Today’s battle pits two great cataclysmic events in human history, the global phenomenon known as the Great Depression of the early 20th century and the turbulent times that overturned the Bourbon dynasty in France, the French Revolution.
Having a doctorate in business, I am genuinely interested in the Great Depression as it gives us a historical picture of everything that could go wrong as well as how our world economy is truly globally tied together and that isolationist viewpoints can have drastic and devastating repercussions.
The Great Depression of the 20th Century was a truly global phenomenon. Beginning in the United States in September 1929, it affected almost all industrialized countries except two, China and the Soviet Union. I’ll get back to why each country avoided the effects of the Depression as they did so for different reasons. I will also touch on why some countries came out of the economic slump quickly, a few in 1932, and others, who suffered up until the start of World War II in 1939.
The start of the depression that would affect the world started on September 4, 1929, and not on October 29th as is commonly believed. The stock market tumble in September was the signal that all was not well with the US stock market. Back in March, the Federal Reserve warned investors that there was excessive speculation going on in the market which causes a small downturn, but a lead banker from the National City Bank proclaimed that his institution would provide enough credit to pull the market through this correction. The market reversed course and began a climb back up to its high point on September 3rd, 381.17.
Today, with the Dow Industrial’s hovering around 25,000 that may seem like a ridiculously low number, but at the time, it was considered really high. Roger Babson had warned investors that “a crash was coming” which caused the downturn on the 4th but many viewed this market correction as merely a buying opportunity. But on October 24th, the beginning of the end of the bull market came crashing down on Wall Street. By the end of trading, the Dow had dropped 11 percent. The worst was yet to come.
On the following Monday, the 28th, an additional drop of 13% occurred as margin calls were demanded of investors. This caused even more panic which led to Black Tuesday where the market dropped another 12%. While there was a small rebound, another deeper slide was coming. By July 8, 1932, the Dow hit rock bottom of 41.22 which represented a loss of 89 percent from its peak.
While this was going on in the United States, the rest of the worlds stock markets were crashing as well. The Great Depression had begun.
The term “Great Depression” has been attributed to two people, US President Herbert Hoover, and British economist Lionel Robbins. The latter wrote a book, published in 1934 entitled “The Great Depression.” The former used the term in a speech given to Congress in 1931, “I need not recount to you that the world is passing through a great depression.”
The drastic drop in the market was not the only crash that happened as agriculturally; there was a dive from exaggerated heights as well. There were bumper crops of wheat that had carried over from 1928 causing considerable drops in the price which caused farmers to lose everything. There were wild fluctuations of prices based on rumors about crop failures, and subsequent reversals caused mass panic.
So now we have set the stage for the beginning of the Great Depression, but now the question arises, how did some economies recover quickly while others took years, sometimes a decade to come back from the depths. One answer was the gold standard.
The gold standard. The definition is “a monetary system in which the standard economic unit of account is based on a fixed quantity of gold.” Money, in this scenario, is asset based. Something backs the value of the currency in question. Gold was the predominant asset for the backing of currency. In ancient through medieval times, the amount of precious metal in the coin itself is what gave the currency value. In modern times, the amount of gold or silver that the country kept in safekeeping, think Fort Knox, is what gave value to paper dollars.
While adhering to the gold standard during good times is a smart idea, doing so in bad times such as a depression or a recession can be a bad idea. This would be seen when comparing which countries came out of the depression early versus those that were stuck in the mire. Staying with the gold standard would make deficit spending almost impossible which we understand today is one meaningful way to dig your way out of an economic downturn.
The first country to abandon the gold standard was Great Britain in 1931 followed quickly after that by Japan and Scandinavia. The US and Italy didn’t ditch the standard until 1932 and 33 while France, Poland, Belgium and Switzerland waited until 1935 through 1936. Looking back at the timing of each of the abandonment of the gold standard, the quicker the country left the system was how quickly their economy recovered.
Japanese Finance Minister Takahashi Korekiyo saw the problem and decided to implement deficit spending while simultaneously devaluing his currency. By 1933, Japan had emerged from the depression, but they faced a potential of an overheated economy which would lead to hyperinflation if left unchecked, so they moved to reduce the deficit which spared the country.
The United States on the other hand, under President Herbert Hoover, refused to do so as the politically and economically conservative Hoover thought that any hint of deficit spending was evil and unnecessary. His refusal to intervene caused the US economy to continue to decline which dragged the rest of the world with it except for one, the Soviet Union.
