Economic

History
Answers to exam questions : 1 - 52

by

Global SGH
Table of content:
1. Agriculture in Middle Ages. The concepts of manoralism and feudalism. .......................................... 4
2.The revival of the cities ........................................................................................................................ 5
3.Guilds .................................................................................................................................................... 6
4.Trade in middle ages.Hansa. ................................................................................................................ 7
5. Black Death .......................................................................................................................................... 8
6. Great geographical discoveries and first colonial empires. ................................................................ 9
7. 16th-century demographic expansion and the price revolution. ..................................................... 10
8. Agriculture in Eastern and Western Europe in 16th and 17th centuries .......................................... 11
9. Baltic Trade in Early Modernity, ........................................................................................................ 13
10. Social structure of Poland & Lithuania before 1795 ....................................................................... 14
11. Mercantilism.................................................................................................................................... 17
12. Struggle for colonies in 18th century ............................................................................................... 19
13.Industrial Revolution in England ...................................................................................................... 20
14.French Revolution and Napoleonic Wars (1789-1815) .................................................................... 24
15. Laissez-faire and free trade ............................................................................................................. 25
16. Industrialization of continental Europe:.......................................................................................... 27
17. Industrialization of continental Europe - latecomers...................................................................... 28
18. United States in 19th century. Economic consequences of civil war. .............................................. 30
19. Latin America in 19th century. ......................................................................................................... 31
20. China & India in 19th century. .......................................................................................................... 33
21. Second Industrial Revolution........................................................................................................... 34
22. Revival of colonialism after 1870. ................................................................................................... 35
23. Protectionism .................................................................................................................................. 36
24. Gold Standard and bimetallism. ...................................................................................................... 37
25. Banking 19th century: ..................................................................................................................... 37
26. Business cycles in 19th century : ...................................................................................................... 39
27. The industrial working class and labour movements of the 19th century ...................................... 43
28. Land reforms in Central and Eastern Europe in the 19th century.................................................... 47
29. Polish lands and their industrialization before 1914....................................................................... 49
30.Modernization attempts and backwardness in 19th century .......................................................... 52
31.World War I ...................................................................................................................................... 53
32. Polish hyperinflation and stabilisation: ....................................................................................... 58
33. World finances in the interwar period. ........................................................................................ 59

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34. Soviet Union and the centrally planned economy before World War II ......................................... 61
35.The Great Depression ....................................................................................................................... 63
36.The Great Depression in Poland ....................................................................................................... 67
37. The new states of central and eastern Europe before World War II ......................................... 69
38.Franklin Delano Roosevelt and New Deal ........................................................................................ 70
39. Totalitarian and democratic economic policies in 1930’s. ......................................................... 71
39. Polish economic policy in 1930’s ..................................................................................................... 75
41. Japanese economy from Meiji to WW II. ........................................................................................ 77
42. Land reforms in Central & Eastern Europe (1918 – 1939) ........................................................ 80
43. World Agriculture 1918-1939 .......................................................................................................... 84
44. World industry after 1918-1939...................................................................................................... 86
45. World War II and it’s consequences ................................................................................................ 88
46. Keynesian economic polices ......................................................................................................... 92
47. Bretton Woods System.................................................................................................................... 92
48. Marshall Plan ................................................................................................................................... 94
49. European integration after World War II. ....................................................................................... 97
50. Soviet Union after 1945................................................................................................................... 99

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1. Agriculture in Middle Ages. The
concepts of manoralism and
feudalism.
(Rolnictwo w Średniowieczu. Koncepcje "panowania" i
feudalizmu)

Agriculture: (1) Lord-peasant as dominant relation. Both sides have limited

(although asymmetrical) right to the same property. (2) Open fields divided
into lord's land, peasants' fields and commons (usually pastures and woods).
(3) Peasants worked their own land (fief) and that of the lord. Peasant owned
labour service to the lord, additionally possessing police and judical rights over
the peasants in exchange for military protection.

Feudalism: (1) Term was coined by French lawyers of 17th century. Used,
usually inappropriately, to non-Western countries, like Japan, to underline
similarities in society situation. It lasted until bourgeoisie revolution. (16th
century- Nederlands, 1640's- England, 1789- France, Napoleonic time- rest of
Europe, 1860's- Eastern Europe). (2) Feudalism described relation between
lords and vassals. It helped restore public order and strengthen royal power.
Karol Marx found feudalism as "stage in history that preceded capitalism; the
entire social and economic structure of medieval Europe; oppressive and
hierarchical".

