THE INTER WAR ECONOMY:

INTRODUCTION -

DIA -The majority of the First World War (1914–18) was fought in Europe. But people all
throughout the world were affected by it. It caused the first half of the 20th century to enter a
crisis that took more than three decades to resolve, which is particularly relevant to our
concerns in this chapter. Another devastating war, as well as significant economic and
political upheaval, occurred during this time.

3.1 WARTIME TRANSFORMATIONS -

SHIVESH - As you are aware, two power blocs engaged in battle during the First World
War. The Central Powers, which included Germany, Austria-Hungary, and Ottoman Turkey,
were on the other side from the Allies, which initially consisted of Britain, France, and Russia
(later joined by the US). There were many reasons for the war to begin. The major reasons
were the Balkan war, the rise of German Militarism and Entente Cordiale which was an
anglo-french agreement. Many governments believed that the war would be concluded by
Christmas when it first broke out in August 1914.

DIA - More than four years passed throughout it. There had never been a war like the First
World War. This war was the first modern industrial war. It saw the use of machine guns,
tanks, aircraft, chemical weapons, and more on a massive scale. These were all increasingly
products of modern large-scale industry. To fight the war, millions of soldiers had to be
recruited from around the world and moved to the frontlines on large ships and trains.

SHIVESH - The scale of death and destruction—9 million dead and 20 million injured—was
unthinkable before the industrial age, without the use of industrial arms."
Most of the killed and maimed were men of working age. These deaths and injuries reduced
the able-bodied workforce in Europe. With fewer numbers within the family, household
incomes declined after the war.

DIA -Industries underwent reorganisation to create items for the war. Entire civilizations
were reorganised for war; while males went off to fight, women took over the roles that had
previously been expected only of men. The Globalisation of the World The conflict caused
the economic ties between some of the biggest economic powers in the world to break, and
they were forced to start battling one another to pay for them.

SHIVESH - Therefore, Britain took out significant loans from both US banks and the general
US population. The US became a global creditor as a result of the war rather than a global
debtor. In other words, the US and its citizens owned more assets abroad after the end of
the war than did foreign governments and their residents at home.
3.2 POST WAR RECOVERY

PIHU - The post-war economic recovery was challenging. Britain in particular experienced a
protracted crisis since it was the largest economy in the world before World War I. India and
Japan had expanded their economies while Britain was focused on the war. Britain found it
challenging to compete with Japan worldwide and regain its former position of dominance in
the Indian market after the war.

PARTH -In addition, Britain had taken out a lot of loans from the US to pay for the war. As a
result, Britain had substantial foreign debts at the end of the war.

PARTH - Germany had to agree upon the treaty of Versailles in which they lost 13% of its
land and 12% of its population and Rhineland was taken from German territory and was
given to France, Belgium and Netherlands.

PIHU -An economic boom, or a significant rise in demand, output, and employment, had
been brought on by the conflict. Production decreased and unemployment rose after the war
boom. In order to bring bloated war expenses into line with receipts during peacetime, the
government also cut them at the same time. One in five British employees were unemployed
in 1921 as a result of these changes. Indeed, in the post-war era, stress and uncertainty at
work became constant features of life.

BHAVYA - A lot of agricultural economies were in trouble. Think about the situation with
wheat farmers. Eastern Europe was a significant exporter of wheat before the war. Wheat
production increased significantly in Canada, America, and Australia when this supply was
interrupted during the war. However, after the war, production in eastern Europe picked up
and led to a glut in wheat production. Grain prices decreased, rural incomes decreased, and
farmer debt increased.
3.3 RISE OF MASS PRODUCTION AND CONSUMPTION

PARTH -The US noticed a quicker comeback. The US economy resumed its rapid
development in the early 1920s after a brief period of economic turmoil in India and trouble
in the years following the war. Mass production was a significant aspect of the 1920s US
economy. The shift towards mass production had started in the late nineteenth century, but it
wasn't until the 1920s when it really started to dominate US industrial output.

DIA -Henry Ford, a well-known manufacturer of automobiles, was a mass production

pioneer. He modified an assembly line from a Chicago abattoir (where butchers dissected
slain animals as they descended a conveyor belt) for his new auto facility in Detroit. He
understood that the "assembly line" approach would enable a quicker and more affordable
means of creating vehicles.. By accelerating the rate of work, this method increased
productivity per worker.

BHAVYA -No worker could afford to stop what they were doing, take a break As a result,
Henry Ford's vehicles left the assembly line at three-minute intervals, which is a significantly
higher rate than was possible with earlier techniques. The first mass-produced vehicle was a
Ford TModel. The stress of working on assembly lines where they had little control over the
speed of the work first proved too much for the Ford factory's employees to handle. So they
all left in great numbers.

