There reasons show how the Great depression led to WW2:
Mass unemployment (eg Germany) and poverty (eg Japan silk workers) caused great anger = people put in power/accept right-wing, dictatorial governments who told them their country was superior and it was OK for them to take what they wanted by force. It was the kind of thing they wanted to hear in the circumstances. 25 countries became dictatorships 1929-39.
America called in her loans to Germany . This caused the collapse of Germany industry = led directly to Hitler’s rise to power.
Leaders in the depression times, turned people’s attention to foreign affairs to direct people’s hatred against other countries. To have a few successes in foreign policy = more aggressive, nationalistic foreign policy.
In the atmosphere of cut-throat economic trade, the answer of countries like Japan & Italy was to build an empire – that would secure their supplies of raw materials and natural resources. Countries like Japan (Manchuria ), Italy ( Abyssinia ) and Germany (eastern Europe), therefore, set about building an empire = international conflict and tension.
5. Self Interest
Countries who were prepared to be philanthropic during the 1920s, could not afford to give way during the 1930s = countries left the League instead (eg Japan over Manchuria ). Self-interest destroyed the international co-operation ideal of League of Nations .
6. Britain and France
were suffering too – that was one reason why they did not send an army to Manchuria or impose sanctions on Italy over Abyssinia (could not afford). Again, that was a reason they did not begin to rearm against Hitler in the 1930s = appeasement/ failure of League of Nations .
Causes of the Great Depression:
1. Stock Market Crash of 1929 on Oct 29(Black Tuesday)
Within two months of the crash, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.
2. Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured=people lost their savings. Surviving banks, unsure of the economic situation did not create new loans. This exacerbated the situation leading to less and less expenditures.
3. Reduction in Purchasing Across the Board
Individuals from all classes stopped purchasing items(fear of further woes)=less production=less jobs=less money to purchase and defaulting on loans. The unemployment rate rose above 25%.
4. American Economic Policy with Europe
US created new tariff policy(Smoot-Hawley Tariff Act) in 1930 to help protect American companies from cheap imports. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.
5. Drought Conditions
Not a direct cause of the Great Depression. Drought occurred in the Mississippi Valley(The dust bowl) in 1930, it was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves.
6. Federal Reserve of US policy
After the stock market crash, the Fed cut the money supply by nearly a third, thus choking off hopes of a recovery. The Fed wanted to teach irresponsible banks a lesson and allowed them to fail.
Fed’s policy prior to the crash, i.e in the roaring twenties was also directly responsible for the crash. In the twenties, Fed kept the interest rates very low, which led to market bubble leading to the crash and then kicked the economy when it was down.