supporters he had in the central committee, and through political games was able to control the communist party absolutely. The party could not oppose him because in many ways, he was the party. As head of the Communist Party, Stalin had control of the military, the police, the court systems, and the decision-making apparatus. He used these to rule Russia through fear. Opposition to Stalin meant almost certain arrest, possibly torture, and then execution or banishment. But opposition was not always required for an arrest. Stalin's secret police acted on rumors, and rumors of rumors. By the late 1920's and early 30's, nearly every Russian knew or knew of someone who had been arrested or had disappeared mysteriously. This created a great fear that it might happen to them. This fear had as its solution only one option – obey Stalin and his regime, and you will be as safe as you can possibly be. But Stalin offered no guarantees – he didn't even speak about the arrests. Even at an impersonal level, Stalin's good will was the only thing that could save one from arrest. This fear broke down any organized opposition, or even criticism from the people of the Soviet Union. He began having political enemies executed almost as soon as he took office, and by 1936 had already directly or indirectly caused the deaths of 8 million people within his own borders. Most of these executions were arbitrary, or carried on only circumstantial or heresay evidence. It seems clear that in Russia, only Stalin could protect you from Stalin. Being part of a political organization, or an opposition faction would only get a person killed. These groups thus either ceased to exist, or had to be so careful with their ideas and contacts that their efforts could have no public impact at all. There was nothing to shield the individual from the power of the state. This provided Stalin, then, with the power to command the politics, society, and economy of the Soviet Union to a degree unprecedented, even in the defunct Czarist regime. With this power in hand, Stalin immediately set about reforming Lenin's reforms, so as to get the class war back on track. It is unclear whether this was due to his sincere love for the working person, or had more to do with his need for some sort of war to use as a legitimator for his exercise of such unprecedented power. In any case, among his first acts was to dismantle the NEP. In its place, Stalin proclaimed a second revolution, in which the Soviet Union would become completely communist, and the bourgeoisie would be wiped out. His first step was to collectivize farms. The state confiscated the property that the NEP had allowed peasants to buy, and forced peasants to live together in collectives, and to work the farms collectively as well. Each commune was given production quotas, and its produce was to be handed directly to the state after harvest. Communes were required to get their own food from the state through state run stores. This was effectively a policy to turn peasants into agrifactory workers – in Marx's terminology, to alienate them from production just as factory workers were, and in that way to give them a kind of class consiousness that was comparable to that of factory workers – to heal the rift between the barn floor and the assembly room floor. Accompanying this collectivisation effort, Stalin also promoted a policy of persecution of the //Kulaks// – peasants who had owned their own land even before the revolution, and had kept it up to Stalin's time. These people were now branded as class enemies, their situation set apart from the bulk of peasants who had never owned their own land. They were turned out of their homes, and their possessions were confiscated. They were made example of in front of the other peasants in order to create a clear sense of divide between the new peasant proletarians, and the peasant bourgeois. Stalin's next step in making the peasants a part of the proletariat – turning farmers into workers, was his first Five-Year-Plan, introduced in 1928. Over 5 years, Stalin decided, the USSR would create for itself a centrally planned and controlled economy that could be shifted by its guiding committee to suit the needs of the times. Stalin set as a goal a 70% increase in agricultural production, a 250% increase in heavy industry production, and a 300% increase in light industry production. By 1932, when the plan had reached its end, it had been so successful that Stalin initiated continuous 5-year plans throughout his time as leader of Russia. In these ways, then, Stalin first succeeded in eliminating any mediating organizations between himself and each individual Russian, thus becoming both the threat that kept them disorganized, and the only hope for safety they had. He achieved much of this through re-organizing a cultural war, which he could then lead, and which he could use to justify his awesome total control of Soviet Society. (Please try this drag n drop activity to help prepare for the unit exercise.)

