The Economic Depression and The Dictatorship

In 1929, John J. Raskob, an executive at General Motors, penned a seminal and significant article titled “Everybody Ought to Be Rich.” In it, he discussed the potential for anyone to secure an excellent investment by committing a modest sum of fifteen dollars monthly to the American stock market. This piece was heralded by the American press as a revolutionary article, offering a swift recipe for wealth accumulation. While Raskob advocated for investment, the American populace was experiencing what is commonly referred to as the American Dream. Following the conclusion of World War I, the United States emerged as a global powerhouse, often dubbed the ‘bank of the world,’ facilitated by the American banking system’s reconfiguration of lending mechanisms that enhanced accessibility. This era led to a proliferation of automobiles, household electrical appliances, and an increase in homeownership thanks to mortgage financing. The United States was living through the so-called Roaring Twenties, a period marked by the widespread enjoyment of jazz music, which resonated in night-time shows under the glow of electric lights that reached every urban and rural community across the nation. This era served as an exemplar of individual prosperity and is attributed to the capitalist system, with the banking sector and stock markets at its core.

One morning, as Joe Kennedy, the father of the thirty-fifth President of the United States, JFK, was getting his shoes polished on the streets of New York, a shoe-shine boy offered him financial advice regarding the stock market. Kennedy senior took this as an ominous sign that the market was not functioning properly. He reasoned that if a shoe-shine boy could predict market movements, there must certainly be something amiss. Consequently, he sold most of his stock holdings and exited the market, advising his close associates to do the same. Regardless of the precise accuracy of this anecdote, what followed was a gradual market collapse, culminating on Black Tuesday, October 29, 1929, when the Dow Jones Industrial Average lost 13% of its value in a single day. This precipitated a frantic selling spree of stocks at market prices in an effort to exit collapsing companies, creating an oversupply that led to the complete collapse of the American stock market in the following weeks, ultimately leading to what was later termed the Great Depression.

The Great Depression led to the American stock market losing approximately 30 billion U.S. dollars in value, consequently impacting employment levels, which fell by 25%. This left more than 11 million American citizens jobless, and millions lost their homes due to the inability to meet mortgage payments. A series of economic collapses ensued, ultimately halving domestic production due to weak demand.

The structure of the American economic system played a significant role in exacerbating the economic crisis, as the United States embraced an extreme capitalist principle, strictly prohibiting government intervention in the economy. This stance was in part due to America’s positioning itself at the forefront of combating communism, which it perceived as a threat to both the economy and freedom. Therefore, any move towards market intervention was met with significant apprehension by American politicians, media, and even unions. However, during the Great Depression, many American institutions and unions demanded government intervention to shield citizens from the catastrophic effects of the economic collapse. This aligned with the theories proposed by Maynard Keynes, which essentially challenged the fundamental ideas of Adam Smith about leaving market regulation entirely to the “invisible hand.”

Keynes’ theories found a receptive audience in the United States, particularly with the newly elected President Franklin D. Roosevelt. He swiftly announced a series of immediate economic support measures under a new initiative he called the “New Deal.” This program implemented Keynes’ principles through an American framework, including social welfare benefits, health insurance, and economic revitalization incentives. The funding for this generous spending was secured through a series of stringent economic measures both domestically and internationally, including demanding repayment of debts and accrued interest from European countries, which the United States had loaned to before, during, and after World War I. This created a significant economic crisis in European countries still reeling from the aftermath of World War I.

While the United States was preoccupied with its internal affairs and successive crises, significant changes were brewing on the other side of the Atlantic. Adolf Hitler utilized the economic collapse to galvanize the German people under the leadership of the National Socialist German Workers’ Party, known as the Nazi Party. He vocally rejected the policies of deprivation and humiliation imposed on Germany following World War I and criticized the enormous reparations demands that had led to the collapse of the German currency due to severe economic conditions and the government’s resultant need to print excessive amounts of money, which further precipitated economic decline.

This situation persisted, marked by instability and political and economic tensions in Germany, until it reached what is known as hyperinflation in 1929, following the American stock market crash previously mentioned. Unemployment soared, exceeding 6 million jobless individuals, representing more than 30% of the German population. This dire situation coincided with a period of American isolationism, as the United States focused inwardly on repairing its own economic conditions. This withdrawal further impacted the global economic landscape, notably affecting Germany, which was already grappling with the catastrophic consequences of the post-war reparations and economic management failures.

