The Effects Of Great Depression On Foreign Policy - Essay Example

The Effects Of Great Depression On Foreign Policy Great Depression refers to a period in history, from 1929 to 1939, in which the world economy reached its lowest ebb. It was the period marked by the decline in employment, international trade, industrial production etc. Construction, heavy industry, agriculture, and mining received some serious blows. Though it started in the United States, it quickly spread throughout Europe and rest of the world. There was no part of the world that it didn't suffer from its devastating effects and the effects weren't only economic in nature—there were profound effects on culture, society, and politics of the world. Democratic governments lost their power to dictators such as Hitler and Stalin and the whole political order fell into chaos leading to Second World War. ("Great Depression")("United Kingdom: The Great Depression and its aftermath") One of the countries that suffered severely was Britain. It was still paying the price of participating in the First World War when the Great depression took over its economy. Britain tried to finance its war losses by selling off its foreign assets. It lost around 300 million pounds of foreign investments. Its merchant navy suffered the most because of its involvement in U-Boat attacks. By 1918, British foreign investments have fallen by 20%. Thus the British economy became highly sensitive to economic vicissitudes, totally relying upon few exports. The British lost its position in the international market and lost its long –standing customers of textiles, shipping, and coal. It tried to recover its economy by appreciating the pound sterling to "gold standard" at pre-war exchange rate with the dollar. This, however, made British products more expensive in the international market and thus, unemployment at home increased to 1 million. ("Great Depression in the United Kingdom") So by, the time Great Depression hit Britain, it was already afflicted by numerous problems at home and abroad—thus Great Depression gave a further blow to the already crippling economy. At home, industrial areas and Mining suffered most as the demand for British goods almost came to nil. As a result, exports fell by 50% and a large number of people was made redundant—unemployment rose to 2.5 million people and so did the Government expenditure on unemployed people. The gold standard, which was introduced by the government in the 1920s, added fuel to the fire resulting a complete disappearance of gold from the country. ("Great Depression in the United Kingdom") Expectedly, the British foreign policy was also affected. There are three aspects of British foreign policy, " Peace, Security, and Trade"---the first two became of immense importance after the First World War, especially because after the war British had become militarily weak. It lost its position as a great power and on the other hand, Germany, America, and Russia became immensely powerful. Thus the Americans, to great extent, dictated the foreign policy of the British. The further aggravation of economy during the Great Depression weakened the position of Britain on the international level. (Willert, 1928) British realized that they could not afford another major conflict with any power as the war and depression has made them very vulnerable. Thus they adopted a policy of appeasement during this period, as explained by Paul Kennedy in his book “ Strategy and Diplomacy” as follows: "the policy of settling international quarrels by admitting and satisfying grievances through rational negotiation and compromise, thereby avoiding the resort to an armed conflict which would be, expensive, bloody and possibly dangerous." The most prominent case of appeasement was that with Hitler by British Prime Minister Neville Chamberlain in late 1930s when the Munich Agreement was signed, which eventually failed.There were several reasons for the appeasing Hitler. Firstly, there was fear of the spread of communism. British believed that if they continued to fight Germany in the West and didn't pay any attention to the Soviets, the latter would quickly conquer Poland and Germany which would eventually mean the victory of communism over capitalism in Europe.They also believed that the " Treaty of Versailles" was unfair to the Germans as it restricted Germans from participating in their own internal matters. They also believed that Hitler was justified in his aggressiveness as he and Germans were, merely, reconquering what was previously and rightfully theirs. However, this was proved wrong the Germans attacked and conquered the city of Prague in 1939. There was another major reason for complying with the Germans. The First World War and Great Depression forced the Government to cut down on military expenditure. Its debt to the United States of America has increased manifold and a reduction in domestic spending would have let to public dissent and uprising.Thus cutting down on military expenditure seemed a very sensible option which was only possible if Britain had friendly relations with the World Powers.( Kennedy, 1984)( Newton, 1996) Besides that, the position and control of British in its colonies was diminishing. A large number of Indians, who had participated in the First World War as soldiers in British Army, were killed. This has resulted in large scale public dissatisfaction towards the rulers.Around 72,000 men had been killed in the war. Moreover, There were nationalist movements in these colonies.In 1927, Simon Commission was sent to India to suggest political reforms for the country. However, it was boycotted by all Indians and a large number of mass-protests and attacks on important buildings were carried out. In1929, there was an attack on Central Legislative Assembly as a protest against Public Safelt Bill and Trade Disputes Bill that would reduce the rights of Indian citizens. In 1931, British, frustrated by the economic conditions and freedom movements throughout the Empire, hanged some important revolutionaries such as Bhagat Singh will lead to increased agitation and hatred towards the British Crown. Unable to control the growing demands for independence by the Indians, the British Government passed the Government Act of 1935 in 1935 under which the All-Indian Federation was to be formed with complete provincial autonomy. Elections took place in 1937 in which Congress won most of the seats and formed the government. However, this didn't satisfy the public especially the Muslim League and its supporters who zealously demanded the independent Muslim State of Pakistan. Under the immense pressure from the Indian people for Independence and from Muslims for the creation of Pakistan, British finally gave up and India and Pakistan achieved freedom from colonial rule in 1947.