**The Great Depression: Cause & Effect**
As with any other historical event, the Great Depression had many causes, and multiple effects, some economic, some social, some political, some structural. In this lecture, I will try to review a number of these causes, and to suggest how they helped move much of the world in new directions. In fact, I would like to subtitle this lecture "Modern Solutions to Modern Problems." It is my intent to show not only what happened, but that such phenomena as Nazism, Stalinism, the New Deal, and Japanese Ultranationalism were not unique phenomena that stand out as cancerous tumors on the body of humanity with no clear cause. Instead, they began as viable solutions to problems that appeared insoluble with ideas that existed at the time – including capitalism and democracy. In fact, democracy was so notoriously inefficient in solving the problems created by the war and the depression that followed that totalitarianism seemed to be not only a solution, but the best and most modern solution – a method to bring maximum productivity to society, and maximum happiness to individuals. The roots of the Great Depression went as far back as the Industrial Revolution itself – into the 18th century. Mostly, however, the causes can be found in the First World War and after. To summarize, the Treaty of Versailles put such huge burdens on Germany as to make payment of reparations a practical impossibility. Add to this the fact that all the belligerents had paid for the war with debt, creating a network of debt owed and debt owned, and you already have a recipe for financial collapse. The next part of the equation was the fact that Europe's war efforts and recovery were supplied by Japan and the United States – the workshops and supermarkets for the world in the 1910's and 1920's. Both countries entered the war as net debtor nations, both ended it as net creditor nations. Once European need for Japanese and American goods and food was reduced, however, after reconstruction, both countries discovered they had a serious overproduction and excess labor problem. Finally, in almost no country on the planet was there a system of social welfare, or an economic safety net. Nowhere did the government insure bank deposits, or regulate banks or loans. To Germany's credit, it made a massive payment in May, 1921, that dwarfed the total reparations paid in any war in human history to that point. Most of this payment, however, was made in kind, not in cash, as Germany did not have the money, and its industrial and financial infrastructure was in shambles. To pay the debt, the German government printed massive amounts of money. This caused unprecedented deflation in the value of the mark. The 1913 mark had been worth about 4 to the U.S. dollar. By January the exchange rate was 186 to the dollar, and that deflated to 402 per dollar in July of the same year. By December, 1922, a single U.S. dollar, whose purchasing power was only 1/206th of its own prewar value, was worth 4,000 German marks. The German government found itself unable to continue making reparations payments, and went into default. In response to the German default, France, which was having difficulties of its own and required the cash Germany was supposed to provide, and which was determined, by making Germany pay every penny, that the German economy would continue in the tank for the foreseeable future, occupied the Ruhr industrial district. Although Belgium participated in this unilateral solution to the reparations payment problem, every other nation that had participated at Versailles in 1918 condemned the act. Never the less, France was determined that Germany should pay. That meant that if the Germans would not, France would take over Ruhr mines and factories and make them pay. Germany resented this attack on its sovereignty, and to spite the French, paid its workers in the Ruhr district to stay home. This meant that the French had difficulty getting workers to do the mining or man the factories. At best, the French effort broke even. It certainly never made a profit, and never contributed what the French government had hoped it would for the economy. The occupation also proved to be an embarrassment to France, showing it to be the most fearful and shrill voice of self-serving vengeance among the former WWI allies. This act, and France's constant belligerence concerning Germany, served to isolate it from its former friends, making depression-era aid and understanding that much more difficult to get. For its part Germany, while it maintained its sovereignty over the Ruhr in a heroic, non-violent way, gained no economic benefit from its reaction to the occupation. Rather, the need to pay idle workers for years was another major burden on Germany's overtaxed financial system and led to even further deflation of the currency. Following the French occupation of the Ruhr, the German government again turned to printing money in order to make up for the shortfall due to lack of exports from the Ruhr region. By January, 1923 the mark stood at 7200 to the U.S. dollar, and slid from there 1 million to the dollar in August, and 4.2 trillion per dollar in December of 1923. Single mark notes were worth so little that Germans shoveled them into their wood stoves to heat their homes and cook their meals rather than use them for shopping – they had more value as scrap paper than as money. It took whole truckloads of marks to buy bread. Families saving for a home, or other major purchases saw the value of their savings wiped out overnight – their future dreams beyond their reach in a period of hours. What had been a good salary one day would not even buy groceries the next. Germany was, by 1923, simply unable to meet any of its reparations obligations. This would have major effects on the mountain of debt that the allies had built up internationally during the war. The United States, which had been in debt to the rest of the world to the tune of more than three billion dollars, loaned nearly twelve billion to European countries during the Great War. Most of this was owed to the U.S. by Great Britain, but Great Britain was owed huge sums by other countries as well. France owed three and a half billion dollars to Great Britain and the United States, and was in turn owed huge sums by Russia – up to a full quarter of all of its foreign loans. When the Bolsheviks took over, one of Lenin's first financial moves was to repudiate all foreign debt. This devastated France, and left it with little to use in paying Britain and the U.S.. As your textbook points out, international debt of this scale could only be transferred as gold bullion, or by the sale of goods, which would provide foreign currency revenues which could be taxed, then used to repay loans. The scheme the Europeans planned to follow involved the latter method. With this in mind, European countries encouraged trade with the United States in order to be able to make the payments they owed. This debt problem was combined with the fact that immediately after the war, the European countries who had participated relied on Japan and the United States to supply them with food and industrial goods and equipment as they rebuilt their infrastructures. This problem really went unseen, and so it was with some