SHIVESH -Ford upped the daily wage to $5 in January 1914 due to pure desperation. He
also forbade trade unions from working in his factories at the same time. Henry Ford was
able to recover the high wage. The choice to increase the daily wage was so significant that
he instantly referred to it as the "best cost-cutting decision" he had ever made. Fordist
manufacturing techniques quickly spread throughout the US. The cost and price of
manufactured goods decreased via mass production.

DIA - More employees may now afford to buy durable consumer products like cars because
of increasing pay. From 2 million cars produced in the US in 1919 to more than 5 million in
1929. T-Model automobiles lined up outside the plant, there was a surge in the purchase of
refrigerators, washing machines, radios, and phonograph players all through a system of
"hire purchase.". A growth in home building and home ownership, again supported by loans,
also fueled the demand for refrigerators, washing machines and other appliances.

SHIVESH -The foundation for American wealth was laid during the 1920s housing and
consumer boom. The United States restarted capital exports to the rest of the globe in 1923
and overtook all other foreign lenders. Over the following six years, US imports and capital
exports helped the European recovery as well as global trade and income growth. But
everything turned out to be too good to last. By 1929, the world immersed in a decline unlike
any other
3.4 THE GREAT DEPRESSION

DIA - Starting roughly 1929, the Great Depression continued until the middle of the 1930s.
The majority of the world's regions during this time had catastrophic decreases in production,
employment, incomes, and trade. Each nation experienced the depression at a different time
and with a different effect. It occurred due to the crashing of the stock market in the US but
generally speaking, rural areas and towns suffered the most. This was due to the fact that
the decline in farm prices was bigger and lasted longer than the decline in industrial products
prices.

SHIVESH -There were various reasons that contributed to the slump. We've already
witnessed the unstable state of the post-World War II economy. First, there is still an issue
with agricultural overproduction. The situation was made worse by declining crop prices.

PIHU -Farmers strove to increase production and bring more food to market to retain their
overall revenue when prices fell and agricultural incomes decreased. As a result, the
market's oversupply intensified and prices fell even lower. Lack of consumers caused farm
food to decay. Second, several nations used US loans to finance their investments in the
middle of the 1920s. When things were going well, it was frequently very simple to raise
loans in the US, but when things started to go south, US foreign lenders worried.

SHIVESH - 96 loans from the US to India and the Contemporary World abroad totaled more
than $1 billion in the first half of 1928. It was only a quarter of that amount a year later.
Countries who were heavily dependent on US financing were suddenly facing a severe
crisis. Although in varied ways, the withdrawal of US loans had a significant impact on the
rest of the world. It caused the downfall of some significant banks and the devaluation of
currencies like the British pound sterling in Europe. It exacerbated the decline in agricultural
and raw material prices in Latin America and abroad.

DIA - Another significant blow to global trade came from the US's attempt to defend its
economy during the Great Depression by raising import taxes. The US was also the
industrial nation that was hit by the slump the hardest. The US banks had likewise reduced
domestic lending and called loans back in response to the price decline and the possibility of
a slump. Businesses failed, houses were destroyed, and farms were unable to sell their
harvests. Many US households were forced to give up their homes, vehicles, and other
consumer durables because they were unable to pay back their debts as a result of declining
salaries.
PARTH - The 1920s' consumerism opulence has since vanished in a cloud of dust. People
travelled great distances in search of any work they could find as unemployment rose. In the
end, the US banking system also failed. Numerous banks were forced to close their doors
after going bankrupt due to their inability to recover investments, collect loans, and pay
depositors. The figures are astounding: between 1929 and 1932, almost 110 000 businesses
failed, and by 1933, over 4,000 banks had liquidated. By 1935, most industrialised nations
had begun to experience a moderate economic recovery. However, the wider consequences
of the Great Depression on society, politics, and international relations, as well as on
people's thoughts, proved to be more permanent.

QUIZ

PIHU: We have just completed an informative presentation on the inter-war economy, and
now it's time to put your knowledge to the test with an interactive Q&A quiz. This quiz is
designed to assess your understanding of the key concepts presented during the session.

DIA: So here's how it works: We will ask a series of questions related to the presentation,
and you will have the opportunity to provide your answers.
The quiz consists of objective questions with multiple-choice options. After I present each
question, I will give you a moment to think and then reveal the correct answer.