Adolf Hitler, a recipient of two Iron Crosses for his service as a corporal in the German Army during World War I, emerged as one of the most radical leaders in Germany during the twentieth century. His ideas advocating the rejection of war reparations imposed on the German people and the necessity of reclaiming Germany’s occupied territories gained substantial traction during that turbulent period. Capitalizing on his formidable oratorical skills, Hitler led the Nazi Party to win first place in the 1932 German elections with 37% of the vote. The following year, he was appointed Chancellor by the then President of Germany, and by 1933, the Nazi Party had increased its electoral share to 44% of the vote.

Shortly after these elections, the Reichstag (German parliament) building was set on fire, an event that Hitler and the Nazi Party, with the support of other parties, used to push through the Enabling Act. This law granted Hitler absolute powers, which he used to implement a series of economic and military measures that would later define Nazi Germany’s policies. By 1934, the number of militia forces loyal to the Nazi Party had grown to approximately 2 million armed members, and in the same year, following the death of the President, Hitler assumed the role of Führer (‘Leader’) with the support of the German Army, confirmed by a public referendum in which he allegedly received 90% of the vote.

Subsequently, Hitler initiated a series of administrative, military, and economic measures aimed at restoring Germany to prominence on the world stage. These began with actions against Jewish capital and later extended to accusations of unpatriotism against all Jews, blaming them as one of the causes of Germany’s defeat in World War I. Hitler also empowered the Gestapo (German Secret Police) to have a significant presence in political and civil life, ultimately leading to the abolition of all other political parties and establishing the Nazi Party as the sole political entity in Germany. This series of actions not only consolidated Hitler’s absolute control over Germany but also set the stage for the aggressive expansionist policies and the atrocities of the Nazi regime.

Hitler constructed a regime with a singular face and mind, controlling the narrative through his Minister of Propaganda, Joseph Goebbels, who depicted all of Hitler’s actions as significant achievements against the economic and political oppression that Germany faced at the time. While Hitler launched numerous projects with an economic veneer, they were multifaceted endeavors that harbored more political and military motives than developmental aims. Utilizing a typical solution for economic downturns, he initiated extensive road and bridge projects, promoted as achievements of a modern Germany. However, at the time, the country did not have a sufficient number of vehicles to utilize these roads, which later revealed their true purpose: facilitating the movement of military units in the event of war, a plan that indeed came to fruition during World War II. This strategy also served as a short-term plan to employ the large number of unemployed German youth, disregarding genuine economic viability, while continuing to pump substantial funds from the national budget into war production and directing all economic and industrial projects to serve his power obsession.

The harsh economic experience Germany endured after the severe losses of World War I and the impact of the subsequent American and global economic crises profoundly influenced the German populace, one of the most cultured and educated societies in the world. This exacerbated the German tendency towards nationalism and populism, coinciding with the presence of an articulate leader skilled in rallying public emotions. Hitler transformed Germany, a former powerhouse in industry, culture, and literature, into a dictatorial state that oppressed its people through murder, displacement, and repression, posing a direct military threat to the world and causing significant harm to the global fabric by encouraging other nations to adopt similar policies to resolve disputes with their neighbors.

From 1935, Hitler began building a large army, aided by the economic collapse and its impact on economic output and the high unemployment rates, which he countered with lavish spending on the armed forces. This was seen by the Germans as a suitable means to revive a strong Germany and also a way to provide livelihoods for themselves and their families amidst widespread joblessness. A significant portion of production factors was diverted towards war production and enhancing military industries, shifting German intellect to war factories to advance German military industries. This increased the decline in industrial production and boosted military output, emboldening Hitler to embark on reckless military adventures supported by the military without any domestic opposition, ultimately leading to Germany’s collapse in 1945.

The economic collapse in the United States, separated by an ocean and thousands of kilometers from Europe, had a profound impact on the fabric of the European continent. It fostered a monster armed with populism and vengeance, costing the world millions of lives in wars and millions more in the aftermath of these conflicts, along with tens of billions of dollars from the wealth of nations.

The direct economic impact of all economic crises throughout history typically occurs on three levels: immediate, which affects market indicators and capital stocks; short-term, which directly influences people’s lives in terms of inflation and economic growth over a medium term; and long-term, which affects the social fabric and changes societal perceptions and behaviors, potentially leading to shifts in cultural, social, religious, or political directions. Thus, the ultimate cost is often steep if economic troubles are able to shape an unchecked consciousness among the masses, resulting in nations paying a price for decades to come.

This analysis illustrates how deeply interconnected the global economic system is—problems in one part can lead to severe consequences in another, echoing through generations. The cascading effects of economic downturns can trigger widespread social and political changes, demonstrating the critical need for robust economic policies and international cooperation to manage and mitigate these impacts effectively.