WI no great depression?

In most AH threads the great depression is treated as an immutable fact. As if it would have happened no matter in what other manners the world had changed. However, the great depression was actually a very unlikely event that only happened because of a series of incredible stupid policy decisions by a variety of people in the aftermath of the stock market collapse of the '20s bubble.

Specifically three poor decisions are to blame:

1. Smoot-Hawley tarrifs, and the subsequent retaliation by other nations, led to a collapse of international trade and therefore a permanent reduction of the Production Possibility Frontier.

2. The Federal Reserve Banking System decided to tighten monetary controls and reduce currency in circulation against the advie of the NY Federal Reserve Bank. This action lead to dramatic deflation of about 33 percent.

3. President Hoover and Congress reacted to growing budget deficits by cutting spending and raising taxes, further aggravating the situation.

WI after the bubble burst in Oct '29 Congress would have suspended work on the Smoot-Hawley bill after consulting with learned economists. The Fed listened to the NY branch and held rates steady or cut them and Congress would not have worried about short-term deficits.

There would be no world-wide depression. No mass unemployment. No rise of Hitler in Germany. No New Deal in the US. How dramatically different would the world have been?

Hansmeister said:

WI after the bubble burst in Oct '29 Congress would have suspended work on the Smoot-Hawley bill after consulting with learned economists. The Fed listened to the NY branch and held rates steady or cut them and Congress would not have worried about short-term deficits.

There would be no world-wide depression. No mass unemployment. No rise of Hitler in Germany. No New Deal in the US. How dramatically different would the world have been?

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This WI is interesting. Here are some of the things that might have occured:

1. Less well educated, more class conscious. Even in the US there was classism before the war, with no war and the corresponding GI Bill, many people would have 'never gotten off the farm.

2. Higher populations [ BUT ], no deaths in the war, but the pre war was a period of relatively low birth rate any way. Was this a function of the depression?

3. Science would be more theoretical and less applied.

What about international finance ? Lending Germany masses of money to pay the reparations to France and Britain who then used the money to pay off loans to the USA from the Great War ?

Grey Wolf

This just appears to be US-centric. How would that still effect such places as Austria and Germany that would still face a financial collapse and the likely ripple effect from them throughout Europe. Weren't there certain symptoms of an economic collapse that pre-date the October 1929 fall?

David S Poepoe said:

This just appears to be US-centric. How would that still effect such places as Austria and Germany that would still face a financial collapse and the likely ripple effect from them throughout Europe. Weren't there certain symptoms of an economic collapse that pre-date the October 1929 fall?

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In Germany, yes, the multi-tiered spending plans of Wiemar were leading to problems by 1928. Britain spent most of the twenties depressed anyway, she wasn't really any worse off after 1929. France was relatively unaffected by the depression, her problems came later with the "hollow years". The only major depression that was PURELY a result of the US's was that of Japan.

I'm also not convinced that an alternate policy is plausible, possible yes. Keynesian economics were in their infancy in 1929, most "learned economists" would probably have supported tighter fisacl/monetary policies to preserve financial stability and aited for teh cyclical upturn they mostly thought was inevitable.

Well, the focus on balancing the budget is probably the one that would have been the hardest event to change because it was very accepted economic policy at the time and virtually no one disagreed with the policy at the time (indeed, FDR continued that policy for several years). But it was also the least damaging to the economy.

What the US would have likely seen was a sharp recession that would have lasted 2-3 years, similar to the steep recessions in the late 19th century.

The result would have probably a victory for FDR in '32, but without the landslide control of Congress. There would have been no mandate for a massive expansion of the government. Indeed, the rapid recovery should start just as his term in office started. He would therefore probably win a second term in '36, but wouldn't have the pull to run for an unprecedented 3rd term. There would have been no Social Security bill, nor any of the other expansionism of government. By 1940 the US government would still be very small, probably not much more than the 3.4 percent it was in 1930.

Germany would have had a deeper recession, but it would not have been as deep as it was in OTL. Once war indemnities were forgiven in 1931 the German economy would have probably recovered along with that of the rest of the world, meaning that unemployment would have topped out around 4 million, instead of 6 million. The Nazis would have gained electoral strength, but would not have received enough votes to get into power in 1933. As the economy improved they would have likely imploded as too radical. Germany would have probably seen a succession of center-left and center-right coalition governments.

Europe would see a very different '30s than in our timeline, where the greatest threat would not have been a resurgent Germany, but a resurgent Russia (Soviet Union).

In the next post I will try to outline how I think it would play out in the ATL. If someone has an idea of names of likely german presidents and chancellors in the ATL, I'm all ears.

I'm looking forward to this one, should be very interesting.

Wow ! Where to begin ? No new deal or Rooservelt in the USA . Legs cut from under Nazi party in Germany , leaving it on the periphery and allowing the Weimarr to continue . Far less urgency towards dissarmourment in Britain and France . The US becomes incredibly wealthy , with a population that is the envy of the world , in stark contrast to the Soviet Union which is still in Abject poverty . As a consiquence attempted communist insurrections in E europe fail as there is little popular suport for them amongst an increasingly wealthy midle class . WW2 never happens , certainly in the way it does in OTL . In fact given the wealth differential between the W european powers ,
USA and Russia , it is unlikely the Russians are able to expand by military means even if they wish to do so Colonialism lasts far longer without WW2 and with increased wealth to spend on both military supression and buying local patronage . We live in a very differnt world .

OK. The Fed does NOT mismanage the Deprression out of the weaknesses in the US economy. The 20's boom recovers and goes a second round.

1. No rise of the Nazis. weimar does not fall. No WWII. Holocaust is a series of pogroms in Poland and Rumania killing hundreds of thousands and chasing most of the rest of the Jews into the USSR, Italy, Hungary and South Africa.
2. No state of ISrael whose existance depends on western guilt for the holocaust over riding for a brief time Arab oil.
3. No WWII in europe.
4.FDR probably still becomes President. The demographic swing of the rise of the big city ethnics and the destructiuon of the GOP WASP majority before an agricultural collapse that was evident even in the 20's. He governs from the center left and is elected in 1936. New Deal happens in a less extreme form - Social Security and the TVA but no NRA or WPA.
5. Decolonization is far more tentative and far more gradual, especially in areas where there is any economic justificatiojn however minimal.
6. China War does not spread to Pacific War as no oil embargo. War lasts into 1960's, impoverishes China and Japan. Demographic catastrophe for China.
7. Naval building race makes US #1 naval power by 1944.
8.Russia has first nukes but not until 1960's.
9. Germany has first satellite, first IRBM but not till 1980's.
10. Europe is somewhat richer, rest of the world somewhat poorer.

Reported