The Fragmented World of the 1930s

The central themes in this chapter are the disintegration of the international economy — de-globalization — which followed the onset of the Great Depression, and the path to recovery in the main areas of the world. Cooperation was desperately needed to mitigate the effects of the slump, but it was not forthcoming. The European nations and the United States displayed disharmony and rivalry at the World Economic Conference of 1933. Each country had its own agenda and priorities; the world economy broke up into separate trading areas. The sterling area fared the best as a result of Britain's devaluation. India and Latin America are special cases within the sterling area. The gold bloc retained the gold standard and fared the worst. The United States and Soviet Union pursued opposite policies toward recovery. Another difficulty in returning to prewar patterns was created by the changes that had occurred in world markets. Competitors whose economic circumstances were affected relatively little by the war, notably the United States and Japan, had seized the opportunity created by the inability of European manufacturers to maintain their normal trading activity and had successfully invaded their markets. Japan, in particular, rapidly increased her sales to many Asian countries that had previously looked mainly to Britain for their imports. Moreover, as we have seen, huge export capacity had been built by cheap primary producers. The war also stimulated domestic production in nonEuropean countries in order to substitute for imports from Europe. This is what happened, for example, to cotton textiles and other light manufactures in India and Latin America, thereby reducing the markets upon which the prewar output of the exporting nations had depended.