SHIVESH : Let's see how well you've absorbed the information.Let's begin!"
MCQS

3.1

Question 1:
What were the two main power blocs during World War I?

a) Allies and Central Powers

b) Axis and Allies
c) Triple Entente and Triple Alliance
d) Allied Powers and Axis Powers
Answer: a) Allies and Central Powers

Question 2:
Which country became the world's largest overseas lender after World War I?
a) Britain
b) Germany
c) United States
d) France
Answer: c) United States

Question 3:
What was the primary innovation in industrial warfare during World War I?

a) Rifles
b) Horses
c) Machine Guns
d) Swords
Answer: c) Machine Guns

Q4. The First World War was fought mainly in

(a) Asia
(b) Europe
(c) America
(d) Africa.
ANS- B EUROPE

Q.1 Who pioneered mass production of cars in the 1920s? Answer: Ford

Q.2 What financing method fueled demand for consumer goods post-WWI? Answer: Hire purchase

Q.3 What economic cycle drove US prosperity in the 1920s? Answer: Prosperity

Q.4 Which nation became the top global lender post-WWI recovery? Answer: US

Q.5 What economic event in 1929 caused a severe worldwide depression? Answer: Depression

3.3

Question 1:
Which car manufacturer is known for pioneering mass production techniques?
a) Chevrolet
b) Toyota
c) Honda
d) Ford
Answer: d) Ford

Question 2:
What did 'hire purchase' allow consumers to do during the rise of mass consumption?
a) Purchase goods at a lower price
b) Buy goods without making any payments
c) Buy goods on credit, repaying in installments
d) Only buy goods that were on sale
Answer: c) Buy goods on credit, repaying in installments

Q3. Who adopted the concept of assembly line to manufacture automobiles?

(a) T. Cuppola
(b) Henry Ford
(c) Samuel Morse
(d) Christopher Columbus
ANS-B

3.4
Question 1:
What was the economic impact of the post-war boom in the United States?

a) A decrease in consumer spending

b) A surge in demand, production, and employment
c) A decline in mass production
d) A decrease in homeownership
Answer: b) A surge in demand, production, and employment

Question 2:
What was a major cause of the Great Depression?
a) A surplus of agricultural products
b) Increased international trade
c) Expansion of US loans to other countries
d) Low unemployment rates
Answer: a) A surplus of agricultural products

Question 3:
Which region was the worst affected during the Great Depression due to falling agricultural prices?
a) Urban centers
b) Industrial areas
c) Agricultural regions
d) Coastal areas
Answer: c) Agricultural regions

Question 4:
What was the outcome of the Great Depression on international relations and trade?
a) Increased global cooperation
b) Enhanced international trade
c) Trade disruptions and currency collapses in various countries
d) No significant impact on international relations
Answer: c) Trade disruptions and currency collapses in various countries

Q5, Which country recovered quicker than the rest after WWI
a) Germany
b) France
c)Austria
d) US
Ans- US

6. In which country did the Great Depression start?

(a) Britain, 1925
(b) USA, 1928
(c) USA, 1929
(d) Germany, 1929
ANS-USA,1929

7. Which bank’s stocks crashed in US which caused the great depression

(a) JPMorgan Chase
(b) Citigroup
(c) Wells Fargo
(d) The Federal Reserve
Ans- (d) The Federal Reserve

3.2

Question 1:
Which country faced a prolonged economic crisis after World War I due to high external
debts and competition from emerging economies like India and Japan?

a) Germany
b) France
c) Britain
d) United States
Answer: c) Britain

Question 2:
In which countries wheat production expanded during WWI recovery

a) Britain, France and Germany

b) Canada, America and Australia.
c) Austria, Hungary and Germany
d) France, Russia and Britain
Ans- Canada, America and Australia.

Q3.Which country went from the greatest creditors to greatest debtors?

a) Britain
b) America
c) Canada
d) Australia
Ans -a) Britain

Q4.These developments led to huge losses in ---------------- one in every five british
workers was out of work
a) 1922
b) 1921
c) 1923
d) 1924
Ans- b) 1921
Q5.When the war boom ended , production contracted increased .At the same time
the government reduced ----------------------------------------------to bring them into line with
peacetime revenue .
a) Local expenditures
b) Bloodshed
c) War expenditures
d) Taxes
Ans- c) War expenditures

Q6Moreover, to borrow finance war expenditures Britain had borrowed liberally from
the --------------
a)Japan
b)Russia
c)Canada
d) US
Ans-d) US

Q7. The war had led to an economic boom,that is , to a large increase in

---------------------,-------------------.-----------------------
a) Taxes,population,unemployment
b) Poverty, diseases , medications
c) Demand,production and employment
d) Hate, jealousy, bloodshed
Ans-c) Demand,production and employment
This is a picture of an immigrant mother during the Great Depression in California, 1936