surprise, and great confusion, that the United States and Japanese agricultural sectors began experiencing serious declines in the mid-1920's. These declines were exacerbated by the fact that the market had been so good. It seemed in the early 20's that farmers could not grow enough of anything – demand was always greater than supply. This kept prices firm, and encouraged farmers to increase production by increasing their acreage. This they did with bank loans, secured with the property they already owned. Many also had to by farm equipment to make possible production on a larger scale. These tools they also bought on loan. When the demand for American and Japanese agricultural products began to drop in the mid-1920's, farmers and banks were caught by surprise. As prices plummeted, and markets eroded, farmers began simply abandoning crops they had grown. They were unable, in both countries, to make payments on their loans, and banks foreclosed. Foreclosure was useless, though, because there were precious few people in either place that had the money or the interest in buying land. This meant banks were unable to recoup their losses on the loans to farmers, and began to experience a cash shortage. In the United States, at that time, there was no banking regulatory commission, no Federal Deposit Insurance Corporation, nor any other government means of controlling bank policies or interest rates. This meant that banks could take huge risks in making loans, and were not required to maintain any reserve cash to cover deposits. Once the loans were in default, the bank's capital was often exhausted, and depositors could simply not get their money. This banking crisis was already a serious problem as early as 1928, when 600 banks were failing each year. Industry in Japan and the United States, however, was still in a boom cycle between 1925 and 1929. These two were the only advanced industrial nations to have taken no serious damage to their industrial infrastructure, and so were able to supply both the world, and expand to continue supplying their domestic needs. The continued boom in industry fueled several years of speculation in stocks and bonds. Lack of regulation of the stock markets allowed prices to make drastic moves over a single day, and re-open the next day to begin their climb all over again. This dizzying upward movement tempted more and more average Americans to invest in the stock market – most with no clear knowledge of what they were doing. Its sustained upward growth fooled many into thinking they couldn't lose. Everyone expected to get rich quick on the market. In October of 1929, however, this investment boom came to a sudden halt as the economic realities began to catch up with the stock market fantasies. European imports were seen in the United States as competition for American firms who were under pressure and needed to sell more. They were under pressure because the agricultural sector – still the largest part of the U.S. economy in the 1920's, was suffering severe setbacks, and farmers were not buying farm or consumer goods. The U.S. Congress took up the question of how to protect American industry from foreign competition in a contracting market, and decided to set up a system of tarriffs – taxes on goods entering the country – to discourage imports, and encourage import substitution by American firms. Their attempt to save the economy backfired. Rather than create a captive set of American consumers who would support American companies by buying their goods (because there were no others available), the Smoot-Hawley Act (the trade protection bill) actually set up barriers to the international flow of money. Without access to the American market, European countries could not earn American currency, and had to attempt to pay loans in their own deflating currencies. When they could not make their payments, American banks which had provided the money for the loans had no recourse. The money that was late, or in default, was simply lost to American banks and, just as with the agricultural crisis, banks could not cover their deposits and failed. All of this came to a head on October 24, 1929, also known as Black Thursday, when the New York Stock Exchange lost nearly 2/3 of its value in a single day of trading. Stock speculators were ruined by the thousands. Their money, which might have been used for investments, just went up in smoke. Large sectors of the economy lost all investment support, and so all ability to grow business or invest in new equipment or, most importantly, in employees. With industry mechanized, but still in its early stages of automation, most factories operated with a huge dependence on human labor. As companies went bankrupt, and factories closed, their laborers were left out in the cold – no job retraining, no prospects, no Social Security income, no Welfare, no Medicare or Medicaid. If you lost your job in this society, you lost everything. The problem was, of course, that thousands were losing their jobs. By 1929, the unemployment rate in the United States was 24.5%. One in four people was without a job, and without prospects for one. As the United States crashed, its trading partners did, too. As American trading partners crashed, their business partners also felt the effects. Like the ripples of a stone thrown into a quiet pond, the depression spread throughout the world until nearly every country saw itself set back, sometimes below the living standards it had experienced a full century earlier. As the world crashed economically, people worldwide began to wonder exactly why things weren't working as expected. The scientific advances of the 19th century, combined with European success at conquering and controlling large parts of the non-European world, increased numbers of democracies, successful treaties that prevented war and maintained the balance of power – all of these things had suggested that the story of humanity was the story of progress. But the story of the First World War was a technological nightmare – nine to thirteen million deaths, an untold number of lost contributions to society, the loss of agricultural land, destruction of towns, factories, homes, memories and lives. The Treaty of Versailles was an exercise in vengeance and unrealistic. The Great Depression was the story of shortsighted and selfish isolationist behavior combined with lack of fiscal responsibility and unrealistic expectations by all involved. None of these things seemed to be progress in any but the most superficial ways. Humankind, especially Europe, but significantly, its colonies as well, began to question the values that had led up to the war. The search for solutions – ways to clean up the mess in human lives and set right the economic waste of the Great War – was first on the agenda of nearly every country even peripherally involved. Next was to make sure that the solutions created did not lead to the same problems again. Ironically it was, in fact, the modern solutions to these modern problems that would lead directly to the Second World War, and this time greater technology and better control of larger populations meant not 13 million, but 50 million lives would be lost – most needlessly – and the world economy would again be demolished in the name of nationalism and progress.