Manorialism: (1) characterised by the vesting of legal and economic power

in a lord, supported economically from his own direct landholding and from the
obligatory contributions of a legally subject part of the peasant population
under his jurisdiction. These obligations could be payable in several ways, in
labor (the French term corvee is conventionally applied), in kind, or, on rare
occasions, in coin.
(2) Manors each consisted of up to three classes of land: (a) demesne, the
part directly controlled by the lord and used for the benefit of his household
and dependents; (b) dependent (serf or villein) holdings carrying the obligation
that the peasant household supply the lord with specified labour services or a
part of its output (or cash in lieu thereof), subject to the custom attached to
the holding; (c) free peasant land, without such obligation but otherwise

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subject to manorial jurisdiction and custom, and owing money rent fixed at the
time of the lease.

Difficult words:
fief- lenno, feudum
in kind- w naturze
demesne- majątek, właśnośd
serf- chłop paoszczyźniany, sługa, kmied
villein- paoszczyzna

2.The revival of the cities

(odrodzenie miast w Średniowieczu)

-disputable continuity with both Roman towns in Western Europe and tribal
centers in Central and Eastern Europe
-continuity in the Bizantine Empire and its former lands but different path of
development
-11th century- beginning of revival fueled by trade and crafts
-municipal self-government (commune) as revival's distinctive feature
-fast political emancipation of the cities (Legnano 1176)

The Craft Guilds were formed in a similar way to the Merchant Guilds. A
group of tradesmen or craftsmen engaged in the same occupation joined
together. There were Craft Guilds for every trade or craft performed within a
Medieval city or town. These are the most important trades or crafts: Masons,
Carpenters, Painters, Cloth Makers, Tanners, Bakers, Shoemakers (Cobblers),
Apothecaries, Candle Makers

Here is a link to the more detailed list: http://www.middle-ages.org.uk/medieval-

london-guilds.htm

The Battle of Legnano was fought on May 29, 1176, between the forces of
the Holy Roman Empire, led by emperor Frederick Barbarossa, and the
Lombard League.
Result: Decisive Lombard League victory.
Importance: Free Italian Cities defeated the Holy Roman Empire, what allowed
them to retain the sovereignty and accelerated economic development

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 The biggest Middle Ages Cities (I don't add number of population, cuz it was
changing really fast, cuz of invasions and epidemics): Constantinople, Paris,
Florence, Venice, Ghent (Belgium), Norwich. The biggest Polish city was
Cracow.

Difficult words:
municipal- miejski, komunalny
to retain the sovereignty- zachowad suwerennośd
Tanner- garbarz
Cobbler- szewc
Apothecary- aptekarz

3.Guilds

The guilds in the Middle Ages were an important part of Medieval life. A higher
social status could be achieved through membership to Merchant guilds. There
were two main kinds of Medieval guilds - Merchant Guilds and Craft Guilds. The
word “guild” is from the Saxon “gilden” meaning "to pay" and refers to the
subscription paid to the Guilds by their members.
1-Merchant guilds
 The system of Feudalism during the Middle Ages allowed the lords and
owners of the land to tax the people and their trades. As trade increased
in the Middle Ages the taxes became excessive. A single person had no
chance of making any objections to the rate and amount of tax that the
lord demanded. The idea of Merchant Guilds was born. A Merchant Guild
was an association of trades interested in international commerce.
● most merchant guilds confine membership to inhabitants of one city,
usual high entrance fee give them an exclusive character
● the urban social upheavals of the late 13th and 14th centuries, the
Zunftrevolution (“guild revolution”) transfer all or part of the political
and economic powers of the participate to the craft guilds
● 15th century - most European merchant guilds disappear or survive as
attenuated bodies, sometimes as kind of social clubs

2-Craft guilds

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 ● The Craft Guilds were formed in a similar way to the Merchant Guilds. A
group of tradesmen or craftsmen engaged in the same occupation joined
together. There were Craft Guilds for every trade or craft performed
within a Medieval city or town. These trades or crafts included all
artisans from specific branch of industry or commerce. hierarchical body,
divided into the three categories of masters, journeymen, and
apprentices
● proof of technical competence (masterpiece) demanded from
journeyman before awarding the status of master
● greatest expansion after 1250
● besides economic importance, significant social, religious, military and
political duties to perform
● primary economic objective: establishment of complete monopoly in the
common profession, hence focus on obligatory membership
● despite frequent attempts at price-fixing, usually not efficient due to
other guilds’ competition or the breach of the monopoly by craftsmen
working beyond city limits.
● municipal supervision and interference in craft policy common at all
stages of guild history
● from the 15th century onward additional intervention of national
governments
● the need of avoiding guild regulations was the primary motive behind
the putting-out system
● drift of industrial activity from the towns into the countryside left the
guilds isolated from the main currents of economic power
● guilds as obstacles to free competition were the basic feature of
feudalism in industry and hence their abolishment after the French
Revolution
● revival of guilds under the rule of communist party – obligatory
membership in Poland since 1948, its abolishment in 1988

4.Trade in middle ages.Hansa.

