Totalitarianism in Germany and Italy

The global Great Depression of 1929–33 did not in itself cause the unraveling of Europe's fragile political stability of the 1920s, but it certainly accelerated its demise. The reasons for the vast economic downturn were myriad and complex. Economic expansion in both the United States and Europe had been strong between 1924 and 1929, and financial speculation abounded. The injection of American money into Germany through the Dawes Plan, beginning in 1924, created not only an artificial economic boom (by 1926 Germany would again push past Great Britain in industrial production) but also a situation of fiscal dependency. In addition, there was the problem of war reparations, which Germany could not and, later, would not repay. The crash of the American stock market in October 1929 in itself simply signaled a period of deflation. A dramatic fall in industrial production led to a fall in the price of consumer goods, a fall in wages, and a sharp rise in unemployment. With the collapse of two German banks in 1931, the world's system of credits and currencies was thrown into disarray. Communists and socialists blamed the deteriorating situation on laissez-faire capitalism. Capitalists and financiers blamed the problem on the conservative monetary and fiscal policies endorsed by politicians.