Most people agree that if World War I never occurred, the Great Depression would not occur. However, does the Great Depression still occur if the Central Powers win WWI? For some clarification, here’s the POD. Germany wins the Battle of Verdun, leading to Falkenhayn not being discredited and remaining in power. Because of this, unrestricted submarine warfare does not continue in 1917, meaning America doesn’t declare war. Germany knocks Italy out after Russia is defeated, and then plans the Kaiserschlacht to perfection, knocking France out, leading to a CP Victory with Germany dominant in the East with Brest-Litovsk gains and taking virtually all of France’s colonies except for Algeria, Tunisia, Madagascar, and French Guiana. AH and Ottomans also get some territory from the end of the war. Does the Great Depression still occur if the Central Powers win WWI under these conditions?
Does the Great Depression still occur if the Central Powers win WWI?
- Thread starter victhemag
- Start date
WW1 without the economic malaise that followed is like asking for a nuclear war without radiation. Win lose draw by any side is still the biggest wealth destruction exercise of the industrial era.
An excellent book on the subject is Lords of Finance- The Bankers who broke the world.
An excellent book on the subject is Lords of Finance- The Bankers who broke the world.
Well, OTL's great depression really grows out of two things:
1) The mismanagement of the US FED
2) The damage inflicted on the world economy by WW1
If the central powers win WW1, the only thing that changes is that German bankers are in a better position to mess up the world economy by their mismanagement (and trust me, the Germans had some ticking time bombs in their monetary and financial theories). So here's what could occur:
1) Germany emerges a financial superpower, an alt great depression happens when German financiers make a boo-boo (likely happens earlier than OTL's great depression, but could happen later, the spread of this depression would also be different).
2) Germany and the US emerge as equal financial superpowers, each will have their own economic crises and there's a chance we could see a "German mega-recession" and an "American mega-recession" (though of course, one could trigger the other, meaning the great depression could start in either country)
3) The economic turmoil in Germany is too great, and Germany is sucked into the tentacles of US finance, in a situation half-way between OTL Germany and OTL Britain, the Great Depression starts in the US.
Personally, I'd bet on (2) or (3).
fasquardon
1) The mismanagement of the US FED
2) The damage inflicted on the world economy by WW1
If the central powers win WW1, the only thing that changes is that German bankers are in a better position to mess up the world economy by their mismanagement (and trust me, the Germans had some ticking time bombs in their monetary and financial theories). So here's what could occur:
1) Germany emerges a financial superpower, an alt great depression happens when German financiers make a boo-boo (likely happens earlier than OTL's great depression, but could happen later, the spread of this depression would also be different).
2) Germany and the US emerge as equal financial superpowers, each will have their own economic crises and there's a chance we could see a "German mega-recession" and an "American mega-recession" (though of course, one could trigger the other, meaning the great depression could start in either country)
3) The economic turmoil in Germany is too great, and Germany is sucked into the tentacles of US finance, in a situation half-way between OTL Germany and OTL Britain, the Great Depression starts in the US.
Personally, I'd bet on (2) or (3).
fasquardon
Whats the situation with repatriation in this scenario? If there is a lot of coal (and other resources) in the reparations then that's going to really distort the European economies just as it did OTL (instead of cheap German coal on the market)?
Also, the situation could depend on whether Britain will be forced into spending on a renewed naval race with the Germans or whether there is a formal/informal treaty that reigns things in.
There is also the big question of debt and what happens to that, particularly French and to a lesser extent British loans from the US, which will likely be a significant burden to those recovering economies.
Also, the situation could depend on whether Britain will be forced into spending on a renewed naval race with the Germans or whether there is a formal/informal treaty that reigns things in.
There is also the big question of debt and what happens to that, particularly French and to a lesser extent British loans from the US, which will likely be a significant burden to those recovering economies.
Riain
Banned
What about the different situations in Russia and Britain-France? I think the Germans wouldn't let the commies win, so Russia doesn't spend the decade after the civil war trying to destroy the only productive parts of its economy. I think Britain and France would enter into a strategic economic arrangement to reduce their vulnerability to greater Germany.
This means you have 3 or 4 significant economic blocs by the late 20s. If 1 or 2 turns to shit them maybe the other 2 or 3 have enough power not to drown as a result?
This means you have 3 or 4 significant economic blocs by the late 20s. If 1 or 2 turns to shit them maybe the other 2 or 3 have enough power not to drown as a result?
My understanding is the there is little underlying consensus at to the exact causes of the Great Depression, so... I mean, we can probably conclude that there would be a serious economic crisis at some point after a Central Powers victory, but determining when it starts or how bad it becomes eventually becomes less a discussion about history and more a debate between proponents of various schools of economics.
I reckon the wikipedia page is a bit misleading in the way it presents things. The cause of the Great Depression was hot money flowing from Europe into the USA (because the USA was demanding its loans be repaid quickly after WW1), inflating a bubble in the US economy while the European economy deflated. The FED then got scared by the bubble and slammed the breaks on hard, sending the whole fragile mess over the cliff.