Fascism
German Nazism was not the first political movement to combine popular concepts from both right and left of the liberal political spectrum and create something completely outside of representative democracy. That dubious honor lies with Italy, at least on the continent of Europe, and the political experiment was Fascism. Fascist Italy under Mussolini rejected political liberalism and the heritage of Western Europe since 1688 of ever-increasing participation by the people in the political process, and of enlightened self-interest (individualism) as the basis for the improvement of human society. Instead, Mussolini claimed that to belong to a nation required that one belong fully - subordinate oneself to the group in all things. Individual wants and needs come entirely second to the needs of the state or organizations representing it. The state was defined in a racial sense, and Mussolini built upon the ideas of earlier Italian Nationalists Giuseppe Mazzini, who founded the Young Italy movement in the 19th century. Mazzini had claimed that the nation state was the natural system (read God-given and God-intended) of division of human cultures and political units. Mazzini's belief was that there was a hierarchy of human nations, based on God's intentions, so that some nations ranked higher than others in terms of destiny, political intelligence, national achievement, Military prowess, etc... Italy's //Fasci di Combattimento// was a political action group formed in 1919 - veterans of the First World War upset about the sacrifices they had made for what they felt amounted to nothing - the peace treaties had, in their minds, robbed Italy of gains they felt they had made, and left them and Italy with nothing to show for the blood and treasure they had spent. They were also nationalists and liberals who were unwilling to accept the labor protests and inflation that plagued Italy, like much of Europe, in the interwar period. They stood most firmly opposed to socialism. The were led by Benito Mussolini, whom they called //Il Duce// (the chief), a former socialist whose commitment to the ideas of a collectivist remained even after his loss of interest in socialism. Mussolini found a new ideological home for his collectivist/pseudo-socialist ideas by investing them with Mazzini's nationalism to create the idea of a state in which all citizens worked for the collective good, and the ultimate goal was the success of the nation - particularly in war. This Mussolini called //fascism// from the symbol adopted by the //fasci di combattimento// - the symbol of the ancient Roman army - a tied sheaf of grain with a scythe - known in Latin as the //fasces//. In any case, Mussolini's fascists took control of Italy through a series of riots, local takeovers, bullying, and minor election victories. By 1921, their support of the middle class property-holders against labor uprisings and peasant protests of inflation, poor wages and working conditions (which the fascists' parmilitary arm, the "blackshirts" were only too happy to take care of through the use of violence), they had been elected to local posts of power, or in effect occupied various local power centers. In a bid to grab national power, Mussolini organized a blackshirts protest march on Rome. The cabinet of Italy saw this as disorderly conduct and decided the best way to deal with it would be to disperse the march with the army. King Victor Emanuel III, however, for reasons of his own, refused to allow this. The cabinet resigned in protest, and the king then asked Mussolini to form a government and sit as its prime minister. Thus, rather than facing an army, the blackshirts' march on Rome ended with a welcome by the new prime minister, their leader, and a parade through the capitol's streets. Mussolini did not have a majority in parliament, as is the custom for parliamentary governments like this. In total, the fascists had been able to place only 35 people into the national parliament. Though he was appointed by the king, and so his government was nominally legal, it had not been achieved by parliamentary means. Instead, Mussolini had come to power through coercion - the threat of riots and discord in the Italian countryside had cowed the king into giving him a government in a desperate situation. Fascist rule operated in much the same way. An election victory under new proportional representation rules in 1924 allowed the Fascists to take complete control of the government, and by 1926 dissolve all other political parties, and turn Italy into a single party state with a dictator who could rule by decree. This pattern was one that would be repeated in other fascist regimes. Mussolini's government also healed the rift that had existed between the Italian government and the Catholic Church since the 1861 unification of Italy. By paying an indemnity to the Church for lands confiscated by the Italian government during unification, and by recognizing Catholicism as the official religion of Italy, Mussolini made both a popular decision among his people, and was able to gain the support of the Church for much of his program. This alliance between Church and State was also a pattern in later fascism. Finally, one of Mussolini's main programs for rebuilding the economy included rearming and increasing the size of Italy's military, and then using that to increase the territory under Italian control. This was very successful. The Italians created what was in 1922-26 the most technologically advanced army in Europe. They