The Middle Ages saw the rapid expansion of Medieval trade. The most
important factor in the expansion of trade and commerce were the Crusades.
The Crusades, which had facilitated the relations with Eastern countries,

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developed a taste in the West for their indigenous productions, gave a fresh
vigour to this foreign commerce and trade, and rendered it more productive
by removing the stumbling blocks which had arrested its progress
- Dark ages is a term referring to the precieved period of cultural and economic
deterioration and disruption that occurred in Europe following the decline of
the Roman Empire 476
- Growth of medieval society – 11th-13th centuries. The Crusades and the
Levantine trade. Venice and Genoa, decline of Byzantine and Muslim trade.
Champagne fairs as a meeting point of Northern and Southern European trade
- Mongol incursions, Pax Mongolica
- The black death was one of the deadliest pandemics in human history.
Thought to have started in China, it travelled along Silk Road and had reached
the Crimea by 1346. From there, probably carried by Oriental rat flears residing
on the black rats that were regular passengers on merchant ships, it spread
throughout the Mediterranean and Europe.
- 14th century crisis of feudalism in the west are crisis resulting from a
maladjustment of the factors of production. A demographic collapse, followed
by an agricultural depression characterized by low grain prices.
- 15th-century growth and preconditions for agrarian dualism. Bruges as
leading trade centre between North and South, growth of Antwerp

The Middle Ages was a period of European history from the 5th century to the
15th century which finished by the Italian early start of modernity.

5. Black Death
The Black Death was one of the deadliest pandemics in human history, peaking
in Europe between 1348 and 1350. It is widely thought to have been an
outbreak of bubonic plague. Thought to have started in China, it travelled along
the Silk Road and had reached the Crimea by 1346. From there, probably
carried by Oriental rat fleas residing on the black rats that were regular
passengers on merchant ships, it spread throughout the Mediterranean and
Europe.
The plague is thought to have returned at intervals with varying virulence and
mortality until the 18th century. Europeans were smitten by the Black Death a
third or more of the people died; a half when you count the losses inflicted by
psequellae.
The 14th century eruption of the Black Death had a drastic effect on Europe's
population, irrevocably changing the social structure. It was, arguably, a serious
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blow to the Catholic Church, and resulted in widespread persecution of
minorities such as Jews, foreigners, beggars, and lepers.
Medieval people called the catastrophe of the 14th century either the "Great
Pestilence"' or the "Great Plague".
Several pre-existing conditions such as wars, famine, and weather contributed
to the spread and severity of the Black Death.
The great population loss brought economic changes based on increased social
mobility, as depopulation further eroded the peasants' already weakened
obligations to remain on their traditional holdings.
In Western Europe, the sudden shortage of cheap labour provided an incentive
for landlords to compete for peasants with wages and freedoms, an innovation
that, some argue, represents the roots of capitalism. In many ways the Black
Death and its aftermath improved the situation of surviving peasants, notably
by the end of the 15th century. In Western Europe, labourers gained more
power and were more in demand because of the shortage of labour.
Sources: Mainly Internet, as Lecture 1 mentions Black Death in one line (slide
11) and Landes mentions it briefly (page 40).

6. Great geographical discoveries

and first colonial empires.
Great geographical discoveries
● 1492 – first voyage of Columbus (Spain), discovery of America
● 1498 – Da Gama (Portugal), passage to India
● 1517-1519 – Magellan & Elcano (Spain) - first encirclement of the globe
● 1519-1521 – Cortés (Spain) conquers the Aztec Empire
● 1532-1533 – Pizarro (Spain) conquers most of the Inca Empire
● 1577-1580 - Drake (England) – second circumnavigation of the World,
contesting Spanish-Portuguese duopoly
First generation of colonial empires
● Treaties of Tordesillas (1494) and Saragossa (1529). Most of Americas -
Spain. Indian Ocean – Portugal. Philippines - Spain, Moluccas (Spice
Islands) – Portugal.

