Between the Two World Wars
Senior 3 · History and Citizenship
Between the Two World Wars
Lesson 2 of 5
25 min
On 4 March 1933, as banks closed across the United States and a quarter of American workers had no job, Franklin D. Roosevelt became president. His first speech set the tone for a new approach.
So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. […] This Nation asks for action, and action now. Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself …
Source A. Franklin D. Roosevelt, first inaugural address, 4 March 1933.
Analysing the source. Roosevelt makes two points. First, the panic itself was making the crisis worse, so restoring confidence was a policy in its own right. Second, he promised that the government would "put people to work" directly. His predecessor, Herbert Hoover, had believed the economy would recover by itself; Roosevelt's government would act. Every country faced the same choice between waiting and acting, and between acting within democracy and giving up democracy.
Definition
New Deal: the programme of laws and agencies with which President Roosevelt fought the Depression in the United States from 1933.
Public works: building projects paid for by the government, such as roads, dams and schools, which create jobs.
Welfare state: a state that protects citizens with benefits such as pensions and unemployment insurance.
Autarky: the policy of making a country self-sufficient so that it needs few imports.
Deficit spending: a government spending more than it collects in taxes, borrowing the difference, to boost the economy.
Roosevelt's New Deal is often summed up as the "three Rs":
| Aim | Examples |
|---|---|
| Relief for the poor and unemployed | The Civilian Conservation Corps (1933) gave young men jobs planting forests and fighting erosion; the Works Progress Administration (1935) employed millions on roads, schools and public buildings. |
| Recovery of the economy | The Tennessee Valley Authority (1933) built dams that controlled floods and brought electricity to a poor region; farm laws paid farmers to grow less so that prices rose. |
| Reform so it could not happen again | The Emergency Banking Act (March 1933) reopened only sound banks; bank deposits were insured; the Social Security Act (1935) created old-age pensions and unemployment insurance. |
The New Deal did not end the Depression completely: unemployment fell after 1933 but stayed high, and full employment returned only when the United States rearmed for the Second World War. But it saved the banks, gave work and hope to millions, and made the federal government responsible for citizens' welfare.
Britain formed a National Government of several parties in 1931. It left the gold standard in September 1931, which made British goods cheaper abroad, and in 1932 it placed tariffs on most imports while favouring trade within the British Empire. Low interest rates made loans cheap and led to a boom in housebuilding. The south of England recovered well, but old industrial regions such as northern England, Scotland and Wales stayed poor.
France was hit later but recovered slowly. In 1936 the Popular Front government of Léon Blum gave workers a 40-hour week, two weeks of paid holiday and higher wages. These reforms were popular, but prices rose and business confidence fell.
In 1936 the British economist John Maynard Keynes argued in The General Theory of Employment, Interest and Money that in a depression governments should spend more, even if they had to borrow, to create demand and jobs. This idea, deficit spending, shaped economic policy for decades.
Germany. When the Nazis came to power in 1933, German unemployment was close to 30%. They continued and expanded public works planned before them, such as the Autobahn motorway network, and paid for them and for secret rearmament with deficit spending. Conscription was reintroduced in 1935. Unemployment fell sharply, but free trade unions were banned, wages were controlled, and the economy was built for war.
Italy set up a state holding company to rescue failing banks and industries (1933) and aimed at autarky; in 1935 it invaded Ethiopia. Japan, whose silk exports collapsed, turned to its army, which had already seized Manchuria in China in 1931.
Figure 1. Two roads out of the Depression. Both used public spending; only one kept freedom.
The colonial powers protected themselves at their colonies' expense. Britain and France used tariffs and imperial preference to keep colonial trade inside their empires. With revenues falling, colonial governments cut spending on schools and health, but kept demanding taxes in cash, so African farmers had to grow and sell more export crops at lower prices. In Ruanda-Urundi, as in the Belgian Congo, forced labour and compulsory crops continued through the 1930s. The Depression, in other words, was fought in Europe partly by making Africans work harder for less.
Worked example: comparing responses
Question: Compare the way the United States and Germany dealt with the Depression. (8 marks)
Similarity. Both governments spent heavily on public works to create jobs: the United States on dams, roads and schools through the Tennessee Valley Authority and the Works Progress Administration; Germany on the Autobahn network. Both accepted deficit spending.
Differences. (1) Purpose: the New Deal aimed at relief and reform for citizens; Nazi spending aimed increasingly at rearmament and war. (2) Freedom: Americans kept elections, free unions and a free press; Germans lost all three. (3) Welfare: the United States created social security for all; Nazi welfare excluded Jews and others the regime called enemies.
Conclusion. Both reduced unemployment, but the United States did so within democracy, while Germany's recovery served a dictatorship preparing for war.
Tip
New Deal = the three Rs: Relief, Recovery, Reform. Give one example of each and you have a full answer.
Warning
Don't praise the Nazi economy uncritically. Unemployment fell, but partly through rearmament paid for with hidden debt, conscription, and pushing women and Jews out of jobs and out of the statistics. A recovery built on preparing for war is not a model.
Crash Course US History #34, "The New Deal" (CrashCourse channel, 15 minutes). Watch for the three Rs, and for the debate about whether the New Deal ended the Depression.
Rwanda also uses public works against poverty. Since 2008 the public-works part of the Vision 2020 Umurenge Programme (VUP), run by the Local Administrative Entities Development Agency (LODA), has paid people from poor households to build feeder roads, terraces and anti-erosion ditches. Compare it with the New Deal's Civilian Conservation Corps. What makes public works useful beyond the wages they pay?
Practice
Sources and credits
This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
