How did the Great Depression Contribute to World War 2

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It began as an American crisis with one of the darkest days in history. On October 29, 1929 the stock market crashed and it had a rippling effect that was felt around the world. The timing of the Great Depression had varied around the globe but had the same effect; poor economics and a weak peace treaty from World War I contributed to one of the world's most prolific wars of our time.

The ending of World War l brought countries together in hopes to put an end to such devastation that amounted to the war. The magnitude of death and catastrophic nature was enough for world leaders to convene with hopes that such devastation was adequate enough to end all wars. The conference was called to recognize the terms of peace after World War 1.The deterioration of global relations and the most severe economic crisis weigh heavily on nations. Italy, France, The United Kingdom and The United States were known as the “big four” and dominated the proceedings over the 30 nations that had attended the conference at the Paris Peace Conference Negotiations. The Paris conference was complicated due to Italy, France and the United Kingdom being allies during World War 1. Although the United States fought alongside these other countries the United States was not bound to honor pre-existing agreements held between the other nations.

The agreements focused on postwar redistribution of territories. These agreements often led to many disagreements between the nations and negotiations were also shaky due to the fact that other allies were absent during treaty talks. The United States only participated in World War 1 marginally but it cost the United States. Diminish global banking systems and those countries that heavily relied on American loans motivating the United States financiers to call in existing loans held by other countries. The Great Depression would have the effect of motivating individual nations to adopt more beggar-thy-neighbor trade policies in order to protect domestic industries from foreign competition.

The United States Senate refused to ratify the Treaty of Versailles and rejected membership in the nascent League of Nations. Congress in 1922 effectively shut out the American market to foreign vendors with the Fordney-McCumber Tariff, among the highest in United States history, and the Smoot-Hawley Tariff eight years later. Washington also insisted that the Europeans repay the entirety of the loans extended to them by the US Treasury during the war. And for the first time in its history imposed a strict limit on the number of immigrants who could annually enter the country. Among those eventually excluded were thousands of Jewish fugitives fleeing from Nazi persecution. The US had turned their back on the world and withheld important resources that other countries had grown accustomed to willingly taking from the United States.

According to the French and British, Germany was subjected to punitive measures. At the end of the First World War, the victorious European powers demanded that Germany compensate them for the devastation wrought by the four-year conflict, for which they held Germany and its allies responsible. Unable to agree upon the amount that Germany should pay at the Paris Peace Conference and pointed the blame towards Germany. As part of Germany’s punishment was to pay restitution payments. With such extensive payments it forced Germany’s new government approximately ten percent of its prewar territory in Europe and all of its overseas possessions. In its effort of the peace treaty this created resentment for the harsh punishment inflicted by the nations. The Germans felt that they were being placed for sole blame for World War I.

Although it began as an American crisis specifically the stock market crash the effects had rippled around the world. Many countries had felt uneasy because of widespread panic of poverty, unemployment and starvation. American companies had a huge record production figures growing so rapidly that they were making more product than the consumer demand. This launched agricultural and industrial overproduction leading to decline in sales prices and profits. When share prices started to plummet on October 24, 1929 it sent the New York Stock exchange into a frenzy. Shareholders started to panic and sell stocks causing the prices to drop further. The trend continued over several weeks until two consecutive days where the stock exchange lost one eighth of its value. Average sock sale prices had once peaked for major companies before hitting an all time low creating the Stock Market crash in mid November. It was disastrous for the US economy creating a decline in American industrial production by 45 percent. Many companies went bankrupt or ceased trading while other companies tried to cut costs by means of placing employees on unemployment.

This resulted in mass unemployment and the jobless were forced to stand in “bread lines” where it was common to see thousands of desperate people line up for food handouts. This would be one of the most devastating effects on American society. Hundreds of people starved to death and the jobless became homeless. The effect of the Great Depression began to take its toll around the world. Countries that relied on industrial and agricultural exports suffered even more. The Great Depression hit Germany hard. The impact of the Wall Street Crash forced American banks to end the new loans that had been funding the repayments under the Dawes Plan and the Young Plan. The financial crisis escalated out of control and mid-1931, starting with the collapse of the Credit Anstalt in Vienna in May. This put heavy pressure on Germany, which was already in political turmoil (Boundless, 2020).

Weimar Germany was not so dependent on export as it was on American loans that had ceased while the US pursued existing loans for repayment. German banks struggled to provide money along with credit, ultimately folding financial intuitions. The effects on Germany were just as devastating on their economy as it was on the United States with the exception that it affected the rich and the poor. While there was no shortage of food there was no way for the population to obtain it and of the millions of people, the children suffered the most of starvation and malnutrition along with related diseases that devastated their population. The deteriorating German economic condition contributed to the rise of the Nazi party from a small private group to the nations most political party.


  1. (n.d.). Retrieved February 29, 2020, from
  2. Boundless. (n.d.). Boundless World History. Retrieved February 29, 2020, from
  3. Capet, Antoine. (2020, March 6). Retrieved March 6, 2020, from
  4. The Editors of Encyclopaedia Britannica. (2020, January 26). Treaty of Versailles. Retrieved January 27, 2020, from
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How Did the Great Depression Contribute to World War 2. (2022, Feb 04). Retrieved July 19, 2024 , from

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