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 ● Portuguese colonial empire: Brazil, Spice Islands, Hormuz, Goa, Melaka,
Macao, African possessions, trade with Japan. Pursuit of trade monopoly
on Indian Ocean (failure in Aden)
● Spanish colonial empire: American viceroyalties (white settlement, big
estates), Caribbean Islands, Philippines (Manila galleon – result of
Portuguese monopoly on Indian Ocean)
● 1503 – Casa de Contratación (House of Trade) set up in Seville in order to
manage American colonial trade (monopoly until 1713)
● separation of colonies during Spanish-Portuguese union (1580-1640) –
inability of policy coordination, the Dutch and the English expel the
Portuguese from most of the outposts, after ca. 1630 – Portuguese ally
with England
● breakup of Spanish empire after Napoleonic Wars (resistance of Creoles
against authorities sent from Madrid, US Monroe doctrine of 1823
supported by Britain) and war against USA (1898, loss of islands)
Read more in: Slides 1-5 from Lecture 4, Landes pages: 422-441, 163-164
Morawski

7. 16th-century demographic
expansion and the price
revolution.
Demographic expansion:

After the wars (Hundred years war 1337 to 1453), the Great Famine in 1315,
and plagues (Black Death-bubonic plague-1348-50) in the Late Middle ages,
when the population diminished by 2/3 in the West (less in the East), the

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population of Europe only started to rise again in the16th century do to
developments in agriculture (described in the next question) and trade.

Price revolution- A high rise in inflation (in XV-XVII century in Western Europe.)

Caused by:
● a large inflow of gold and silver from the New World brought by the
Spanish (too much money) (the classic explanation, now questioned if it was
that important)
● the demographic expansion (too many people, increase in global
demand)
● increase in the circulation of money due to an intensification of trade
and an increase in the number of transactions
● debasement of coins (Debasement was often done by the issuing body,
where less than the officially specified amount of precious metal was contained
in an issue of coinage, usually by alloying it with a base metal.)
● the monopolization of trade of many important things (prices higher in a
monopoly)

Too much money, too many people => increase in demand (agriculture was
having a hard time keeping up, prices of food were rising faster than the prices
of industrial products=> dualism in agriculture) => inflation of prices

8. Agriculture in Eastern and

Western Europe in 16th and 17th
centuries
New in agriculture in general:
● Crop rotation (after a while it was impossible to get more land by
cutting down forests etc, and the three-field system (trójpolówka) was a waste
because it did not use all the land)
● New technology which increased productivity per person (which in turn
caused people to be less needed on the farms=>could/had to work in
industries=> industrial rev/urbanization) It was needed because in Europe in
general there was more land than labo

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 ● Reclamation, irrigation (melioracje) and fertilizers became common
(intensification of agriculture)
● New plants (from colonies such as the potato which became a basic food
source in many parts of Europe, corn), improving the existing varieties
(selecting the best grains, thinking about what you’re planting)

Dualism in agriculture: the West went toward industrialization and the East
refeudualisation.

● beginning from 14th century specialization of Central&Eastern Europe in

primary exports (metals, wood, linen, hemp, grain, cattle) (comparative
advantage) The East couldn’t get into the colonial trade because it was
far from the ocean and wasn’t developed enough to compete with the
West.
● together with 15th-century population growth rising demand for
agricultural products all over Europe
● the answer: refeudalisation of agriculture in the East
● Elbe as a border between two areas (in present day Germany)
● domination of Amsterdam in the Baltic trade – source of future Dutch
supremacy (new trade routes as a result of the great expansion), later
surpassed by the English, London
● no access to the Baltic – specialization in cattle

Results:
● Fall of Eastern European cities due to absence of internal market (no
point o city)
● General economic backwardness in the East
● Dominance of nobility in politics because they owned the land, and got
the money from selling the crops
● Enlightened absolutism policies in 18th century (At its core was a critical
questioning of traditional institutions, customs, and morals, and a strong
belief in rationality and science.)
● In case of Poland: partitions (rozbiory, jakby ktoś nie wiedział)
1772,1793,1795!
● Need of land-enfranchisement reforms in 19th century (uwłaszczenia)
● Delayed or uneven start to capitalism because of prolonged feudalism

Crisis in 17th century due to the Thirty Year War =>stagnation in trade,
money was being used up by war=>crisis in Eastern Europe because it
could not sell to the West => revolutions and serf revolutions

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9. Baltic Trade in Early Modernity1,
from “God’s playground” N. Davies, chapter 8: HANDEL: The Polish Grain Trade.

*Baltic Trade in Poland as the main index of the economy from 1450 for about
3 centuries.

Why it started from II half of the XV century? External demand (Western

Europe) for Polish corn (rye, (buck)wheat, barley, hemp) was nicely matched by
favorable prospects of increased internal supply (Poland)

*Danzig (Gdansk) very essential in Polish trade from 1466 to 1648 (Chmielnicki
Uprising)

Exported grain through Gdansk: 1490 – 12k t, 1540- 23k t, 1560 – 152k t, 1620
– 271k t2

Trade with Gdansk was predominated by Dutch people and Englishmen. 500
local merchants served the operations of foreign firms, mainly German
Danzigers (Gdanszczanie).

