ABSTRACT

No single factor was more important in explaining the breakdown of the diplomatic system in the 1930s than the world economic crisis. What began as a slow fall in the business cycle in 1929 quickly accelerated into a recession of such intensity that unemployment rose to between one-fifth and onethird of the industrial workforce in the advanced economies. The system of world trade and finance, already in difficulties during the 1920s because of war debts and a weak pound, collapsed. The value of world trade fell 70 per cent between 1929 and 1932. In 1931-2, Austria, and then Germany, came to the brink of national bankruptcy. Only a timely moratorium on all debts, initiated by the United States, prevented the world credit system from seizing up altogether.