The interwar years (1919–1938) pose a challenging puzzle for students of globalization: Why did the prolonged period of relative peace and prosperity in Europe, from 1815 to 1914, give way to world war, economic collapse, and the rise of fascism and socialism?
The interwar period began with the Paris Peace Conference and the Treaty of Versailles, which formally ended World War I—the “Great War”—in 1919. The war destroyed the Westphalian System under which elites of government colluded to channel the fate of Europe’s empires and colonial subjects. The Treaty of Versailles humiliated Germany and imposed burdensome reparation payments. The war also saddled with national debts the other defeated Central Powers (Austria-Hungary and the Ottoman Empire) and the victorious Allies (France, Russia, Britain, Italy, and the United States).
This period witnessed efforts to construct a self-regulating global market, the rise of the human rights framework, and the emergence of new international political bodies, all of which ultimately failed, but which left lasting impacts on the economic, social, and political landscape of the twentieth century. Internationalists, who rejected policies of economic and political isolationism, pursued global peace through two mechanisms: the creation of the League of Nations and the restoration of the gold standard.
With the Westphalian balance of power in ruins, the U.S. president Woodrow Wilson promoted the League of Nations as the primary body for a new style of international relations. However, the League of Nations, which first met in November 1920, initially represented only forty-two nations. Germany, Russia, and the United States were notably absent. Embarrassingly for Wilson, the United States voted in 1919 against membership in the League, and the United States never joined. Although it refused to participate in international political bodies such as the League, the United States remained involved in the economic affairs of Europe. Throughout the 1920s the United States insisted upon repayment of the loans made to Britain and France during the war. France and Britain in turn insisted that Germany repay to them the enormous reparations agreed to at Versailles. But the strain on the German economy threatened to disrupt the German political and economic order and weaken European stability in general. The Dawes Plan in 1924 and the Young Plan in 1929 both refinanced international loans to Germany. But toward the end of 1929, the New York stock market boom had absorbed all available funds for foreign investment, which placed severe pressure on a German economy that had become dependent on this flow.
Other internationalists promoted a return to the gold standard. Conventional wisdom held that banknotes had value only if they represented gold. Between the 1870s and until the start of World War I, a transnational network of elites embracing market liberalism created a financial mechanism called the gold standard to extend the scope of markets internationally by enabling people in different countries with different currencies to freely engage in transactions with each other. The idea was to create a mechanism for global self-regulation by imposing a gold standard that relied on three rules: First, set the value of any nation’s currency in relation to a fixed amount of gold and commit to buying and selling gold at that price; second, base the domestic money supply on the quantity of gold that your nation is holding in its reserves, so that circulating currency will be backed by gold; and third, give residents maximum freedom to engage in international economic transactions. However, efforts to restore the gold standard and an open world economy after World War I failed to reestablish the stability of the prewar period. The openness of the international economy only served to transmit deflationary pressures from one country to another after 1929, and acted as an obstacle to national recovery programs in the early 1930s.
In the United States, the Federal Reserve Board refused to manage the economy according to the gold standard. It instead acted to neutralize the expansionary effects of large gold imports into the United States from Europe, preventing a domestic price rise while placing an even greater burden of adjustment on European economies already facing severe economic problems. Despite the United States’ contributions to the structural weakness of the interwar gold standard, it was not until the Great Depression that internationalists abandoned their experiment with restoring the gold standard. Germany, under the Nazis, built up a structure of exchange controls to close their economy off from the rest of the world, and U.S. president Franklin D. Roosevelt began institutionalizing his more protectionist New Deal policies.
More enduring signs of cultural transnationalism during this period were expressed in the form of jazz music, which was popularized initially in rapidly urbanizing North America but soon traveled to, and became localized within, Paris, as well as to more distant places such as Japan and China. Indeed, the interwar years are frequently referred to as “the Jazz Age,” and the music became an important symbol of an emerging aesthetic of modernism, and cultural modernity more generally.
Despite earnest international efforts to construct institutions to secure global peace, and some signs of cultural transnationalism, conflict within nations was widespread and laid the groundwork for another descent into total war. In 1917 the Bolsheviks established a singleparty dictatorship under the leadership of Vladimir Lenin after seizing power in the Russian Revolution. After Lenin’s death in 1924, Joseph Stalin abandoned Lenin’s economic policy for a totalitarian system of central planning. When the better-off peasants (kulaks ) rebelled in 1929 to 1930, Stalin initiated a reign of terror that killed three million people.
In the United States rapid demobilization and the lack of price controls sparked inflation and unemployment, which intensified competition for jobs among the working class. In 1919 more than twenty race riots erupted in cities across the country. White workers violently protested returning black soldiers’ demand for equal rights to employment. Americans watched their stock market roar in the 1920s, only to suffer the Great Depression in the 1930s.
In China the Manchu Dynasty fell in 1911, leaving local warlords to tax their populations. In the 1920s Mao Zedong cofounded the Chinese Communist Party, and the nationalist organization Guomindang (GMD) became a mass party under the leadership of Chiang Kaishek. By 1931 the GMD had defeated most of the warlords, confined the Communists to one rural region in the south, and gained nominal control of most of the country. Chinese peasants, hard hit by the Great Depression, helped Mao launch a comeback. Chiang was forced to contend with this Communist threat at the same time that he was battling Japanese encroachments on, and (in 1937) invasion of, Chinese territory.
Nationalism also grew in the Middle East during the collapse of the Ottoman Empire. During World War I the British had heavily sponsored Arab nationalist thought and ideology to challenge the Ottoman Empire. However, Britain’s secret Sykes-Picot Agreement with France divided the eastern Arab lands between the two imperial powers, and Arab nationalism became the basis for an important anticolonial movement.
In Italy political tensions between fascist “black shirts” and Communist “red shirts” brought the country to the brink of civil war. The fascist leader Benito Mussolini took power, later became one of Hitler’s most important allies, and provided support for the fascist cause, fueling Spain’s civil war. In 1936 Spanish military nationalists under General Francisco Franco’s leadership declared their intention to overthrow the government that replaced the monarchy. The stage was now set for World War II (1939–1945).
SEE ALSO Arabs; Bolshevism; Collectivism; Communism; Fascism; Federal Reserve System, U.S.; Franco, Francisco; Gold Standard; Great Depression; Hitler, Adolf; Jazz; League of Nations; Lenin, Vladimir Ilitch; Mao Zedong; Mussolini, Benito; Ottoman Empire; Palestinians; Riots; Russian Revolution; Socialism; Spanish Civil War; Stalin, Joseph; Totalitarianism; Union of Soviet Socialist Republics; Wilson, Woodrow; World War I; World War II; Zionism
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John G. Dale