Chapter 19 Chapter 3 The Great Economic Panic 3

3 The Great Depression was so severe that the general public, whether intellectuals, activists or ordinary people, was convinced that something fundamentally wrong with the world.Does anyone know of any way to govern this?Those in power clearly can't do anything about it, and those who believe in traditional 19th-century liberal formulas don't seem to be up to no good. No one listens to them anymore.As for those great economists, no matter how smart they are, how much trust can they deserve?Earlier, they were blatantly advocating that a properly functioning free market society would never allow the Great Depression to occur.Because under the self-adjusting mechanism of the market function, if there is excess production, it will soon (according to the economic law proposed by a Frenchman in the early 19th century) self-adjust.However, the words still ring in their ears, and they themselves have been caught in the turbulence of the Great Depression with everyone.According to classical economic theory, the decline in consumer demand will lead to a reduction in actual consumption. At this time, the interest rate will be reduced in the same proportion, which just meets the needs of stimulating investment.Therefore, the vacancy left by the reduction in consumption demand can just be filled by the increase in investment.But in 1933, economic reality made it hard for people to continue to believe in this theory.Unemployment has skyrocketed, but the old liberal economic theory holds that building public works cannot really increase the employment rate (this is the view held by the British Treasury).Because the wool comes from the sheep, the investment amount is only one sum, and the funds for public works are just the transfer of private works.If the same amount of money is spent on the latter, the same amount of employment can still be created.However, it seems that this statement does not make sense now.Some economists also advocate that the economy should be allowed to develop on its own, with as little interference as possible.Some governments intuitively believe that, apart from deflationary measures to maintain the gold standard, the best policy is to stick to orthodox fiscal means, balance the budget, and reduce expenditures.These practices are obviously of no avail.In fact, as the depression continued, many other scholars—including Keynes, a generation of economists who argued vigorously at the time and had the greatest influence in the next 40 years—believed that the traditional laissez-faire policy would only make the situation worse. deterioration.For those of my generation who lived through the Great Depression firsthand, the pure free market orthodoxy, apparently discredited at the time, resurged as the dominant thinking in the global recession of the late 1980s and 1990s. Incredible.This strange amnesia phenomenon just confirms and reminds one of the main characteristics of history: Whether it is the scholars who put forward economic theories or the implementers engaged in economic practice, both of them have poor memory, which is too unbelievable.Their forgetfulness also vividly illustrates a fact: society does need historians, and only historians are professional historical and social memoryrs, remembering for the compatriots the regrets that everyone wishes to forget.

And in any case, once the social economy is increasingly controlled by large enterprises, "perfect competition" has completely lost its meaning.Even economists who have always opposed Marx's theory have to admit that Marx's theory is good after all, and his prediction of capital concentration is particularly accurate.At this point, can the so-called "free market economic system" still be a thing (Leontiev, 1977, p. 78)?One doesn't have to be a Marxist, or take an interest in Marx, to see how different interwar capitalism was from the free competitive economy of the nineteenth century.In fact, long before the Wall Street stock market crashed, a Swiss banker wisely pointed out that economic liberalism is no longer a failure of universal norms (as was socialism before 1917), which explains why countries are forced to switch The causes of authoritarian economic systems—such as fascism, communism, and large corporations that act on their own regardless of the interests of investors—(Somary 1929 pp. 174-193).By the end of the 1930s, the free and open market competition advocated by traditional liberalism had drifted away, leaving only a tripartite state of the global economy: one was a market-style economy, and the other was a government-to-government economy. An economy with transactions (such as Japan, Turkey, Germany, and the Soviet Union, all of which are planned or governed by the government) and some economic activities that are regulated by international public or semi-public organizations (such as the International Necessities Commodities Association, etc.) (Staley 1939, p. 231).

Under such circumstances and atmosphere, it is no wonder that the Great Depression had a profound and rapid impact on politics and public opinion.There was no distinction between the governments at that time, such as the Hoover administration of the United States (1928-1932) on the right, and the Labor governments of Britain and Austria on the left. We can only blame them for their bad luck. , So they had to step down one after another.However, the changes are not as drastic as those in Latin America: local governments or regimes changed quickly. Within two years from 1930 to 1931, a total of 12 countries changed their dynasties, and 10 of them changed their governments by means of military coups.Although the changes in regions outside South America were not as drastic, in general, by the mid-1930s, I am afraid that few governments could not be found without changing their faces.The political situations in various countries are also very different from those before the stock market crash.Europe and Japan began to turn sharply to the right, with the only exceptions being Sweden in the north and Spain in the south.The former entered its half-century of social-democratic rule in 1932; the Bourbon dynasty of the latter gave way to an unfortunate and short-lived republic in 1931.We will discuss this history more in the next chapter.Here I will first discuss the militaristic regimes that rose up almost simultaneously in Germany and Japan (Japan in 1931, Germany in 1933).The emergence of nationalism and belligerence in Germany and Japan, the two main military powers, was nothing less than the most far-reaching and evil political consequences of the Great Depression.The gates of World War II were opened in 1931.

