Summary
Highlights
After World War I, Germany faced severe economic disaster due to massive reparations payments required by the Treaty of Versailles and war debt. To cope, the German government printed more money, leading to hyperinflation where the value of the German Mark plummeted drastically. By November 1923, one US dollar exchanged for 4.2 trillion marks, and the price of a loaf of bread soared from 160 marks in 1922 to 200 billion marks in 1923. This crisis also impacted Britain and France, who struggled to repay their war debts to the US as Germany couldn't pay them reparations. Colonial economies also suffered due to their dependence on parent countries.
Following Russia's withdrawal from WWI and the ensuing economic devastation, Vladimir Lenin introduced the New Economic Policy (NEP) in 1923. This policy incorporated limited free-market principles into the Soviet economy to stimulate recovery, despite communism's ideological opposition to free markets. After Lenin's death in 1924, Joseph Stalin rose to power and replaced the NEP with a series of Five-Year Plans. These plans aimed for rapid industrialization, requiring the collectivization of agriculture. Small private farms were merged into state-owned collective farms, with most produce directed to feed industrial workers. This policy led to harsh repression of wealthy landowners (kulaks) and, notably, a devastating famine in Ukraine (Holodomor, 1932-33) due to state-imposed quotas and restrictions on movement, resulting in millions of deaths.
Initially, the United States' booming economy helped support European recovery after WWI. However, the US stock market crash in 1929 triggered the Great Depression, which quickly became a worldwide phenomenon due to Europe's reliance on American investment. Before this, the US government had a hands-off approach to the economy. In response to the crisis, President Franklin D. Roosevelt introduced the New Deal, a series of government-sponsored policies. This included infrastructure projects, a government retirement program, and medical insurance, signifying a major shift towards government intervention in the economy. While the New Deal's effectiveness in ending the Depression is debated, World War II's outbreak in 1939 ultimately resolved many of the US's economic hardships.