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HIST363 Study Guide

Unit 8: Economic Crisis and War in the 20th Century

8a. Interpret the effect of industrialization on warfare using a variety of primary and secondary sources to contextualize World War I as an industrial war

  • Lenin argued that imperialism was the final outcome of capitalism. Was he right? Why or why not? In what ways can we apply his theory to World War I?
  • What new military weapons were introduced in World War I?
  • How did the participants in World War I apply industrial technology and production to warfare? Why did these new applications result in horrific mass casualties?
  • In what ways did military leaders fail to understand how new military technologies had made their strategies and tactics obsolete?

Several factors helped catapult Europe into World War I, although Gavrillo Princip's assassination of Archdulke Franz Ferdinand in 1914 provided the initial spark. Competition among the European powers for colonies was a primary cause, such as disagreements that erupted over Morocco and the Congo among German, France and Britain.

Russia's Vladimir Lenin had described imperialism as the last stage of capitalist development. The colonies had become a valuable source of natural resources and a market to sell finished consumer products. Combined with militarism, ethnic discontent, and a complex web of military alliances, the European leaders had created a tense atmosphere that resulted in the outbreak of war in 1914. 

Military leaders at the time tragically failed to realize the technological changes that had occurred during the Industrial Revolution. The mechanization of warfare and mass production of new weaponry created a military stalemate where millions of soldiers and civilians were killed and maimed. The industrialization of warfare had rendered traditional military strategies and tactics obsolete and useless. The generals refused to understand this and led what was supposed to be a quick and relatively bloodless conflict into one of the bloodiest events in human history.

Review Division of the World among Capitalist Associations by Vladimir Ilyich Lenin, Age of the Mass, 1914–1939: World War One, and America and World War I by Henry J. Sage.


8b. Identify the main events of the Great Depression and identify ways in which governments tried to recover from the Depression

  • What were some of the main causes of the Great Depression?
  • How did the Great Depression shake confidence in unfettered laissez faire capitalism?
  • What were the basic premises of Keynesian economics? How did President Roosevelt apply its principles to the U.S. economy after his election in 1932?
  • What measures did Roosevelt take to stabilize the U.S. economy and stimulate a recovery?

In the United States the Great Depression (1929–1933) was an unintended consequence of the booming economy that followed World War I, the so-called Roaring 20's. The postwar prosperity, and social changes that came with it, made Americans believe the economy would continue to grow and expand forever: the laissez faire capitalism and government of Adam Smith were the new norm. Speculation in the stock market, buying and selling stocks on margin, the proliferation of debt, and a lack of government regulation created the perfect conditions for an economic collapse.

When the stock market crashed in 1929, the Hoover administration relied on outdated economic ideas that suggested it should keep government involvement to a minimum. As the economy spiraled downward, Hoover was unable to restore confidence in the economy or the government's ability to stabilize it.

Following his election in 1932, President Franklin D. Roosevelt took an active role in restoring economic confidence. Roosevelt increased government spending in accordance with his belief in Keynesian economics. John Maynard Keynes (1883–1946), the British economist, believed the government should pump money into the economy to stimulate activity, promote business growth, and pay off the deficit once prosperity returned. Between 1933 and 1939 Roosevelt and Congress worked to jump start the economy by enacting the New Deal, a series of programs, public work projects, financial reforms, and regulations.

Roosevelt created new agencies and programs to bring about recovery, and imposed new regulations on the stock market, banks, and businesses. These policies were beginning to have a positive impact, but the outbreak of World War II, and mobilization for war, created the most dramatic economic improvement. U.S. industries profited enormously from increased sales to Britain, other Allied forces, and the U.S. government when it entered the war in 1941. As a result, the United States emerged from World War II in 1945 as an economic and military superpower.

Review Great Depression by Gene Smiley, Economic Recovery in the Great Depression by Frank G. Steindl, and The Old Order Falls, A Capitalist Collapse, and Global Depression.


8c. Explain the economic causes and effects of World War II

  • What were some of the economic factors, particularly in Germany, that led to the outbreak of World War II? What other factors contributed to the outbreak of the war?
  • How did the U.S. government and economy mobilize for war?
  • What impact did the war have on the U.S. economy and American society as a whole?

While multiple factors led to World War II, economic realities in Europe played a huge role. Germany was reeling from the impact of military defeat in World War I. The excessive war reparations the Treaty of Versailles imposed caused great economic hardship and resentment among the German people. Rampant inflation devalued Germany's currency and led to social strife and political conflict. These conditions set the stage for the rise of Adolf Hitler and the Nazis who promised to redress the grievances, fix the economy, and make Germany politically and militarily great again.

The eventual outbreak of war in Europe, and U.S. involvement after Japan attacked Pearl Harbor, led to rapid mobilization and the increased industrialization of the U.S. economy. The United States not only sold munitions to its allies, but was able to meet the challenge of fighting a war on two fronts against Germany and Japan.

Review Causes of World War II, The American Economy during World War II by Christopher J. Tassava, and Worldwide War, Planning the Peace, and Pilgrim's Monument.


8d. Explain the importance of the Bretton Woods Conference and the Marshall Plan to the restructuring of the world economy on U.S. terms

  • What was the purpose and outcomes of the Bretton Woods Conference? What organization did the conference create to assist with postwar economic recovery.
  • What were the main aims of the Marshall Plan? How was it developed and what were its outcomes?

At the end of World War II in 1945, the allied powers resolved to avoid repeating the mistakes they had made after World War I. Participants at the Bretton Woods Conference (1944) began establishing a new global financial system that would create a new system of foreign exchange, prevent competitive devaluations of currencies, and promote international economic growth. They created the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) to help countries rebuild and develop local economies which had been decimated during the war.

In 1948, the U.S. Congress enacted the Marshall Plan which would provide more than $15 billion in funds to countries in Europe that needed help to rebuild. The fund provided food relief and aid for the physical reconstruction of war-torn Europe. The Russians and Soviet Bloc countries refused to participate.

Review The Conference at Bretton Woods and The Marshall Plan.


Unit 8 Vocabulary

  • Bretton Woods Conference
  • Herbert Hoover
  • Imperialism
  • International Bank for Reconstruction and Development (IBRD)
  • International Monetary Fund (IMF)
  • John Maynard Keynes
  • Keynesian economics
  • Laissez faire capitalism
  • Marshall Plan
  • The New Deal
  • United Nations