If the Whites win, then Russia owes significant debts to France and Britain (and probably to Germany to pay for "help rendered" in this scenario). And I am dubious about the Germans being so willing to intervene in Russia with enough force to make the disunited and dysfunctional Whites (or at least one faction of them) able to win. The POD is in 1917, Germany has already lost enormous amounts of blood and treasure to the war and even if they go on to win it, the dead boys won't come back to life and the hungry civilians won't be filled with warlike vigour without the passage of time. Germany, like everyone else by this stage in the war, wanted peace. After they've gotten all they can from the defeated enemies (including Russia), how can the government persuade the people to keep fighting for years more bringing a puppet regime to power in Russia?
As to Britain and France, by 1917, the majority of the damage has already been done and they're already deeply in hock to the Americans. Plus, in this scenario there'll be whatever reparations Germany demands from them. Britain and France would continue to be important, but they'd be hollowed out by this late defeat, and lack the importance to be the epicentre of something as big as the great depression.
fasquardon
Riain
Banned
I don't mean that the Germans fight for the Whites, rather their occupation forces (25 divisions in 1919) support them with sanctuary, military supplies, advisors and perhaps the odd military action. Maybe that or a few more deliberate interventions would be enough, but we're not talking about keeping WW1 levels of fighting going. Further, we're talking about a depression some 5-10 years after the war/revolution ends rather than following hard on the heels, there is some time for things to settle, rebuilding to start and wealth to be generated. Russia is a big country with a lot of natural resources and after 5-10 of peace will be able to regain its health again and become something of a factor.
Again, we're talking 5-10 years after the war, long after the initial shocks of resource transfers are done and well into the recovery period. Futher, I'm not talking about France and Britain and a pair of single entities, but rather as the core of a customs union to counter German MittleEuropa arranging their trade flows in mercantilist fashion in order to strengthen their national power in a cutthroat world. Now if both the US and Germany have big recessions at the same time GB-F are going to suffer, but if it is only 1 then such a large economic unit will be able to better cope than a pair of small, disparate units.
Aphrodite
Banned
Its hard to blame WWI rather than the many bad decisions after for an economic depression that happens over a decade later. Any alternate timeline will depend on the many decisions made afterward but several general factors should be kept in mind.
Reparations: Contrary to popular opinion, the reparations tab was not economically burdensome. Based on Germany's 1913 spending, half the tab could have been paid out of reduced military spending and eliminating the princely pensions. While Germany had suffered during the war, with peace growth resumed from technological change and population growth. By 1930, the burden was little. Paying the reparations would have been far cheaper than the NAZI arms buildup.
Politically, any reparations would have been a burden on any German government. After all, we're raising your taxes to give the money to the allies is not a winning campaign slogan
These same factors would apply to Entente nations paying reparations to Germany.
Debts: The Entente incurred large debts to the Americans. Any secured loans would represent a wealth transfer to the Americans while the Americans are going to find any unsecured debts uncollectable. From a macro economic viewpoint, this isn't too important. Total wealth doesn't change but title does.
Tariffs: Now this is where a German victory becomes interesting. As early as the September program, the Germans are contemplating an economic union of some sort. This would include the minor, neutral states of Europe as well. In prewar Europe, tariffs and trade barriers were a significant burden on the Continent. The extreme case was Russia where the cost of tariffs exceeded military spending. If Germany does impose an economic union of sorts, growth will be far more rapid in the postwar era in those states included.
Reparations: Contrary to popular opinion, the reparations tab was not economically burdensome. Based on Germany's 1913 spending, half the tab could have been paid out of reduced military spending and eliminating the princely pensions. While Germany had suffered during the war, with peace growth resumed from technological change and population growth. By 1930, the burden was little. Paying the reparations would have been far cheaper than the NAZI arms buildup.
Politically, any reparations would have been a burden on any German government. After all, we're raising your taxes to give the money to the allies is not a winning campaign slogan
These same factors would apply to Entente nations paying reparations to Germany.
Debts: The Entente incurred large debts to the Americans. Any secured loans would represent a wealth transfer to the Americans while the Americans are going to find any unsecured debts uncollectable. From a macro economic viewpoint, this isn't too important. Total wealth doesn't change but title does.
Tariffs: Now this is where a German victory becomes interesting. As early as the September program, the Germans are contemplating an economic union of some sort. This would include the minor, neutral states of Europe as well. In prewar Europe, tariffs and trade barriers were a significant burden on the Continent. The extreme case was Russia where the cost of tariffs exceeded military spending. If Germany does impose an economic union of sorts, growth will be far more rapid in the postwar era in those states included.