Polish producer: great magnates, smaller landowners (had 2/3 villages) , casual
producers (i.e. minor nobility, tenant farmers)

Cycle of the trade: Polish producer Danzig merchant Foreign firm

Gdansk: in 1600 5 times larger than Warsaw and 3 times larger than
Cracow/Poznan. Had self-government, own militia, raised its own finances, and
minted its own money. Very high standard of life. Cosmopolitan. During the
best times, Danzig handled ¾ of the Polish total foreign trade!

Grain trade not the best to fund a solid state. The Grain Trade did not develop
many skills, techniques, or forms of organization. It did not require
manufacturing process, nor any special raw materials from abroad. It
contributed nothing to the Polish treasury, as there was little tax on the grain
trade.
1
Early modernity – 1500-1800

2
k- one thousand, t - ton

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Spectacular growth of the export trade in grain & spectacular growth of the
conditions of serfdom (panszczyzna)

Until 1650, grain prices in Amsterdam twice as high as in Danzig, and prices in
Danzig twice as high as from polish producer.

The annual trip down the Vistula soon became a prominent institution of Polish
social life. Together with war, it provided one of the few occasions when
provincial noblemen could see the world at large, offering excitement and
adventure to generations of men whose experience was otherwise confined by
the bounds of their estates. It was a major cultural stimulus, spawning a rich
new vocabulary for the Polish language, and inspiring numerous works of prose
and verse.

10. Social structure of Poland &

Lithuania before 1795
from “God’s playground” N. Davies, chapter 8: SZLACHTA: The Nobleman’s
Paradise.

Privileged estates: the Nobility, the Clergy, the Burghers, the Jews & the 5th
state: the Peasantry which was largely subordinated to all estates but the Jews.
Estates cannot be confused with socio-economic status! i.e. a landless noble
family could be poorer than their peasant neighbor.

The Nobility: had legislative supremacy, many privileges, and immunities.

Monopolies in landed property, in government, administration & central policy.
(Sadly) organized the states in its own interest. Why so many privileges? : they
provided military service, but the nobility actually fought little for the state.

The Clergy: Churches extended their jurisdiction over all their members in holy
orders & over their lands and properties

The Burghers: control of municipal self-government; their commercial activities

governed by the guilds and confraternities.

The Jews: craftsmen, tradesmen, money-lenders, innkeepers, fences, brokers.

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The Peasantry: the most numerous estate (60% in 1569), worked for all and for
themselves.

The Polish–Lithuanian Commonwealth (or Union) was a kingdom of Poland and

Lithuania, and the largest and one of the most populous countries of 16th- and
17th-century Europe with some 400,000 square miles (1,000,000 km2) and a
multi-ethnic population of 11 million at its peak in the early 1600s. It was
established at the Union of Lublin in July 1569, and was destroyed by the 3rd
partition of Poland in 1795.

The Union possessed features unique among contemporary states: its political
system was characterized by strict checks upon monarchical power. These
checks were enacted by a legislature (Sejm) controlled by the nobility
(szlachta). This idiosyncratic system was a precursor to modern concepts of
democracy, constitutional monarchy and federation. The two component
states of the Commonwealth were formally equal, yet Poland was the
dominant partner in the union.

The Polish–Lithuanian Commonwealth was marked by high levels of ethnic

diversity and by relative religious tolerance,
though the degree of religious tolerance varied over
time. The population of the Commonwealth was
never overwhelmingly either Roman Catholic or
Polish. The Commonwealth comprised primarily
four nations: Lithuanians, Poles, Belarusians and
Ukrainians; the latter two usually referred to as the
Ruthenians.

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16
11. Mercantilism.

