1.3 The impact of the Great Depression

• America's central role in global finance

  Led to financial collapse
• Boom


  1. America had experienced a colossal technological and economic boom

  2. USA lent money to Britain, France and Germany

  3. Encouraged heavy spending in those countries
• Wall Street Crash in October 1929


  Caused financial panic
• US loans were stopped and recalled


  Countries struggling to deal with the Crash then fell into economic depression
• Britain and France were forced to cut a great deal of public spending


  Recalled their own loans from Germany
• Germany owed loans to the USA and to Britain and France


  • All of which were demanding immediate repayment
  • Germany fell into economic depression and unemployment soared
• The Wall Street Crash


  Caused a global economic disaster which led directly to the rise of Germany, Japan and Italy as major aggressors, and ultimately to the collapse of the League
• Powerful dictatorships emerged because of the Great Depression
• Germany


  • Hitler offered radical economic solutions including rearmament, state control of industry and the end of Versailles reparations
• Italy


  • Mussolini, dictator of Italy, tightened his grip on the country by taking over its banks and industries
• Japan


  • Japanese trade was severely affected by the economic downturn, particularly as tariffs had been imposed by China and the USA
  • As people turned against the government, Japan effectively became a military dictators
• In each of these countries, the leaders also had military ambitions which threatened to destabilise international peace
• The League of Nations failed to protect Manchuria


  1. Japanese decided on military expansion to seize resources for their economy

  2. In September 1931, the Japanese used troops disguised as Chinese soldiers to stage an attack on a Japanese railway line, near the Chinese–Korean border

  3. The Japanese response was to invade and seize Manchuria

  4. China turned to the League of Nations for help

  5. The League sent a delegation to 'investigate' which took a year to report back

  6. When it finally rendered judgement, the League merely condemned the Japanese and ordered them to withdraw

  7. The League's members were incapable of matching Japan's military strength and sanctions would have had little effect without the backing of the USA

  8. The Japanese instead invaded more of Manchuria, claiming that the area was unstable

  9. In March 1933 Japan resigned from the League

  10. The League had shown that if a strong nation took aggressive action, it could and would do nothing
• The Abyssinian crisis effectively destroyed the League of Nations

  1. Mussolini decided to test the League's powers

  2. In late 1934, an 'incident' took place at Wal-Wal, 50 miles inside Ethiopian territory: a force of Italians was attacked and this was used by Mussolini as an excuse to invade

  3. Britain and France were ideally placed to offer military assistance to the Abyssinians

  4. Instead, the British and the French tried to secretly negotiate a scheme (known as the Hoare–Laval Pact) wherein Italy would get two-thirds of Abyssinia in exchange for support against Hitler

  5. Details of the plan were leaked in the press

  6. This not only humiliated the British and French, but effectively destroyed the League

  7. Immediately after this, Mussolini abandoned Britain and France and signed an alliance with Hitler – the Rome–Berlin Axis

  8. Hitler had also used this moment of distraction to remilitarise the Rhineland