Module 5: The International Economy

The International Economy

The international economy during the Great Depression was profoundly affected by the aftermath of World War I and the interconnectedness of global financial systems. After the war, many European nations struggled to recover economically, facing massive debts and devastated infrastructure. The Dawes Plan of 1924 aimed to stabilize the German economy by restructuring its reparations payments and providing loans from American banks. Initially, this plan helped to foster economic recovery in Europe and facilitated some degree of international trade. However, as the Great Depression set in, the reliance on American loans and investments became a critical vulnerability for European economies.

As the economic crisis deepened, countries attempted to protect their domestic industries by imposing tariffs, leading to a breakdown in international trade. One of the most significant measures was the Smoot-Hawley Tariff, enacted in 1930, which raised duties on hundreds of imports. This protectionist policy aimed to shield American farmers and manufacturers from foreign competition but ultimately backfired, prompting retaliation from other nations. Many countries raised their own tariffs, resulting in a sharp decline in global trade. The escalation of tariffs further weakened the international economy, as nations became increasingly isolated and unable to recover from the widespread economic downturn.

The interplay between domestic policies and international relations during the Great Depression demonstrated how interconnected the global economy had become. The collapse of trade, coupled with the inability to sustain reparations and foreign debts, led to rising tensions between nations. As countries struggled with economic hardship, nationalist sentiments grew, often at the expense of international cooperation. The repercussions of the Great Depression were felt worldwide, reshaping economic policies and leading to a reconsideration of the roles of trade and regulation in fostering stability. This era highlighted the importance of international collaboration in addressing economic crises, lessons that would influence global policies in the years to come.