( "British Period-Colonial Rule ,1919-1947") There were also some changes in Anglo- American relationships.Most of the trade of the British was carried out through sea which was also the source of great amounts of revenue for the British Government. However, after the war, British lost most of its ships and hegemony over sea-borne trade. This was confirmed in the Washington Naval Treaty when the United States of America and Britain were given equal quotas. Further, the immigration and trade policies of United States of America led to rivalry in the Pacific seas with Japan. Thus the relations suffered after the First World War and before Second World War which included the period of the Great Depression. However, they made sure they had peaceful relations as far as security and peace of the world was concerned which eventually rid the world of Nazism.The differences occurred because both had different views on security and stability issues of the world. They both believed that the Treaty of Versailles was unfair and unjust and political harsh for Germany. They both also argued that the for economic stability of Europe, the economy of Germany plays an important role and if it didn't happen , that would mean permanent economic recessions in America and Britain. They both had similar goals but wanted to differently approach them. They had disputes over their role in peace making process , over trade, debts, monetary policies etc. Britain had a responsibility towards a millions in the world and concerns about its defense situation in different areas—within the Empire and without. The economic problems and difficulties aggravated the situation. On the other side, the USA had economic power but little or no international responsibility. However, at the onset of Depression, relations did improve with efforts of Prime Minister MacDonalds. But Depression frustrated all efforts for development of healthy relations. However, by the end of depression period, some improvements took place.In 1938, a trade agreement was signed between the two countries. In 1939, Britain made an official visit to the USA after a long time.And there on, relationships picked up for a better start.(Dobson,1995) The relations between Britain and Canada were cordial during the Great Depression.Although after the First World War, Britain had lost most its economic and military power internationally and had granted Canada, Australia and New Zealand complete autonomy by 1926. However, Canada was one of the countries that were badly hit by this economic downturn. The unemployment rate reached 27% and its exports, which was one of the main sources of revenue, fell by 50%. The Holwey Tariff Act passed by the United States of America worsened the Canadian economy as the tariffs on Canadians exports were raised. Canada responded to it by increasing its tariffs and duties on American imports and instead chose to buy the same products from within the British Empire.This led to increasing trade between the two countries and both benefited from the increased revenues.Moreover, the British introduced the policy of trade protectionism in 1931-32 which gave special preference to CommonWealth states helped in increasing inter-Empire trade and reduce public debt. The newly independent states of Australia and Canada were suffering from problems caused by trade deficits and thus, this special preference given by the British created market for their exports. By 1938, the number of products being bought from the Canada more than doubled and helped Canada in achieving a favorable balance of payment.( "Great Depression in Canada") After the fall of Macdonald's government over pound issue, Neville Chamberlian began the Chancellor of Exchequer in 1931 and strict economic, especially trade policies were implemented. For the first time, the government abandoned the policy of free-trade. The Government imposed high tariffs and duties on imports. People were encouraged to buy products made within the British Empire.This was done to protect local industry and agriculture which was already facing many problems resulting from Great Depression—local demand, local production, high unemployment, high taxes etc.The Government nationalized important industries, including coal and wages and salaries were fixed for workers in these industries. By 1933, most sectors and new industries started to show signs of recovery.However, the demand for British goods continued to diminish. Many industries lost business as they failed to cope up with increased modernization and competition. While the situation within the British Empire compounded, both economically and politically, new competitors entered the international market. The United States of America became a tough competitor, along with Germany who had recovered from the Great Depression as a result of massive rearmament. From 1935 onwards, it was clear that Mussolini and Hitler had other goals than recovering from the damaging effects of Depression. The stage for another war was being set up. However, it is believed that it was the anticipation of another war that increased demand and investment and consequently pulled the world out of depression, otherwise the world would have entered another Great Depression by 1937.("The United Kingdom")(Clavin, 2000)(History) Bibliography: 1) Great Depression. In Wikipedia [Web]. Retrieved March, 04,2007, from http://en.wikipedia.org/wiki/Great_Depression 2) Great Depression in the United Kingdom. In Wikipedia [Web]. Retrieved March, 04,2007, from http://en.wikipedia.org/wiki/Great_Depression_%28United_Kingdom%29 3) Willert, Sir Arthur (1928). Aspects of British Foreign Policy. New Haven: Yale University Press 4) Kennedy, Paul (1984). Strategy and Diplomacy, 1870-1945: Eight Studies. Winchester (Mass.): Allen & Unwin 5) British Period,-Colonial Rule, 1919-1947. Retrieved March 4, 2007, from Gateway for India Web site: http://www.gatewayforindia.com/history/british_history4.htm 6) Newton, Scott (1996), Profits of Peace: The Political Economy of Anglo- German Appeasement. Oxford: Clarendon Press 7) The United Kingdom, In Msn Encarta [Web](1997-2007), Retrieved March, 04,2007, from http://encarta.msn.com/encyclopedia_761553483_27/United_Kingdom.html 8) Clavin, Patricia (2000), The Great Depression of Europe,1929-1939. New York: St Martin Press. 9) The United Kingdom. (2007). In Encyclopædia Britannica. Retrieved March  6,  2007, from Encyclopædia Britannica Online: http://www.britannica.com/eb/article-44957 10)History, Retrieved March 4, 2007, from United Kingdom, Europe. Website: http://www.britannica.com/eb/article-44957/United-Kingdom 11) Dobson, Alan P.(1995) The Anglo-American Relation in the twentieth century.New York, Routledge. 12) Great Depression in Canada. In Wikipedia [Web]. 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