What Political & Economic Challenges Did the Western World Face in the 1920s & 1930s?

The most significant economic change during the interwar period was the global depression of the 1930s. While the causes of the Great Depression have long been the subject of debate, most scholars believe it originated with the First World War, which changed international balances of power and adversely affected the world financial systems. The gold standard upon which the world’s currencies were based had to be temporarily suspended in order to help pay the costs of the war, causing an inflationary spiral. The effect of the Depression was profound in countries such as the United States, France, Germany and Great Britain; difficulties were compounded because governments did not cooperate internationally in order to stem the crisis.

Two great political movements swept the western world during the 1920s and 1930s. One was fascism. Fascism rose first in Italy, when Benito Mussolini, a former socialist, established an ultra-nationalist right-wing political group called the Fasci di Combattimento, which brutally terrorized its opponents. By 1925, Mussolini had become Italy’s dictator. But fascism saw its chief expression in the rise of Nazi Germany. After the Treaty of Versailles, which ended World War I, Germany was forced to pay reparations to the Allied countries that many Germans felt were harsh and unfair. These reparations along with the postwar inflation already afflicting Europe, caused a hyperinflation of the German mark by 1923 – that year, the rate of exchange between U.S. dollars and marks was one trillion marks to one dollar.

This hyperinflationary spiral in Germany wiped out people’s savings, caused extreme unemployment, and made conditions ripe for Adolf Hitler’s rise to power. Hitler led his Nazis in a failed coup in November of 1923 – the so-called Beer Hall Putsch – but emerged from prison nine months later a hero. Ultimately, Hitler and the National Socialist Party took control of Germany, promising the German people a renewed rise to German glory, at the same time as he grabbed for new territory and began a vicious persecution of Jews and other minorities.

The other great political movement of the 1920s and 1930s was socialism, which swept through the world for essentially for the same reason that fascism did -- the economic uncertainties to which people were subjected suggested that radical alternatives to capitalism were needed. Socialists, who believed in a gradual transformation of capitalism into socialism, rather than one brought about by the world revolution sought by communists, formed powerful blocs in Great Britain, Italy and Germany, and did battle with fascists. Ultimately, fascism won out in Germany and Italy and the Second World War began in an attempt to stem the aggressive expansionist policies of Adolf Hitler.