maintained a large number of armored vehicles, reduced the numbers of horse-drawn weapons and vehicles they used, and were very mobile. Their armored vehicles could withstand most weapons available worldwide in the 1920's (though by 1933 they were badly out of date, and not being renewed), and their weapons were, in the 1920's, more effective, with greater range and accuracy, than comparable armies worldwide. Again, here we see a fascist pattern that will be repeated by Spain, Germany, and Japan in the 1930s - the use of government investment (this is a Keynesian economic principle) to support industry by rebuilding a strong military and improving its mobility and effectiveness through technology, combined with an increase in the size of the armed forces. Ultimately, Mussolini used his rebuilt military to conquer Ethiopia in order to extend Italian territory, improve the Italian economic and political positions in the world as a whole, and to win prestige through conquest - all key parts of his definition of fascism.



**Nazis**
In 1918, when Germany announced its surrender on the Western Front, a young corporal by the name of Adolf Hitler, and immigrant from Austria who had joined the German army, was in hospital recovering from temporary blindness caused by exposure to gas on the battlefield. Upon hearing the news of the surrender, Hitler was devastated. "I tottered and groped my way back to the dormitory, threw myself on my bunk, and dug my burning head into my blanket and pillow. Since the day I had stood on my mother's grave I had not wept. . . . But now I could not help it." Hitler was not alone. The central fact for them remained that, while they were experiencing economic hardship, the German army had not collapsed, and Germany had not been overrun. Defeat in the war had been unthinkable. But that defeat was to be only the first step in a long series of events that would see Germany slide into the pit of massive, debilitating inflation, political gridlock, enforced demilitarization, massive international debt, and loss of control of areas within its own borders. Also in 1918, as Germany's economy collapsed, and it became clear that the war was unwinnable, the Kaiser was forced to resign as head of state in a popular revolution, and a provisional government, under the leadership of the Social Democrats of Germany, took temporary charge of administering Germany while a constitution was hammered out in the city of Weimar. This constitution, created with broad party participation, allowed for the direct election of a national assembly, called the Reichstag, a cabinet to be headed by the leader of the party with the largest contingent of deputies, and a president as head of state. It guaranteed civil liberties, and was a step much farther from the traditional conservative monarchy of the Kaiser than Germany had been willing to make before the Great War. Still, within the constitution, there were some basic flaws, including the fact that the President could, in a state of emergency, issue decrees that made him, in effect, a dictator. Germany was not overrun by the war, but it was made prostrate by the vindictive peace that would be thrust upon it, quite literally under the threat of invasion and occupation. In the end, Germany would find itself without recourse to international assistance, as the League of Nations, set up to address just such problems, had been gutted from the beginning by the unwillingness of its first proposer – the United States – to join, or even to take part in collective security at all. With no recourse to outside help, the Germans began seeking ways to solve their problems. Often their choice for the blame landed on the very people who had ended the war after the Kaiser fled to England and exile in 1918 – the Socialists who had been the majority in the Reichstag during the moment of crisis and had been required to form a provisional government and react to the crisis at short notice following the Kaiser's abdication. These legislators, all of whom had been in search of a way to end the war, but without a defeat for Germany, were not the ones who had conducted the war, nor were they responsible for the decision by the German army to end the fighting. They were, however, the only legitimate power at the time, and were thus not only forced to make critical decisions without having been a party to wartime leadership, but were also forced, nearly at gunpoint, by the allies – who had surrounded and cordoned off Germany from the world, to sign the provisions of the treaty of Versailles, which settled all responsibility for the war upon Germany, and made the Germans responsible for paying for most of the damage done during the war. In addition, these men made the unfortunate choice of basing their new republic, called the Weimar Republic, on France's 3rd republic. This meant a multiparty political system which almost guaranteed political gridlock was to be laid upon a state which had, until now, been largely ruled by a single will – that of the German emperor, or Kaiser. The Reichstag had always had limited powers, and even those had been gotten around. Now, a government that could not make clear decisions on even the easiest problem had to govern a nation of people who were used to certainly and bold decisions made by a sovereign who could cut through debate and rule by decree. The German people thus quickly lost faith, and interest, in their republican government – even without considering the disastrous way that government