The Inter-war Economy
- The impact of the first world war was felt around the world.
- During the war period, the world experienced widespread economic and political instability.
- World-leading industrial nations were involved in the first world war.
- This war is considered the first modern industrial war .
- Massive guns , tanks , aircraft, and chemical weapons were used on a massive scale.
- During the war period , industries were restructured to produce war-related goods.
- Large sums of money were borrowed by Britain from US banks and US citizens.
- The war changed the US from being a global debtor to a global creditor.
- By the end of the war , the US and its peopl e possessed more assets than foreign governments.
Post War Recovery
- The post-war economic recovery was challenging
- The world's largest economy prior to World War I, Britain, experienced a severe crisis.
- While Britain was engaged in war , Japan and India's industries were growing.
- After the war, Britain struggled to compete with Japan worldwide and regain its former position of supremacy in the Indian market.
- Britain had borrowed money from the US to pay for its wartime expenses burdened with huge external debts .
- Production decreased and unemployment rose after the war.
- At the same time, the government reduced bloated war expenditures to bring them into line with peacetime revenues.
- Agricultural economies also struggling.
- Eastern European wheat production revived again, resulting in an excess of wheat production.
- The cost of grains decreased , rural income decreased , and farmer debt increased .
Rise of Mass Production and Consumption
- Mass production was a significant aspect of the 1920s US economy.
- Henry Ford, a well-known manufacturer of automobiles , was a mass production pioneer.
- He used the production process from a Chicago slaughterhouse to his new car plant in Detroit.
- He realized that the assembly line system would allow a more quick and more efficient way of manufacturing cars.
- The assembly line required employees to perform a single task mechanically and continuously.
- This was a strategy to boost output by accelerating the rate of work .
- The T-Model Ford was the world’s first mass-produced car.
- T he United States restarted capital exports to the rest of the globe in 1923 and surpassed all other foreign lenders.
- Over the following six years, US imports and capital exports helped the global economy, European recovery, and income rise.
The Great Depression
- Around 1929 , the great depression began , and it lasted until the middle of the 1930s .
- The majority of the world's regions during this time experienced catastrophic declines in production, employment, incomes, and trade .
- Agricultural regions and communities were worst affected .
- This occurred because the fall in agricultural prices was greater than that of the prices of industrial goods.
- Causes of depression
- Agricultural overproduction was made worse by falling agricultural prices.
- Overseas loans - US overseas loans amounted to over $ 1 billion in the first half of 1928. Countries that heavily rely on US financing were currently facing a serious crisis. The withdrawal of US loans affected much of the rest of the world
- The stock market crisis had an impact on bank failure, which caused more customers to withdraw their savings, causing the banks to close.
- Increase in US import duty - US's attempt to defend its economy during the Great Depression by raising import taxes.
- The wider consequences of the Great Depression on society , politics , and international relations , as well as on people's thoughts , proved to be more persistent.
India and the Great Depression
- Indian trade was immediately impacted by the Great Depression.
- Prices in India also crashed , as international prices increased.
- The colonial British government refused to lower its revenue demands , despite the massive drop in agricultural prices .
- Peasants in India who produced items for the global market took the brunt of the Great Depression's effects.
- The decline in exports of gunny bags caused a 60% drop in the price of raw jute.
- Effects of the Great Depression in Urban India
- Industries gained tariff protection from the British government. Investments in the industry were increased.
- In contrast to rural India, urban India did not experience the same level of crisis.
- Middle-class salaried workers and town-dwelling landowners were those who earned fixed incomes they were in a better position as the prices continued to decline and everything became more affordable.