How Economic Conditions Contributed to World War II

Following the death and destruction from World War I, leaders of some of the world’s major powers held a conference in Paris to sign the Treaty of Versailles. Unfortunately, the combination of a poorly designed peace treaty and a global economic crisis in the modern world culminated in conditions ripe for World War II.

Treaty of Versailles and Article 231

The Treaty of Versailles contained a seed that would give rise to war rather than peace when sown on the soil of economic crises. Article 231, dubbed 'the war guilt clause,' blamed Germany for the war and required reparation payments. Germany was forced to surrender colonial territories and military disarmament.

The Weimar Republic delayed war reparation payments, causing France and Belgium to retaliate. Both countries sent troops to occupy the industrial center of the Ruhr River valley region, effectively appropriating the coal and metal production there.

Economic Crisis in Germany

The loss of the coal and metal industries created an economic shock to German manufacturing, causing an economic contraction. As the government printed money to pay internal war debts, hyperinflation occurred.

While price and economic stabilization would eventually be achieved with the help of the American Dawes Plan of 1924, the hyperinflation wiped out much of the life savings of the middle class. The political consequences were devastating, with many distrustful of the Weimar government, founded on liberal-democratic principles. This sentiment and resentment over the Versailles Treaty increased the popularity of more left- and right-wing radical political parties.

The Great Depression

The onset of the Great Depression undermined any attempts at creating a more open, cooperative, and peaceful post-war world. The American stock market crash of 1929 caused a cessation of loans to Germany under the Dawes Plans and a complete recall of previous loans. The tightening of money and credit eventually led to the failure of Austria’s largest bank in 1931, the Creditanstalt, launching a wave of bank failures throughout Central Europe. This included the complete disintegration of Germany’s banking system.

Deteriorating economic conditions in Germany helped the Nazi Party grow from a small fringe group to the nation’s largest political party. Nazi propaganda blamed the Treaty of Versailles for much of Germany’s economic hardships and fueled Hitler’s rise in popularity. He was elected German chancellor in 1933.

The Great Depression motivated individual nations to adopt more beggar-thy-neighbor trade policies to protect domestic industries from foreign competition. While such trade policies can be individually beneficial, they reduce international trade and the economic benefits that come with it if every country turns to protectionism. Countries without access to raw materials experience a lack of free trade.

From Imperialism to World War

While the British, French, Soviets, and Americans had colonial empires with access to raw materials, countries such as Germany, Italy, and Japan did not. The deterioration of international trade led to the formation of regional trade blocs like Great Britain’s Imperial Preference system.

Those countries without regional trade blocs found it increasingly necessary to use military force to annex territories with much-needed resources. This required extensive rearmament and, in the case of Germany, a direct violation of the Versailles Treaty. Rearmament also reinforced the need for more raw materials and territorial expansion.

Imperialist conquests like Japan’s invasion of Manchuria in the early 1930s, Italy’s invasion of Ethiopia in 1935, and Germany’s annexation of most of Austria and parts of Czechoslovakia in 1938 were all manifestations of the need to expand territories. But these conquests drew the ire of two of Europe’s major powers, and following Germany’s invasion of Poland, Britain and France declared war on Germany on September 3, 1939. This began World War II.

The Bottom Line

Despite noble aspirations for peace, the outcome of the Paris Peace Conference did more to reinforce hostility by assigning Germany as the sole instigator of the First World War. The Great Depression and the economic protectionism it promoted would then catalyze the rise of the Nazi Party and increasing imperialist ambitions among world nations.