The massive defeat of the revolutionary left re-energized the far right, at least during the worst years of the Great Depression.The beginning of the depression shattered the hopes of the Comintern to rekindle the flames of social revolution everywhere; instead of expanding beyond the Soviet Union, the communist movement fell into an unprecedented state of decline.The reason is that the Comintern's suicide policy is hard to shirk responsibility.The Comintern not only carelessly underestimated the dangers of German National Socialism; it also pursued a policy of segregation that was tantamount to the isolation of small sects, and regarded the organized mass labor movement initiated by social democratic parties and labor parties as its greatest enemy (They even called Labor parties "socialist fascists").Looking at it now, this narrow line is really surprising and unbelievable.By 1934, the German Communist Party (KPD), which had been the hope of Moscow's world revolution and was the fastest growing and largest in the Comintern, had been destroyed by Hitler.So far, organized international revolutionary movements, both illegitimate and legal, have declined.At that time, even the Chinese Communist Party was nothing more than a ruined army, which was wiped out from the guerrilla areas in the countryside by the Kuomintang, and embarked on a long trek of thousands of miles, all the way to exile in the border areas. In Europe in 1934, only the French Communist Party remained.As for Italy under fascism, it has been 10 years since the "March on Rome" (March on Rome), and it is entering the most difficult period of the international Great Depression.Mussolini was so full of ambition that he was no longer wary of the Communist Party. That year, to celebrate the tenth anniversary of the Rome March, he released several Communist Party members from prison (Spriano, 1969, p. 397).But in a few years, all this will change again (see Chapter 5).But it became clear at the time that the immediate impact of the Great Depression was exactly the opposite of what the social revolutionaries expected, at least in Europe.

The decline of the Left is not limited to the Communist Party.Hitler succeeded in seizing power, and the German Social Democratic Party disappeared from the political situation.A year later, after a brief period of armed resistance, the Austrian Social Democratic regime also collapsed.As for the British Labor Party, it had long been a victim of the Great Depression in 1931 (perhaps it killed itself because it firmly believed in the orthodox economic dogma of the 19th century).The industrial trade unions led by the Labor Party have lost more than half of their membership since 1920. At this time, the forces of nature have been greatly reduced, even worse than in 1913. In short, socialists in all European countries have fallen into a desperate situation.

Outside of Europe, the situation is quite different.North America was rapidly turning to the left, and the United States, under the new President Roosevelt (1933-1945), began experimenting with a series of rather radical New Deal measures.Mexico, under the leadership of President Lazaro Cardenas (1934-1940), revived the vitality of the early Mexican Revolution, especially in rural land reform.Canada's depression-stricken prairie has also seen a powerful sociopolitical movement.These include the Social Credit Party, which advocates the equal sharing of social rights and interests to achieve a fair distribution of purchasing power, and the Cooperative Commonwealth Federation, the predecessor of today's New Democratic Party.According to the standards of the 1930s, both can be included in the left-wing camp.

As for Latin America, the political impact caused by the Great Depression is even more difficult to describe.The prices of important local export products have plummeted in the world market, and the finances of various countries have gone bankrupt. The government and the ruling party are like the wooden pillars of a skittles, one after another, falling all over the place.But the directions in which they fall are not necessarily the same.However, there are far more leftists than rightists, even if for a short time.After a long period of civilian rule, Argentina entered the period of military government.Although right wing leaders of fascist temperament, such as General Uriburu, were soon sidelined (1930-1932), the line of the Argentine authorities still clearly leaned towards the right, even if it might be traditionally right.In Chile, before the rule of General Pinochet (Pinochet), there were very few military dictatorships. At this time, the country’s rare military dictatorship President Ibanez (Carlos Ibanez, 1927-1931) was overthrown, and immediately became a storm. Turned quickly to the left. In 1932, under the leadership of Colonel Marmaduke Grove, the country even adopted a short-lived "Socialist Republic".In the future, it will develop into a very successful People's Front movement according to the European model (see Chapter 5).In Brazil, the Great Depression ended the 40-year-long oligarchic rule of the "Old Republic" (1889-1930), and Getulio Vargas came to power.Vargas, who can best be described as a nationalist and populist (see Chapter 4), has ruled Brazil for 20 years before and after him.As for Peru, the situation of turning to the left is very obvious, but among the new parties in Peru, the most powerful "American Revolutionary Alliance"-this is one of the few successful examples among the parties in the Western Hemisphere that build parties based on the European-style working class-its Revolutionary ambitions failed (1930-1932).It is self-evident that Colombia is moving to the left. After 30 years of conservative regime rule, it is now replaced by a liberal. The president is deeply influenced by Roosevelt's New Deal and is determined to take reform as his duty.Latin America has turned to a radical phenomenon, and it's taking shape in Cuba.As soon as Roosevelt took office, the people of the American protectorate were so inspired that they rose up and overthrew the then president.The president was deeply hated by the people, and even by the standards of Cuba at that time, he was simply corrupt.