It should be rather apparent why the USSR did not suffer because of the depression because it had no ties to the rest of the capitalistic world. While they were protected from this catastrophe, they had lots of other issues like the Holodomor which I talked about in a previous podcast.
International trade was significantly affected by the Great Depression as was international banking. No country suffered worse because of this than post World War I Germany. American banks could no longer lend any money to the impoverished nation to rebuild after the war. This led to an unemployment rate of over 25 percent and general dissatisfaction from the people of Germany towards their government. This economic anger led to the rise of a fringe politician, Adolf Hitler.
Most of the world’s economies came out of the Great Depression in 1935 but did not return to pre-depression levels until 1940, and in some cases until after World War II in 1945. The effect of this massive economic downturn follows us to this day with the latest example being the Great Recession of 2007 to 2009. The response to this economic drop could use hindsight to respond quickly and avoid a depression. Unfortunately, we have not learned our lesson as the US still is saddled with massive debt caused by overspending and lacking the adequate revenue to cover the budgetary deficits, but that is a discussion for another day.
On to the next combatant in our Battle Ground History tournament, the French Revolution.
Before I get into the revolution, I’d like to suggest that anyone who doesn’t know about it, try a listen to Mike Duncan’s podcast Revolutions, where he goes into the French Revolution in more depth than I would ever attempt to do. It is one of the real gems from the man who gave us the excellent history podcast, The History of Rome.
The French Revolution was a ten year and six-month cataclysmic event that shook the world and still reverberates to this day. To cover all the repercussions of this explosion of the people against their government would take a minimum of ten episodes but that just isn’t going to happen.
What I want to do is give you a cursory overview of what happened and what ramifications of the revolution are.
First, we need to talk about the causes, which are hotly debated to this day. What we can do is start with those parts that are not being denied, which is the economic struggle that hit the French government and its people.
Two wars caused the French government to become deep in debt, the Seven Years War of 1756 to 1763, which was a global event that spanned five continents and two major factions, one led by Great Britain with allies including Prussia and Portugal and numerous German principalities versus the other side led by France with allies including Russia, Spain and Sweden. The other war was the American Revolution which the French supported financially, much to their eventual ruin.
The Seven Years War cost the French not only monetarily but in human sacrifice. It is estimated that there were over 350,000 French dead because of the war. The people of France had significantly suffered from this loss of men which affected birth rates over the coming decades.
The banks of Europe were having a hard time continuing to lend money to the Bourbon government led by King Louis XVI. The king and his advisors decided that to keep themselves in a lifestyle that they were accustomed to, they need to increase revenue through broader and more regressive taxation ideas. This put an even higher burden on the peasants and the middle class which was already chaffing from all of the taxes they were already paying.
The proverbial straw that broke the camel’s back so to say was a series of agricultural failures that preceded the French Revolution. People were starving, they were being taxed at levels that were unsustainable, their sons, fathers, and brothers were dead after the Seven Years War, and they saw an absolute monarchy that was living the high life. This was a situation that could no longer be tolerated. The amount of hatred that the people had for their government was to unleash a revolt whose ferocity had rarely ever been seen in human history.
I will forego any further discussion of the causes of the Revolution and dive right into the event itself. Again, if you yearn for more, head over to the Revolutions podcast.
From my perspective and that of many historians, July 14, 1789, is the start date of the French Revolution. It is known as Bastille Day in France, which is when I, as an exchange student in 1972, arrived in Paris.
That day the capital of France was under the control of the Bourgeois Militia of Paris who were planning to storm the Bastille which had served for years as a prison but only held about seven people in it on that fateful day in July. What the militia wanted was the 250 pounds of gunpowder that were stored in the building.
The Bastille was stormed, and the gunpowder was captured by 5:30 that evening. Ninety-eight members of the mob perished along with one defender. When King Louis XVI found out about it the next day, he is reported to have asked the Duke de la Rochefoucauld, “Is it a revolt?” “No sire, it is not a revolt, it is a revolution,” was the response.
At the time a National Constituent Assembly had come together trying to come up with a solution to the issues facing the government. All the while, the Parisian mob was running rampant, rioting and looting throughout the city. Paris and much of the French countryside devolved into mass chaos.
The National Assembly began to act independently of the king. They started with the abolition of feudalism, they stripped taxation rights of the church, dismantled the regional parliaments and began to tear down the privileges of the aristocracy.