Mercantilism- a form of nacionalism, that holds that the prosperity of a nation

is dependent upon its supply of capital, and that the global
volume of international trade is "unchangeable"
Reasons:
● increasing professionalization and technification of the wars of the era-
need of funds
● need to increase fiscal income, and amount of gold and silver among
borders (trade decreased this amount leading to deflation- european
countries paid for commodities form asia, africa in gold and silver)
● loss of political importance of feudal lords
● Reformation; spread of protestant values (hard work, saving money,
reasonable expenses, possessing precious commodities: silver, gold)
(Weber)
● increase of political conflicts (internal and international)
Basic features:
● increasing military potential
● increase the quantity of precious metals inside the borders (bullionism)
● determination to achieve trade surplus
● support of domestic industries, development of the navy
● protectionist tariffs, monopolist trade companies for exchange with
particular regions
● usually open immigration policies favoring qualified artisans but also
merchants and agricultural settlers (exception – religious matters -
France expelling Huguenots 1685)
● in absolutist countries additional prestigious projects with no profit
possibilities
Forms:
● England- system of trade companies, abandonment of some monopolies
as a source of political corruption after 1640, Navigation Acts, wars for
trade
● Netherlands- free-trade attitude, dominating world trade ca.1650,
exception – Dutch East Indies – extremely exploitative and monopolist
policies
● France (colbertism-initially anti-dutch charcter, later also anti-english)
- trade protectionism, bullionism, economic integration of the state
(abandonment of internal duties, development of roads and canals),

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 successful as for production of luxuries (mirrors, furniture, textils), fiscal
drainage due to numerous wars
- impossibility of financing both the strongest navy and the strongest
land army together with general overregulation of the economy - crisis
of the French model during the War of the Spanish Succession (1701-
1714)
4. Germany (later Austria, Russia Prussia)-cameralism- high fiscalism
(especially in Prussia) and anti-import stance, concentration on
unification of separate lands and overcoming their feudal autonomy, lack
of colonies
5. Poland- low fiscalism and complete military disability
Opposition to mercantilism:
1. role of Enlightment’s critique of absolutism, the political basis of
mercantilism
2. American Revolution (famous Boston Tea Party)
3. physiocratism- source of the wealth is in agricultural production, not in
precious metals
4. laissez faire, laissez passer- government does not intervene, no
protectionism
5. failure of physiocratic ministers (Turgot) to balance French crown’s
budget
6. English liberalism (Adam Smith, Wealth of Nations, 1776):
-human labour is the source of wealth
-free competition on the internal market and free trade in external
relations are the best ways to full use of human potential to create
wealth (overregulation and trade monopolies are obstacles, trade is a
positive-sum game)
7. Smithian economic growth through increased division of labour and
trade
8. Call for limited role of government (defence, police, public works and
institutions not profitable to a single entrepreneur)

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12. Struggle for colonies in 18th
century
● English primacy in 18th century heyday of slave trade
● Anglo-French maritime rivalry, (Second Hundred Years’ War,
1688-1783 or 1815)
● Glorious Revolution (1688) and War of Grand Alliance (Nine
Years’ War 1689-1697, no territorial gains or losses on the
English side) (war between France and a coalition of European
powers, known as the League of Augsburg (and, after 1689, as
the Grand Alliance). Louis XIV of France took advantage of the
absence of Emperor Leopold I on a campaign against the Turks
and of the promised support of James II of England to invade
the empire and devastate (1689) the Palatinate)*
Creation of Bank of England, public debt separated from royal
debt
● War of Spanish Succession (1701-1713, Gibraltar, Asiento
privilege for England, Anglo-Portuguese Methuen Treaty - 1703)
(Spanish loyal to Archduke Charles+the Holy Roman
Empire+Great Britain+the Dutch Republic+Portugal+Duchy of
Savoy vs. Spanish loyal to Philip V+France+the Electorate of
Bavaria, over a possible unification of the Kingdoms of Spain
and France under one Bourbon monarch)*
● Asiento abuse and War for Austrian Succession (Jenkins’ Ear
War, 1740-1748, war in colonies started in 1739) (“involved
nearly all the powers of Europe, The war began under the
pretext that Maria Theresa of Austria was ineligible to succeed
to the Habsburg thrones of her father, Charles VI, because Salic
Law precluded royal inheritance by a woman, reality this was a
convenient excuse put forward by Prussia and France to
challenge Habsburg power)*
● superiority of English financial system during war periods
(1740-1748, 1756-1763, 1776-1783).

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 ● paradox of rate of taxation, paradox of faster development of
French colonial trade (eightfold nominal growth in colonial
trade between 1714 and 1789) – catching-up effect
Seven Years War (1756-1763) and destruction of first French
colonial empire:
● losses in the Caribbean and Western Africa (Senegal, Gambia)
● defeat in India (French possessions limited to Pondicherry and
Chandernagore, East India Company control over Bengal,
Plassey 1757, expansionary policy opposite to that of 17th
century)
● loss of Canada and cession of Louisiana to Spain in order to
compensate loss of Florida
● state intervention in East India Company: 1773, Regulating Act
● War for American Independence (1776-1783), fiscal causes of
French Revolution
● gradual British expansion in India (final victory over Maratha
Confederacy - 1818)