Aphrodite
Banned
I think you will find the era of Anglo-French cooperation and Franco-German rivalry to be over. France will bow to reality and accept that Germany can't be beat. Any peace, especially one where France is losing colonies, is going to include clauses rendering the French no military threat to Germany
I also think, that any peace that leaves Germany dominant on the continent means the end of the British Empire and the subjection of the United Kingdom. Others will disagree on this and discussion should probably be left to a different thread
Several factors converged to produce a “perfect storm” to create the American Great Depression.
- The economy since the Civil War was driven by the expansion of railroads and steel. By the late twenties, the U.S. was saturated with railroads and that growth turned to stasis. Timber bridges were already being converted to steel bridges. The new automobile industry and skyscrapers would not yet pick up the slack. It was a market driven downturn that was inevitable. This factor often gets neglected. [It follows the Kondratieff Long Wave economic theory: a downturn driven by the unexpected stoppage of growth in a critical economic sector.]
- Actions of the Fed, bad investment practices that led to the 1929 crash and cash flow (debts, loans) following WW1 always get the blame, but they were not the only factors.
- Once the turndown began, the Smoot-Hawley tariff act only made it worse.
- Then, in the peak of the downturn, the dust bowl hit at a worse possible time.
- For centuries, the American frontier had been the “relief point” in hard times for people seeking a new start, either from Europe or eastern US (or Canada). With the elimination of the frontier, the stresses mounted. California resisted movement of settlers from the dust bowl states.
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The Canadian Prairies, American Great Plains and the Ukraine all suffered a series of droughts during the 1930s. Famine soon followed.
The problem started during the 1860s when railroads and gov’ts encouraged immigrants to settle and plow the prairies. High grain prices also encouraged farmers to plow more land during WW1.
Since the 1870s and 1920s were unusually wet periods “rain followed the plow.” They plowed vast averages of marginal dry grasslands.
When droughts arrived during the 1930s, some farmers starved while others migrated to California.
I'd say scenario 2 is the most likely, do you think the Depression ITTL would be less severe than the one we got IOTL? Also, could the Depression have started even earlier, such as in 1920-21?, as the US had a major recession at this time but it was handled well, preventing a Great Depression from occurring in 1920.
This starts with two unsupportable premises. I've not run across anyone with much knowledge of early 20th Century economics who saw that large a connection between the two. The after effects of the Great War aggravated the Depression, but there were other ongoing economic trends that made a period of deep economic change, or high volatility, inevitable in those decades.
This came just when the agricultural sectors of nations like Germany, the US, & several other key players changed from the dominant sector to subordinate in factors like labor use. In both the US and Germany the transfer of agricultural labor to urban industrial labor hit the tipping point where the latter absorbed the majority of the labor. Two problems occurred with this in the 1920s. 1. The effects of these droughts pushed the transfer along faster. 2. Skilled agricultural workers could not adapt thru skills fast enough and were stuck in the low wage unskilled tier. The "Okies" Farmers migrating from the plains to live in poverty in California are the poster child for this trend. It was occurring globally. Thus instead of absorbing surplus labor in the US as thru 1910 or 1920 the agricultural sector was now creating surplus labor & at a high rate.
#1. here is critical to understanding the global economy of the first half of the 20th Century.
Whenever a new technology replaces a older tech there is a displacement in labor. Skilled labor, including management, in the mature industries incur a significant income loss as the the surplus shifts to the new sector/s. If you look at the number of technology changes 1910-1940 its larger than usual. In the US railroads, coal, agriculture, horse breeding (for industrial use as well as agriculture), steam power, & others were mature industries. those were not growing or absorbing labor their previous rates. This displacement of labor has a profound economic effect as the skilled labor in one sector is displaced and becomes unskilled labor while reeducation occurs. The means a drop in wages and related economic activity. When wages declined & labor fled the rural towns in the 1920s-50s it mean a huge loss of capitol as businesses in the rural population were unable to recoup long therm investment. Ditto for small towns that lost the revenue stream, unable to pay for past investment in infrastructure. This has a knock on effect back into the industrial sector as purchasing by labor in the mature or dealing sectors labor declines. ie: Sears saw its mail order division grow at a slower rate & decline in net revenue as the rural market shrank. The new generation of urban customers preferred brick and mortar venues & Sears made a expensive expansion investment in that direction.
#3 was repeated globally as proponents of market restrictions increased and free market policies declined. The Great War aggravated this, but there had always been a tension between the two & there was a trend towards restriction & government intervention before 1914 as the European empires consolidated their positions. This touches back on mature industries, which tend to try to protect their cash flow via artificial controls on the markets. It also is reflected in the rise of socialist doctrines which tend towards intervention in the markets to protect labor.
The comment below is illustrative of the ongoing tension between free and 'controlled' markets.
When you examine the global economy from 1914 or 1900 it looks like a perfect storm of deep changes in the worlds economy. This peaked out some time between 1920 & perhaps 1940. Economic change is never cheap & the multiple trends of deep change reaching their high or low point after 1920 were costly across the world. Efforts to restore things 'back to the good old days' through antiquated or fadish economic policy, warfare, and denial made this worse.
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