They then published an important work known as the Declaration of the Rights of Man and the Citizen. General Lafayette worked on key parts of the draft with help from Thomas Jefferson of the United States. Its seventeen articles are considered one of the most important documents of human history, up there with the Magna Carta, the US and English Bill of Rights.
Up until then, there was a notion that there was a divine right of kings to rule their people. The declaration stated that “All the citizens, being equal in the eyes of the law, are equally admissible to all public dignities, places, and employment, according to their capacity and without distinction other than that of their virtues and their talents.”
A constitution was being put together, but the assembly failed to address the 800-pound gorilla in the corner, namely the deficit. This did nothing to resolve the other big problem to be dealt with which was the availability of food for the people.
This lack of focus on a critical issue led to a trend toward more radical ways of dealing with things. Giving the people a constitutional monarchy was no longer acceptable to the general populace. By the summer of 1792, things went to hell in a handbasket. All over France, there were revolts and unrest. To top it all off, the Prussians invaded northeast France.
On January 21, 1793, King Louis XVI was executed via guillotine. The death was seen with horror by the monarchs of Europe, many of whom wanted to invade France and take revenge. They also were scared that this precedence would put them in jeopardy. They were right to be scared. Tsar Alexander II of Russia was a prime example of a revolutionary inspired assassination.
The threat of invasion and the battles that were occurring at the borders of France led to a reactionary response within the country as they saw enemies everywhere, especially within their ranks. This led to the rise to power of the Committee of Public Safety led by Maximilien Robespierre which ran the government. This, in turn, led to the Reign of Terror.
The Reign of Terror was to take the lives of over 16,000 people during its time between June of 1793 and July of 1794 ending with the execution of the man responsible for its start, Robespierre. The terror was put into high gear after the assassination of the Jacobin leader, Jean-Paul Marat.
The Bolsheviks used the Reign of Terror as an example of the necessary use of violence to deal with both external and internal threats. They point out that the Jacobins were able to use the terror to put together a mighty army to repulse the foreign attacks of the Prussians along with the British, Spanish and Austrians. They duplicated this methodology during their own Russian Revolution and Civil War some 124 years later.
Civil War was breaking out throughout France with the revolutionary government using brutal means of repression to put down rebellions.
After the Reign of Terror, we have the construction of the Constitution of the Year III. They created a Republican government that did not believe in the concept of a democracy which was why it was so different from the American version of a republic. The revolution had seemingly come to an end, but the ramifications of it were nowhere near over.
Coming on the heels of the French Revolution was the ascension of Napoleon Bonaparte and the ensuing war that was to engulf all of Europe between 1803 – 1815 which cost the lives of over 3 million people, maybe more. Importantly, this war was to change the way the fiscal systems of many European countries operated in. Some argued that the war improved the economies of the world because of the innovations that were spurred on by the military’s needs.
The Jacobins were to influence revolutionaries in Russia leading to the Russian Revolution of 1917 as well as other revolutions throughout the 20th century.
We’ve come to the place for the Put it into Perspective segment.
At the time of the French Revolution, George Washington gave his first State of the Union address, Wolfgang Amadeus Mozart dies at the age of 35, Eli Whitney received his patent of the cotton gin, and Edward Jenner administered the first smallpox vaccination in England.
Now on to the scoring. First, we have to award the 15 points for the number of people involved. This one is a slam dunk for the Great Depression. Hundreds of millions of people were affected compared to probably a few million in France and the surrounding countries. The full 15 points goes to the Great Depression with 10 to the French Revolution.
Next up we have the 20 points for the effect of the event on the rest of the world at the time of the event. Again, we have to go with the Great Depression as it was a worldwide event, but we have to say that the French Revolution had a powerful effect on the world as well. Twenty points to the Great Depression versus 17 for the French Revolution.
The long-term effects for 25 points are what we have to decide on next. This is a real tough one as we can make a case for the Great Depression causing or certainly contributing to the outbreak of World War II, but I’m going to give the French Revolution the full 25 because of the lingering effect that still reverberates today versus the Great Depression. For that, the French get 25, and the Depression receives 20.
Finally, we have the big forty-point prize for the immediate effect on the country or countries involved. There is no doubt in my mind that the French Revolution had an enormous and tumultuous impact on France while the Great Depression did as well, not nearly as devastating as its adversary in this battle. For that, I am giving the French Revolution 40 points with the Great Depression getting 35.
The winner is, by an extremely narrow margin of two points, 92 to 90, the French Revolution which goes on to face the winner of the Fall of Constantinople versus the Cold War.
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