12.1.3 Postwar Recession and Prosperity

World War I devastated the world’s economies. Four long years of conflict and losses had disrupted the labor force across Europe, not to mention governments’ budgetary predictions. The reparations owed by Germany were the means by which Britain and France planned to deal with their own debt, but they also created an economic house of cards that could easily tumble down. Africa, Asia, and Latin America also felt the economic effects of the war. Before the war, African nations had traded extensively with Europe, especially Germany, which had accounted for the majority of European trade with sub-Saharan Africa. When the war began, the difficulty of trading with the combatant nations meant that many European goods became more expensive, and many Africans could no longer afford them.

Following the war, Britain and France looked to their African colonies and to Germany’s former colonial possessions for their financial salvation. Both France and Britain focused on agricultural development. Often this meant increasing opportunities for White settlers to reap profit for both themselves and the home country while limiting opportunities for Black Africans. In the portion of Cameroon given to France to administer after the war, French officials encouraged growing coffee for export. But they also allotted licenses to grow the crop primarily to Europeans and restricted the number of acres that Black Africans could cultivate. Lack of opportunity for Black people meant that White coffee growers had a ready supply of agricultural laborers who were forced to accept low wages. Similarly, in British Tanganyika (present-day Tanzania), the right to cut and market timber was reserved for Europeans. Britain and France also invested heavily in railroad building in Africa following the war, and Britain poured funds into mining operations in Nigeria, the Gold Coast (Ghana), and South Africa.

East Asian countries were also affected by the war, and the economies of several, such as China and Japan, underwent a growth period following its end. Though China was not yet heavily industrialized, it benefited from the decrease in global competition caused by Europe’s economic issues.

In the Taisho period in the 1920s, the Japanese economy was buffeted by booms and recessions, the Great Kanto Earthquake of 1923, inflation, and a serious banking crisis in 1927. Japan had become heavily dependent on trade with the United States, and its urban economy was now undermined by the protectionism practiced by both U.S. and European markets in the form of tariffs on foreign imports. Japan’s economy continued growing in the 1920s, however, as the country increased military production and began making investments in China. Inflation did occur, but the government adopted austerity policies to combat it. Japan was able to increase its exports after the war even more than China did, and trade with the United States, in particular, increased substantially.

Latin American countries saw little real economic change after the war. Many had few industries and still depended on agricultural exports for economic growth. Some faced more competition for these commodities as other regions around the world began to export increasing amounts of items such as rubber. One Latin American commodity that did see growth, particularly in Venezuela, was oil, which was becoming increasingly important in global markets. The heavily industrialized countries of South America, such as Argentina, Brazil, and Peru, provided stable but minor economic growth. They geared their manufacturing to the export market, but tariffs rates and internal changes in monetary policy during the 1920s held them back.

The United States did not suffer the physical devastation of war that the other Allies did. It emerged from the conflict in a position of economic power, a creditor nation to be repaid for its wartime loans to Britain and France. Thus, the 1920s were a decade of prosperity for the country, in which technological innovations added to the sense of affluence. Major retailers were ready to sell consumers new items like vacuum cleaners, electric ovens, and refrigerators through credit lines they paid off over time. Domestic life became significantly easier, wages increased, and unemployment was low. For U.S. citizens, the future seemed bright.