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.

Wartime Transformations


  • 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.

Causes of the Great Depression - Teachoo.jpg


  • 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. 
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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.