The First World War shattered the global capitalist system based on European imperialism. The European powers were gravely weakened, financially and politically. As a result, Fascism emerged in Italy and Germany, and anti-colonial struggles intensified as the colonial powers were weakened by the War.
1. The Great Depression
- Industries that grew for war-time needs had to be abandoned or modified after the War; economic nationalism (protectionism, tariff barriers) affected world trade, and the War left a heavy burden of debt on every European country.
- Stock market crash in the US: the first huge crash occurred on 24 October 1929. People sold shares but there were no buyers; American banks failed and American financiers recalled funds invested abroad.
- England left the Gold Standard, and many countries followed. Nations adopted protectionism and devaluation, creditors stopped lending, and a world-wide credit contraction followed.
- Because its effect was deep and prolonged, economists and historians call it the Great Depression.