.. ever, as the repercussions of the world crisis became increasingly clear, Great Britain experienced a notable decline in its exports which was even greater than the decrease in its imports. Those two factors contributed to generate a deficit in its balance of payments. Still, compared to most other industrialized countries, the U.K. got through the Depression in better economic health.6 In the case of France, things went a significantly different way. First of all, out of the four biggest industrialized countries of the time (U.S., Germany, U.K.
and France), France was the last to be hit by the Depression. Many possible reasons are hypothesized to explain that fact, but the one that is most often heard is the undervaluation of the French franc. The French economy began to feel the effects of the world crisis in 1932. Around that time the Depression caught up with the French economy through an important decrease in its exports (due impart to the shear downsizing trend in the volume of world trade), combined to an increase in imports. The problems faced by France were also worsened by the fact that it still was maintaining the gold standard long after all of the other industrialized countries-starting with Great Britain in 1931–had switched to fleeting exchange rates. As for Japan, we can safely say that it is the one country among today’s industrialized nations that got through the Great Depression with the least damage to its economy.7 Now that we have illustrated how the world crisis affected various nations in different ways, it seems only logical that they would put together solutions that were adapted to their individual problems.
In the United States, Hoover had failed to bring a solution to the Depression, and he was replaced by Roosevelt in 1932. The new president brought with him the New Deal, which can be qualified as a collection of programs aimed at stimulating different sectors of the economy (like the Agricultural Adjustment Act and the National Industrial Recovery Act). As it turned out, the New Deal was not a particularly successful economic initiative, but it was definitely a political success, probably because its goal was to help the American people (even though the means used to accomplish that were never very clear). What proved more effective at bringing economic solutions to what was really an economic problem was the “Keynesian theory”. In 1938, Roosevelt, facing the semi-failure of his New Deal, finally gave in to an increasing number of his close advisors who were confident that Keynes’ ideas would be more successful.8 The underlying theory to Keynes’ ideas was that recovery could only come through fiscal expansion–in other words, running a bigger budgetary deficit. The additional expenditures were pumped into the economy through a variety of government actions–like major public works–in order to stimulate demand by providing people with income.
In Germany, the Nazis’ victory at the 1933 elections was a major accelerating factor on the road to recovery. The Nazi program aimed first and foremost at the reduction of unemployment and it did accomplish at least that. However, the realization of the plans was conditioned by an omnipotent government which was best described by Peter Hayes’ analogy (1987): “It is perhaps accurate to say that, to German industry, the emergent economic system was stiff capitalism, but only in the same sense that for a professional gambler poker remains poker, even when the house shuffles, deals, determines the suite and the wild cards, and can change them at will, even when there is a ceiling on winnings, which may be spent only as the census permits and for the most part only on the promises.”9 One other essential vector that Nazis used toward recovery was rearmament, starting in 1936. Hitler used the defense industry to satisfy two of his im???: recreate a strong Germany while giving people work. The case of Great Britain is different. We have mentioned earlier how well (relatively to other nations) the U.K.
got through the Depression years. Let us now attempt to explain why. Three elements are often mentioned in the British recovery: the abandoning of the gold standard in 1931, the adoption of higher tariffs and the devaluation of the pound. When the U.K. abandoned the gold standard, it gave itself a competitive advantage via-a-vis those countries which did not. The new tariff laws helped by protecting domestic industries and the 30 percent devaluation of the pound added to the competitive edge of the U.K by making British products cheaper to the rest of the world.
In the face of Depression, France reacted quite differently from the other industrialized countries. Confident in its strong economy until 1932, France did not abandon the gold standard until June 1937 and did not devalue the franc until October 1936. Those two factors made France rather uncompetitive for most of the 1930’s, given the actions taken by the U.S., the U.K., and Germany. Those measures, in time, helped lift France out of the Depression but the recovery there might have occurred a few years earlier if the French had only signed their policies to that of the United States and Great Britain in particular.10 When it comes to Japan, two reasons are proposed to explain its good economic performance through the Depression: the fact that it had a planned economy, and the early understanding of the advantages of devaluating the yen. Japan improved its competitive position that way and it reacted very soon after the Depression hit.
As a result, the effects of the crisis were greatly reduced from the start. — Footnotes 1″The origins and nature of the Great Slump,” Fearn. 2″The origins and nature of the Great Slump,” Fearn. 3″Capitalism in Crisis,”edited by Garside. 4″La Crise economique dans le monde el en France,” Nogaro.
5″The origins and nature of the Great Slump,” Fearn. 6″The Great Depression, 1929-1938,” Saint Etienna. 7″The Origins and Nature of the Great Slump,” Fearn. 8″Capitalism in Crisis,”edited by Garside. 9″Capitalism in Crisis,”edited by Garside.
10″Capitalism in Crisis,”edited by Garside.