had managed the war reparations and the German economy. The gridlock in government also allowed for an eclectic and critical cultural life in Germany. Following the defeat in the Great War, plays, literature, art, even music was often anti-nationalist, and rarely conservative or nostalgic for Germany's former imperial glory. To nationalists who looked back at Germany's past, especially the creation of the German empire in 1871, as the crowning moment – the proof in the pudding, so to speak, of German greatness, this kind of criticism of their deeply held, and admittedly racial, beliefs was galling. (It was common at this time in Europe, due to the influence of Darwin, among others, to think of nations as primarily racial in make-up, and thus as having genetic dispositions to greatness, or genetic flaws – these dispositions were generalized over the entire population.) Many Germans were convinced that a secret conspiracy of Jews was controlling German society, and attempting to stamp out the German nation from inside. Combined with these problems, the German economy seemed to be falling into a bottomless pit in the early 1920's. In May of 1921, the reparations total, which Germany had been waiting for as a part of their Versailles agreements, was finished, and the Germans learned, to their astonishment, that they would be required to pay the Allies 132 billion gold marks - this amounted to the greater portion of the total cost of the Allied war effort. Despite the unpopularity of the decision, and their own distaste for it, the new German government agreed, at least in part because of threats by the Allies to invade and occupy Germany, which was mostly defenseless because of the disarmament requirements of the Versailles Treaty. The cost to Germany's economy of such huge debt (which was finally paid in full by the German government in October of 2010) was so high that Germany experienced unprecedented inflation. Germany's Deutschmark, which had stood at about 4 to the U.S. dollar in 1913, was in 1923 valued at 1 trillion to the U.S. dollar at official exchange rates. The hyper-inflation experienced by Germans in the 5 years immediately after the war gutted the savings of millions of common German people, making it impossible for them to realize financial dreams such as purchasing homes, retiring with savings, starting businesses, or even buying food for the evening dinner table. This led to growing feelings of betrayal and a loss of hope for the future. Again the Weimar government was blamed for much of this. As Germany's inflation woes increased, in 1923, France and Belgium invaded the Rhur Industrial district, in the hope of using the profits from running Germany factories as de-facto payments on the reparations balance. This strategy had terrible consequences, as the German government paid its workers to stay home, thus costing France and belgium millions in unrecovered occupation costs, and dragging the German economy further downward. Cooperation in the Rhur, which did end the inflation, combined with a sense of mutual effort with the international community characterized the Chancellorship of Gustav Stressemann. Stressemann's efforts to rebuild Germany's postwar economy and make the Weimar Republic work won him opportunities to reschedule the debt on war reparations, and a period in which peace seemed not only likely, but permanent. Still, problems with wages and working conditions continued to encourage labor disputes and the growth of political parties on the radical left and right. These parties clashed with each other as well as with employers, and with government troops. Contiued public anger over war reparations and the embarrassment of Clause 231 of the Versailles treaty, concerns among the middle class about their ability to keep their property, and about security given the frequent riots and political debates, and the increasing power of the German Communist Party all led to serious social upheaval. The Weimar Republic remained unstable, even during Stressemann's time in power. Occupation of the Rhur, 1923

German Hyperinflation of 1923 Among those dissatisfied with the way the war had been ended and in which German society had been reorganized was Adolf Hitler, a young Austrian who had emigrated to Germany in order to join the German Army in World War I. Adolf Hitler had been born in Austria, son of a minor civil servant who died before young Adolf became an adult. According to the law in Austria in the early 20th century, Adolf was thus given a government pension - a basic death benefit from the government on which he could live. He was an aspiring artist, and several times applied to the Vienna Arts Academy. Apparently he was not accepted, as he was not deemed to have enough talent to be able to benefit from the Academy's program. He thus had the means by which to pay his rent, no job, and no school to occupy his time. He turned to politics, and began following the career of Vienna mayor Karl Lueger, whose politics were often centered on a tendency to blame other races, expecially Europe's Jews, for social and economic ills in Vienna and Austria as a whole. Hitler learned much from Lueger, about how to maneuver as a politician, and about what race was, and how it might be used effectively as a political tool. Hitler eventually moved from Vienna to Munich, Germany, in order to avoid being drafted into the Austrian military. However, in 1914 he was again drafted, this time by the German army. This time, Hitler seemed genuinely excited to