In the vast colonial areas, the Great Depression further promoted the trend of anti-imperialism.On the one hand, prices fell sharply for the bulk of basic goods needed for the survival of the colonial economy (at least for the local public purse and the middle class).On the other hand, countries that originally belonged to metropolitan economies are now also strengthening their own protection of agriculture and employment, but completely ignore the impact these measures will bring to their colonies.In a word, the decision-making of economic affairs of European countries is all based on domestic factors.If things go on like this, it is natural that they cannot take into account the infinite complexity of the interests of production sites (Holland 1985, p. 13), and their huge empires disintegrate (see Chapter 7).

In this case, the Great Depression came, and since then began the era of political unrest in most colonial societies.The sulking of the colonial people has nothing to vent, and of course it can only be sent to the (colonial) government.Even the colonies that had just fought for independence after World War II were not peaceful.The societies of British West Africa and the Caribbean began to be disturbed by the crisis of export crops (cocoa and sugar).During the bad years, conflicts intensified in areas where anti-colonial movements had begun, and especially elsewhere where political unrest had affected the general population.During the same period, the power of the "Muslim Brotherhood" (Muslim Brotherhood, established in 1928) in Egypt was greatly expanding; the masses of India were also under the leadership of Gandhi (1931), and the second general mobilization began (see Chapter 7). .The Irish Radical Republicans, led by De Valera, won the 1932 Irish general elections.This victory may also be seen as an anti-colonial echo of the economic collapse. (Annotation: Ireland finally became independent, and Valera was the first president.)

The impact of the Great Depression was felt, and the whole world was devastated.The depth and breadth of the shock may be glimpsed from the quick global scan below.In just a few years or even a few months, political turmoil has set off everywhere in the world, from Japan to Ireland, from Sweden to New Zealand, from Argentina to Egypt.However, although these short-term political changes were extremely dramatic, the depth of the impact of the Great Depression was not measured only from this perspective.In fact, this is an earth-shattering catastrophe, destroying everyone's hope in one fell swoop: the world's economy and society will never return to the old days of the long 19th century. The period from 1929 to 1932 was undoubtedly a deep valley. After that, it was impossible to return to the beauty of 1913, and there was no need to even think about it.Old-school liberalism is either dead or not far off.Today, there are three forces competing for hegemony in the ideological and intellectual circles and the political arena.Marxist communism is one.After all, Marx's own prophecy seems to be coming true; it was announced at the American Economic Association in 1938.What's more, the Soviet Union was apparently quite immune to the Great Depression.The second force is reformed capitalism.This school of thought, no longer adhering to the free market as the best standard of economics, has instead been secretly combined with the moderate social democratic views of the non-communist labor movement, and sometimes even established a long-term relationship.This faction proved most successful after World War II.But in the short term at that time, it was at best an experimental psychology stimulated by the failure of the classical free market, and it was not fully promoted as a conscious policy or choice.They always think that when the depression is over, it will never happen again.Therefore, the social democratic policy implemented in Sweden after 1932 was a contingency measure against the failure of orthodox economic thought.Swedish economist Gunnar Myrdal, one of the main designers of the country's new economic policy, believed that the reason why the British Labor Party government failed so badly from 1929 to 1931 was because the party believed too much Because of traditional economic claims.There is also a theory that later replaced the bankrupt free market economic theory, but it was not mature at that time and was still in the brewing stage.The work that contributed the most to this school of thought was Keynes's "General Theory of Employment, Interest and Money" (General Theory of Employment, Interest and Money), which was not published until 1936.It was not until World War II and after the war that governments began to manage economic affairs from a macroeconomic perspective based on national income statistics.But in the 1930s—perhaps a little under the influence of the Soviet Union—they began to look at a country's economy more and more from a holistic perspective, and use this to evaluate the country's total output and total income.

As for the third road, it is the fascist road.The economic depression turned fascism into a worldwide movement, or rather, a threat to the world.The neoclassical theory advocating economic liberalism has become an international orthodoxy since the 1980s.However, the tradition of German intellectual circles has always been hostile to neoclassical theory (this is quite different from the Austrian intellectuals).The rise of the German version of fascism (National Socialism) was largely driven by this hostile tradition.And the government's relentless attitude that unemployment must be eradicated has also contributed to the spread of fascism.We must admit, however, that Germany's desperate response to the Great Depression was indeed swifter and more successful than that of the rest of the world (the Italian Fascist regime was less successful).However, for Europe, which has long been at a loss, there is nothing wrong with Germany's approach.As the tide of fascism rose amidst the Great Depression, one thing became increasingly clear: in this era of great turmoil, it is not just peace, social stability, and economic systems that are passing with the wind; The political systems and values ​​that were the cornerstone of liberal capitalist society in the 19th century were also on their way out.Next, we have to take a look at how this process evolves.