David M. Kennedy: The Great Depression: An Overview

Roundup: Talking About History

[David M. Kennedy is Donald J. McLachlan Professor of History, Emeritus, at Stanford University and author of many books on American history, most recently, Freedom From Fear: The American People in Depression and War, 1929-1945 (Oxford University Press, 1999). ]

Herbert Hoover got many things wrong about the great economic calamity that destroyed his presidency and his historical reputation, but he got one fundamental thing right. Much legend to the contrary, the Great Depression was not entirely, perhaps not even principally, made in America. “The primary cause of the Great Depression,” reads the first sentence of Hoover’s Memoirs, “was the war of 1914-1918.”

Though economists and historians continue to this day to debate the proximate causes of the Great Depression, there can be little doubt that the deepest roots of the crisis lay in the several chronic infirmities that afflicted the post-World War I international economic order and touched every country on the planet. The fighting had taken a cruel toll on key economies like those of Britain, France, and Germany, the core societies of the advanced industrialized world. The lingering distortions in trade, capital flows, and exchange rates occasioned by the heedlessly punitive Treaty of Versailles, as the economist John Maynard Keynes observed at the time, managed to perpetuate in peacetime the economic disruptions that had wrought so much hardship in wartime. What was more, memories of the war’s bitter fighting and vengeful conclusion rendered the post-war international atmosphere toxic, poisoning the wells of traditional diplomacy and dooming any efforts at concerted multi-lateral action to deal with the gathering crisis. To those abundant physical and institutional ills might be added the psychological maladies of near-religious faith in laissez-faire and the gold standard as the most sacred of orthodoxies, the economic equivalents of the Nicene Creed. All of this added up to a witches’ brew of economic illness, ideological paralysis, and consequent political incapacity.

The United States had participated only marginally, and only late in the day, in the First World War. But even that relatively modest departure from the nation’s historic tradition of isolating itself from European affairs was sufficiently costly and so disillusioning that Americans turned their country decidedly inward in the 1920s. They disarmed their military forces and swiftly dismantled the nation’s war machinery. The United States Senate refused to ratify the Treaty of Versailles, and rejected membership in the nascent League of Nations, even though the League had been the brain-child of America’s war-time president, Woodrow Wilson. In 1922 the Congress passed one of the highest tariffs in United States history, effectively closing the American market to foreign vendors. It sealed off that market even more tightly when it passed the notorious Smoot-Hawley Tariff eight years later. The government in Washington insisted throughout the post-war decade that the Europeans must repay the entirety of the loans extended to them by the U.S. Treasury during the war, a short-sighted, penny-pinching, Scrooge-like policy that added heavy additional ballast to an international financial system already staggering under weighty economic burdens. And in 1924 the republic for the first time in its history imposed a strict limit on the number of immigrants who could annually enter the country, slamming the door shut against millions of souls who wanted to claim the American dream, or the American refuge, as their own. They included (though Americans could not yet know it) would-be fugitives from Nazi persecution in the disastrous decade that followed. Militarily, diplomatically, commercially, financially, even morally, Americans thus turned their backs on the outside world and plunged head-long into the intoxicating diversions of the fabled Jazz Decade. ...

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