go, writing home to his mother to say that he thought the First World War would be the opportunity Germany needed to take its rightful place at the top of the hierarchy of nations. Hitler served with some distinction on the Western Front in the Great War, and was awarded the the Iron Cross, First Class in 1918 for his bravery and service to the German Empire. He, along with many other Germans, and most German soldiers, was completely aghast at the surrender in 1918. He was determined to avenge the injustice, and immediately began to look for causes, and for those responsible – as did many Germans following the surrender. Nationalists, and German purists, such as Hitler were determined to destroy this regime which had, in their eyes, betrayed the German people by agreeing to a vindictive peace that was thrust upon them by the enemy. In 1919 Hitler joined the German Workers' Party (at the time a group of 6 individuals who met to discuss policy, but had no platform or party system) and began working specifically toward this goal. By 1921, Adolf Hitler had become the leader of the discussion group that called itself the German Workers' Party, and had single-handedly written a platform for the party. Hitler was a charismatic and inspirational speaker who had already begun to attract new members to the party. He began to form what he called the S.A. - a paramilitary force that was used to guard party meetings, and to provide a kind of public show of unity that inspired people with no hope or sense of unity with anything in their own lives. These men wore brown shirts, with military-looking accessories and riding boots. They were not an official band in any way, simply thugs who had joined the party because they were inspired by Hitler's ideas. They also intimidated Jews and others that the party had decided were undesirable – the causes of the woes of Germany. In 1923, Hitler attempted to create a sort of self-sustaining rebellion in Bavaria that he hoped would bring him and his party, now known as the National Socialists, to power there. The attempt began in a beer hall, and Hitler had the support of Erich Ludendorff, one of two Chiefs of the General Staff of the German army during World War I. Hitler was unsuccessful in his November 8, 1923 "Beer Hall Putsch," and was arrested and sent to prison for his attempt. There, in prison, Hitler enjoyed the moral support of the guards, who liked his ideas, and provided him with easy access to reading and writing material, food, cigars, brandy and the like. During this time, Hitler wrote the book that outlined his ideas in detail, and was to make him famous – //Mein Kampf//. Hitlers goals were relatively clear, although he liked to keep his options open when it came to the question of how to achieve those goals – Hitler was very much an improviser who liked to adjust his actions to the situation of the moment. His goals included a kind of nationalism seen before in the Balkan states prior to WWI – to expand the German nation until its borders included all members of the German race. He was also after //Lebensraum// – living space. Hitler believed that the soul of German culture was agrarian, and so every German ought to have enough land to farm and be self-sufficient. This meant, of course, that Germany would have to expand until it had enough good farmland to accommodate all Germans. The broadest stretch of land was not in the West, but in the East, including Poland, Belarus, Ukraine, and Russia itself. These territories were a part of Hitler's ambitions from the very beginning. Hitler also wanted to solve Germany's financial problems once and for all. Believing that he knew the cause, he thought a solution would not be difficult to find. The cause of Germany's financial woes, according to Hitler, was an international conspiracy intent on keeping Germany poor and minimally armed at best, and interested in partitioning Germany for its land and resources at worst. At the very heart of this problem were the WWI allies who had defeated Germany, and then set impossible reparations payments upon her. Co-conspirators included a group of people who were inside Germany, indeed even claimed to be German, but who were, according to Hitler, aiding this international conspiracy by facilitating the flow of money out of the country. These people were the Jews. Famous for their role in finance throughout European history, the Jews of 20th century Germany were remarkably un-connected to international banking and industrial concerns. Only a minority of them were high level executives in these parts of the economy. For Hitler, though, that was enough to prove that they, the bankers who moved the money, were Jewish, and that the Jews wanted to destroy Germany by helping the world to literally bleed Germany white. It was due to the pressure of Jewish bankers, who set interest rates and made collection calls that the German government (composed of German people who would never willingly cause other ethnic Germans pain, according to Hitler's belief system) had then to meet. In order to meet those payments, the government printed money, and increased taxes on business to the point where German business (which would never willingly pay German workers unfair wages) had to minimize wages in order to meet tax payments. The Jews, then, were at the center of the economic problems – not just at the national level, but at the personal level, too, because, according to Hitler, their actions caused the deflation and kept wages low. The fact that