*Blue- additional comment, to understand what those wars were

about

13.Industrial Revolution in
England
By the early eighteenth century, Britain was well ahead—in cottage
manufacture (putting-out), seedbed of growth; in recourse to fossil fuel; in the
technology of those crucial branches that would make the core of the Industrial
Revolution: textiles, iron, energy and power. To these should be added the
efficiency of British commercial agriculture and transport. British were making
major gains in land and water transport. New turnpike roads and canals,
intended primarily to serve industry and mining, opened the way to valuable
resources, linked production to markets, facilitated the division of labor.
European countries were trying to do the same, but nowhere were these
improvements so widespread and effective as in Britain. For a simple reason:
20
nowhere else were roads and canals typically the work of private enterprise,
hence responsive to need (rather than to prestige and military concerns) and
profitable to users.

The early technological superiority of Britain in these key branches was itself an
achievement—not God-given, not happenstance, but the result of work,
ingenuity, imagination, and enterprise. Britain had the early advantage of being
a nation. By that I mean not simply the realm of a ruler, not simply a state or
political entity, but a self-conscious, self-aware unit characterized by common
identity and loyalty and by equality of civil status.

One key area of change: the increasing freedom and security of the people.
Visitors exclaimed about the high standard of living of the English countryman:
brick cottages, tile roofs, woolen clothing, leather shoes, white bread (one can
follow the rising incomes of industrializing Europe by the white bread frontier).
They saw women in cotton prints and wearing hats; servant girls who so
resembled their mistresses that the foreign caller wondered how to address
the person answering the door. They saw poor people, they tell us, but no
misérables; no starved, pinched faces; beggars, but no beggar "without both a
shirt, and shoes and stockings.

The contribution of high consumption to technological progress struck

contemporaries, and more of them as the British advance grew. Without taking
a course in Keynesian economics, French merchants understood that
mechanization made for high wages, that high wages made for increased
demand for manufactures, and that effective demand made for increased
prosperity. English have grown rich by consuming. One result was a
manufacture that aimed at a large national and international market and
focused on standardized goods of moderate price—just the kind that lent
themselves to machine production. This custom has recentiy attracted much
attention, not only for its own sake but as a window on technological change
and on larger social changes, in particular the growing importance of women as
consumers

What these studies show is a lively market for all manner of fabrics, clothing,
clocks and watches, hardware, pins and needles, and above all notions—a
catchall term for those personal accessories (combs, buckles, buttons,

21
adornments) that go beyond the necessities and cater to appearance and
vanity. Many of these were semidurables and were passed on in wills and as
gifts. Their increased volume reflected not just rising incomes, but quicker
distribution and new techniques of manufacture (division of labor, repetitious
machines, superior files) that yielded lower costs and prices. This production,
needless to say, though largely directed to home demand, also sold to
plantations and colonies and kingdoms abroad.

Britain was largely free of the irrational constraints on entry that dogged most
Continental societies. The stupidest of these were religious:* the persecution
and expulsion of Protestants from France (revocation in 1685 of the Edict of
Toleration of Henri IV); and the widespread exclusion of Jews from all manner
of trades, pardy (psychologically) out of fear and hatred, partly (institutionally)
by virtue of the Christian character of craft guilds and the lingering effects of
earlier expulsions. Religion, moreover, was not the sole criterion of admission
to craft and trade guilds. The Britain of the Industrial Revolution had preserved
the structures and institutions of an older time—the monarchy, the guilds, the
ceremonies, the costumes but over a long period had sidetracked these and
reduced them to vanities and appearances. Insofar as they retained influence
and prestige, they were a drag

I would stress here the importance it gave to time and to saving time, because
nothing better sums up the priorities. Two pieces of "unobtrusive" evidence:
(1) the passionate interest in knowing the time; and (2) the emphasis on speed
of transport. The British were in the eighteenth century the world's leading
producers and consumers of timekeepers, in the country as in the city (very
different here from other European societies). They made them well and
pricey; they also batch-produced them and sold them cheap, if necessary on
the installment plan. They stole them and resold them: if you couldn't afford a
new watch, you could buy an old one from a fence.

22
Not until the defeat of Napoleon at Waterloo in 1815 brought a definitive end
to the fighting could Europe get on with the process of catch-up.

