II.

countries turned inward, trying to save their own economies without reference to, or regard for, their neighbors, through raising tariffs. They sought to relieve the sufferings of the unemployed through extended subsistence payments, on the model of the British dole, and to provide new jobs through vast programs of public works and, eventually, through rearmament.

Most of these measures were mere palliatives, however, undertaken in skeptical and hesitant fashion, and only after years of delay had robbed them of maximum effect The turn toward economic nationalism probably did as much harm as good, constricting the volume of world trade and still further reducing Europe's share in it. In Europe, as in the United States, the only policy that brought much lasting benefit was direct provision of new employment by the government. Even this was far less effective in its original form of public works than in its subsequent guise of war production. On both sides of the Atlantic, only rearmament proved a sufficiently powerful antidote to the Great Depression. It is sobering to note that the great power that was the most successful in pulling itself out of the slump-Nazi Germany—was also the one that plunged most wholeheartedly into preparation for war.

In effect, European governments were returning to the direct control of the economy they had exercised during the First World War. During the 1920s, most governments had attempted to shed their wartime economic responsibilities and return to the classical model of capitalist economy, where a “night watchman state” did little more than protect the uninhibited workings of the marketplace from outside interference. The postwar recession of 1919–1920 and the German inflation that followed had raised questions in the minds of some about whether the economy could really be trusted to heal itself unaided. But the years of stability from 1924 to 1929 made such fears seem excessive. Nostalgia for the “good old days," combined with the very real difficulties of forging a national economic consensus in peacetime, kept the role of the state a restricted one.

By the mid-1930s, however, the economic and social struggles of the decade had raised the question of the proper role of government in new and inescapable fashion. Could popularly elected governments in Britain and France simply watch as millions of citizens sank into the helpless poverty of unemployment? If not, what new model of the relations between government and the marketplace should replace that of capitalist laissez-faire? Fascist governments in Italy and Germany argued that their vision of a classless, corporatist society directed by an all-knowing state provided the only realistic response to economic crisis. Thus the Great Depression, in addition to the immense suffering it caused, also raised political issues about rival forms of government that were blending imperceptibly into the origins of the Second World War itself.

CENTRAL EUROPE: THE YEARS OF TURMOIL

Germany: From Brüning to Papen and Schleicher

The first European government to fall as a direct consequence of the Great Depression was the German ministry led by the Social Democrat Hermann Müller. The cause of its collapse was characteristic of a divergence on economic policy that was to split country

196 The Great Depression, 1929–1935