Class 10 History

Making of a Global World: Inter-war Economy

Let us see what happened in the aftermath of the First World War.

The First World War wreaked large scale havoc around the world in many senses. About 9 million people died and 20 million people were injured in the wake of the war. Most of the people who were killed or maimed were people from working age.

So, there was a significant reduction in the number of able-bodied workforce in Europe. The household income drastically reduced in Europer because of fewer earning members in the families. As most of the men were forced to engage in war women had to replace them in factory jobs. Women were now working in jobs earlier considered as male bastions.

The war also led to snapping of ties between some major economic powers of the world. Britain had to borrow from the US to finance the war. The war transformed the US from an international debtor to an international creditor. Now, the US and its citizens owned more overseas assets than foreign governments or citizens owned in the US.

Post-war Recovery

While Britain was preoccupied with war, industries developed in India and Japan. After the war, Britain found it difficult to regain its earlier dominant position in India. Similarly, it was unable to compete with Japan at the international level. At the end of the war, Britain was under huge debts from the US.

Effect on British Economy

During the war, there was increased demand for goods which resulted in economic boom in Britain. After the war ended, the demand drastically fell to come in tune with the peace-time economy. About 20% of the British workers lost their job after the war.

Glut of Wheat

Before the war, Eastern Europe was a major supplier of wheat. But during the war, Canada, America and Australia emerged as the leading suppliers of wheat because Eastern Europe was involved in war. Once the war was over, the Eastern Europe resumed the supply of wheat. This resulted in a glut of wheat in the market and prices fell. This created havoc in the rural economy.

Rise of Mass Production and Consumption

The US economy was quick to recover from the aftershocks of the war. During the 1920s, the unique feature of the US economy was mass production. Henry Ford, the founder of the Ford Motors was the pioneer of mass production in factories. Henry Ford took lessons from assembly line production in butcher shop and copied the template for the factory. As a result, more cars could be produced in less time. This system was implemented in production of other goods as well.

Improved Quality of Life

Mass production helped in increasing productivity and reducing prices. Workers began to earn better in the US and hence had better disposable income. This created huge demand for various products.

Hire Purchase Culture

The car production rose from 2 million in 1919 to 5 million 1929 in the US. Similarly, the production of white goods; like refrigerators, washing machines, radio, gramophone, etc. increased manifold in the US. There was a housing boom as well in the US market. The demand could be further maintained because of the beginning of the hire purchase culture.

Emergence of US Economy

All of this made for a prosperous US economy. In 1923, US resumed exporting capital to the rest of the world and emerged as the largest overseas lender. This also helped in European recovery and boosted the world trade for the next six years.