Lessons From The Past: The Direct Causes of WWII

Mercantile policies led to the spiral downturn of the Great U.S. Bull Market, the Stock Market Crash of 1929 otherwise known as “Black Monday”, adversely affected the European economy after World War I. The global economy entered a severe plunge, resulting in a great depression among the world industrial countries, which were economically interdependent. More troubles emerged from lingering effects caused by the economic disparity Europe experienced struggling to pay war debts and reparations. The Great Depression, as a result from a series of weakness in the world economy (inadequacy of currency, and the United States unreasonably “high tariff policy”) indirectly gave birth to World War II, heralded by Hitler’s Germany Third Reich. *Through the treatise “Economic Consequences of the Peace”, John Maynard Keynes eloquently discussed his theoretical economic post-war consequences yet prophetically warned about in his prediction that Germany treatment would result in another war, fulfilled in 1939.

Keynes predictions quintessentially held the truth. The protectionist policy most favorable for U.S. Industry, the Hawley-Smoot Tariff of 1930, was to blame for Europe economic devastation during post-World War I, deepening the depression around the world. United States monetary policies affected the flow and value of currency that blocked a healthy trade with Europe, which would have reinvigorated the international economy. In accordance to Keynes, economic interrelation financed by the United States aimed deliberately at the impoverishment of Central Europe through allied powers decisions made in the League of Nations. In truth, Keynes felt that President Wilson, creation of the Treaty of Versailles acted as a mechanism spreading and encouraging further perpetuation of economic ruin. Members of the League held a certain bias in retaliation to the industrial countries in Europe (like Germany), contributing greatly to the collapse of world trade that intensified world economic misery.

The United States did not complete the work of saving Europe after World War I, instead it takes on a role of indifference, isolationism, and protectionism that adversely affected the economic interdependence of the European markets. According to Keynes, “the United States disinclined to entangle herself further (after recent experiences) in the affairs of Europe.” The Treaty of Versailles allowed the exclusion of Germany from the League of Nations and disavowed the settlement of an “Inter-Ally Indebtedness”, an international loan and reform of the currency.

Keynes deemed it impractical that Germany undertakes the restrictions the Treaty had prescribed … the enforced reparations for a long period of time and Keynes suggested the following settlements :

“By fixing the Reparations payments well within Germany’s capacity to pay, we make possible the renewal of hope and enterprise.” However, the Members of the League did not “permit the continuance of Germany’s industrial life” instead it “put limits on the loss of productivity through interference of political frontiers.” The European allies “stripped Germany of all vestige of working capital, in opposition to the arguments and appeals of the American financial representatives at Paris.” Keynes made an argument as a breathtaking orator, “that year by year Germany must be kept impoverished and her children starved and crippled, and that she must be ringed round by enemies, then all proposals that Germany and the industrial populations of Europe gain a part of their former material prosperity and means of livelihood shall be rejected.

An entire cancellation of Indebtedness would have saved Europe from economic ruin. Even then, loans lent with the purpose of it being repaid in full, with pegging the value of the currency at a reasonable “fixed exchange rate”, would have revitalized the European economy; therefore, solving the consequential effects of depression experienced after World War I. Germany paid the price of peace, more than the Bolsheviks in Russia. John Maynard Keynes clearly warned in his final statements, “If we oppose in detail every means by which Germany can recover their material well-being, we must be prepared to face the consequences.”

The Treaty of Versailles was harsh against Germany, punishing it as responsible for World War I, instead of working out an agreement to ensure peace and economic prosperity, which resulted in bitter-resentments among the Nazi, the Nationalist German Socialist Workers Party to seek revenge during World War II. Severe unemployment prompted the rise of the Nazi Part in Hitler Germany. Following the Beer Hall Putsch, after a failed coup d’état attempt to overthrow the Weimar Republic, Hitler was imprisoned and wrote the Mein Kampf, representing the former and desired glory of the German Republic. Hitler blamed the Treaty of Versailles for the economic disparity in Central Europe. The presidency, authoritarian and totalitarian leadership, fell into the hands of Adolph Hitler. Germany remilitarization of the Rhineland and the invasion of Poland started World War II, amidst the unforeseeable consequences predicted by the Economist John Maynard Keynes. After the Attack of Pearl Harbor, Germany declared war on the United States; therefore, forcing the United States to take an active role, away from isolationism, a more increased involvement in European affairs, ending World War II.

The United Nations after World War II, concerned about “solidarity” after the economic ruin of Central Europe, developed the “Bretton Woods system”. Forty-four countries, all of them anxious to devise economic policies and regulations that would help the world avoid the kinds on international economic catastrophes that seemed to play a role culminating in the Great Second World War. Much of Keynes ideals were reflected in the post war international economic system.

There are three segments to the Bretton Woods, the International Monetary Fund (IMF), the World Bank for reconstruction and development (WB), and the General Agreements on Tariffs and Trade (GATT). The IMF monitored the currency exchange rates and it helped industrialized countries avoid serious economic crisis. The member states that dominated the World Bank agreed that European post-war reconstruction was a priority. The GATT ensured Free Trade agreements, reducing barriers to trade in the form tariffs, or impediments in the form of regulations against trade. Encouraged by the United States, the establishment of the European Union (EU) provided the solidarity against policies encouraging economic ruin of industrialized countries, which the Treaty of Versailles had failed to accomplish in their treatment of Germany–an indirect cause of World War II, John Maynard Keynes so eloquently predicted in the treatise Economic Consequences of the Peace.

Every action, good or bad, has its consequences.