Germany not only financed this modernisation by
attracting loans from the US but also paid off
reparations from loans. Other American loans
financed unproductive municipal projects such as
town halls and swimming baths. Much of this
loan capital could be recalled at short notice and
when this happened in 1929 the economy,
already affected by declining international mar-
kets, threatened to spin out of control. The larg-
est Western percentage of unemployed was
Germany’s in 1932 with 30 per cent out of work.
The state of the US economy was the common
denominator in the world economic crisis. The
American economy had assumed such importance
that the other Western economies depended on
its good health. There is thus general agreement
that the origins of great worldwide depression are
to be sought in the US. With the American
economy running down, the prices of raw mater-
ials slumped; markets all over the world con-
tracted as a result. When the US reduced the flow
of capital abroad, and in 1930 created a prohibi-
tive tariff which prevented the European powers
from selling their goods in the US, the rest of the
world could no longer cope.
There were weaknesses in the economic struc-
ture of European nations that had already made
themselves felt, as in Britain, before 1929. The
American recession turned these problems into a
severe crisis. The depression proved to be not just
a short downturn in the business cycle, as had been
expected. The bad year from 1929 to 1930 was
followed by an even worse year in 1931. When
1932 brought no relief, hope of an automatic
upturn collapsed. World economic conditions did
improve from the low point of 1931–2 but only
gradually. The world depression continued down
to the Second World War, which, like the First,
1
THE DEPRESSION, 1929–39 155
An unemployed German war veteran, 1930. The gratitude of the fatherland. © akg-images