there was no evidence to support this theory at all was no barrier to Hitler's argument. By the time Hitler was released from jail in 1924, the German government under Gustav Stressemann had stabilized the economy, and a recovery had begun. But Hitler was aware that it was too late – the hyperinflation of 1923 had shaken German confidence in the Weimar republic to the foundations. He began extolling his ideology immediately, and it immediately began to draw large crowds. Hitler provided the German people with the confidence and security they had lost after the end of the First World War. He told them that they were a pure and ideal race, which he called Aryan, and that they were victims of other races who wanted their land and were jealous of their pedigree. He told them that the economic failure of Germany – which recurred during the Great Depression of the 1930's, was not their fault, but a part of a conspiracy against them facilitated by Jews. He gave them a common enemy to hold guilty for their common problems. Hitler was completely honest about his methods and strategies. The Nazis, he and other members of the party said, would use the republic to destroy the republic. He explained that the Germans needed to expand, and in //Mein Kampt// ranked the people who already lived on the lands he wanted for Germany. The slavic people of Russia, the Poles, and other east European peoples he saw as inferior. They would have to be relocated, and would become labor for the Third Reich (third German Empire). Jews would have to be gotten rid of altogether (although the "final solution" did not take shape until 1939). Those people such as Norwegians, Hitler thought, were Germans who had forgotten their roots. They would be re-educated, and then allowed to stay and take their place in the Reich. Hitler was also against the power of big business, and planned to nationalize the larger businesses. He hoped to make Germany a nation of middle class farmers and business people, and his social designs often harked back to an idealized (but non-existent) German past in which the pure race had maintained its pure values and lived in an egalitarian society of small and medium farmers and craftspeople. He intended to take over labor and trade unions, and nationalize them. In 1932, the Nazi party was able to control the Reichstag. With this security, Hitler was able to have himself appointed Chancellor of the Weimar Republic in 1933, and to have the Reichstag pass the Enabling Act. This law made it possible for Hitler to rule by decree, with no interference from the Reichstag. He also had President Hindenburg issue a decree suspending all civil liberties in Germany. He stacked the government and courts with Nazis and Nazi sympathizers. He claimed to have all the answers to the economic problems that were once again facing Germany, leaving 6 million people out of work. Hitler also used propaganda to give the impression that his regime was supported by a vast majority of Germans (in fact, it wasn't). Posters and publicized Nazi rallies made it look like the Nazi party was the only possible political answer to Germany's ills. Nazi threats to repudiate all of Germany's debt created a flight of international investment capital from Germany's economy, which further strengthened the appeal of the radical nationalist position of the Nazi party. Key to Hitler's economic program was his rearmament of Germany, which he began unilaterally in 1933, expressly in violation of the agreements of the Treaty of Versailles. To countries like the United States, who were getting worried about their investments in Germany, the re-armament program looked reasonable enough, and its results were sufficient, both within Germany and internationally, to convince people that this was Germany's way out of depression. As Hitler thus began preparing for a war he was already planning, the economy boomed, and Germany's unemployment rates dropped to the point where there was a labor shortage. Germans were asked not to worry about international relations, or domestic problems – the Nazis (Hitler) would do that thinking for them. Instead, they were to labor, be loyal, and take home paychecks to support their families, and pay taxes to help the Reich continue rebuilding itself. This was appealing to people who had been through the economic ringer due to international problems, and had felt the sting of personal inability to affect their own futures. It was a relief to many to be able to concentrate on their own personal problems, and not have to deal with larger issues or other people's problems – this created a very individualised, atomized society in which the only associations people belonged to were the nation, Nazi support groups, or their own families. There were no organizations which could or would stand between government and people, thus giving Hitler control over individual Germans in an unprecedented way. But the German people had given up their liberty - to a charlatan, to be sure - but given it willingly in exchange for security and rescue from the Great Depression. Finish This Crossword to prepare for the unit exercise. Now go on to the unit exercise: click on the "Tasks, Tests, and Surveys" link and choose "Chapter 30 Exercise". Then be sure to do the discussion posts! You need to answer my question by Sunday, Nov. 7 at 11:59 PM (this should make it easier for everyone) and respond to another student by next Wednesday, Nov. 10, at 11:59 PM.

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