The First World War shattered the global capitalist system based on European imperialism.The European powers were gravely weakened by the War, financially and politically. The conflict between the workers and the ruling classes that
controlled the government became intense.As a result of this Fascism emerged in Italy and Germany. Anti-colonial struggles got intensified as the colonial powers were weakened by the War.As we saw in the last chapter, the crisis in the
Western world had led to the outbreak of World War I. We now turn to the social and political developments in the world after the end of theWar.
The First World War led to the expansion of certain industries in the hope that the war-time boom would continue. However,when the War came to an end, the industries that grew to meet war-time requirements had to be abandoned or modified. The situation was made worse by the political complications caused by the Treaty of Versailles. A new wave of economic nationalism which expressed
itself in protectionism or in tariff barriers affected world trade. The war also placed
a heavy burden of debt on every European country.
The first huge crash occurred on 24 October 1929. This discouraged investors
and consumers to such an extent that more and more people began to sell their shares and dispose of their stocks. But there were no buyers. This was followed by the failure of American banks. The American financiers were forced to recall their own funds invested abroad.
Despite emergency measures such as cutbacks in expenditure and increased taxation,the situation did not improve in England. So England decided to leave the Gold Standard. Immediately a great number of countries left the gold standard. Each nation adopted a policy of protectionism and devaluation of currency. Devaluation forced creditors to stop lending. This led to a world-wide credit contraction.Thus the defensive measures adopted by various nations to safeguard their economic interests led to an unprecedented decline in world economic activity. As its effect was deep and prolonged economists and historians call it the
Great Depression.
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