One knows how the "first industrial nation" did it. Slow and easy. Britain
trained a factory labor force and accumulated capital as it went. In those early
days, machines were typically small and cheap. Scale was small. Older buildings
could be converted to industrial use. In short, threshold requirements were
modest. So British enterprise could grow by plowing back earnings, by pooling
personal resources, by borrowing from relatives, by renting facilities. Financial
intermediaries, except for such loan brokers as attorney/solicitors, played a
very small role. Banks confined themselves to supplying short-term or demand
loans to facilitate real transactions. Some of this took the form of lines of
credit, renewed as paid down. In good times, such lines were the equivalent of
medium- or even long-term credit. In good times. In bad, they could be called
in, or maturities could be shortened. With the passing years, all of this
changed: machines got bigger and heavier, required buildings to their measure.
Scale economies and throughput grew as transport facilities improved. Still,
British enterprise was rich enough to finance these outlays from within; if
internal funds fell short, one typically brought in additional partners.

Because the Bubble Act of 1720, passed in the wake of the notorious South Sea
speculation and crash, prevented the creation of a joint stock with freely
transferable shares, big projects typically went to large partnerships with assets
vested in trustees. In the nineteenth century, when things got cosdier and risks
greater, the most effective device for mobilizing capital was the chartered
jointstock company with limited liability—chartered because limited liability
could be conferred only by the crown or Parliament. These large, semipublic
enterprises never made much use of long-term bank financing, because no
bank was big enough. The charter of the Bank of England provided that no
other bank could have more than six partners. Not until 1826, and then only
outside a sixty-five-mile radius from London, were joint-stock banks permitted;
and only in 1833 were non-note-issuing joint-stock banks permitted inside that
radius. Yet these new banks were litde different in size and policy from their
private counterparts, and even the railway builders didn't need their help.

23
Twenty-five years of revolution and war from 1789 to 1815 diverted
Continental resources from building to destruction, played havoc with
enterprise and trade, generated some invention but delayed

much application, inspired projects but then inhibited them—in

effect, delayed industrial emulation of Britain an extra generation. Why wait

fifty years to catch up with 1815? They needed more capital than Britain had
needed, and they wanted it now. They wanted up-to-date factories, machines,
engines. From about 1830 on, they wanted railways, canals, roads, and bridges.
Where would they get the money? Four places: (1) personal investment; (2)
financial intermediaries and private credit; (3) government assistance; (4)
international capital flows. First, the Continent had its share of rich people.
Unfortunately, most of these were landowners who scorned the ungenteel
activities of trade and industry. Indeed, many of them had a distaste even for
agriculture (they preferred to feel the earth through horses' hoofs) and hired
stewards to manage their estates. The owners lived on rents and produce;
sometimes on capital. The stewards got rich.

14.French Revolution and

Napoleonic Wars (1789-1815)
● 1786 Anglo-French trade treaty – free trade without revolution
● Abandonment of feudalism in French legal system during first
revolutionary years
● Le Chapelier law (1791) against guilds and trade associations (workers as
also employers)– future weapon against trade unions
● egalitarian policies under Jacobins’ terror
● Anglo-French trade war (1793) develops into full armed conflict, return
to protectionism, Continental Blockade (1806) and embargoes

24
 ● Napoleonic codifications and their spread all over occupied Europe;
decisive unification of French law and administration (goal not achieved
under absolutist rule)
● destruction of part of the privileged trade companies (Holland)
● Prussian reforms after 1806 Jena defeat

Napoleonic codifications

● Code Civile 1804 (freedom of contract, force of law granted to the valid
contracts; inviolability of private property), main influence in the civil
codes of most continental Europe and Latin America
● Code de commerce 1807 (forms of business enterprise – simple
partnerships, sociétés en commandité, sociétés anonymes – limited
liability of all owners but required charter by the government)
● correction of Code de commerce in II Empire – limited liability and
incorporation in 1863 (under 20 million franc of capital) and in 1867 (all
companies) – all the countries follow French example before 1900
(exceptions – Russia and Turkey)

15. Laissez-faire and free trade

One can say that free trade was a result of the opposition to
mercantilism (a theory that dominated Western European economic policies
from the 16th to the late-18th century), where the ruling government played a
protectionist role in the economy by encouraging exports and discouraging
imports, notably through the use of subsidies, tariffs, taxes, and non-tariff
barriers. The Enlightenment played a role in the beginning of free trade,
criticizing absolutism, the political basis of mercantilism. Also, the American
Revolution was partly a response to the mercantilist policies – which can be
illustrated by the Boston Tea Party which was as a direct action by colonists
in Boston against the British government and the monopolistic East India
Company that controlled all the tea coming into the colonies. There was also a
French economic theory dominated by François Quesnay in the 1760’s called

25
physiocracy that emphasized productive work and agricultural production as
the source of national wealth in contrast to the accumulation of gold or ruler’s
wealth. Physiocracy believed in laissez-faire – concept in which the government
shouldn’t intervene in the economy. Unfortunately the French physiocratic
ministers (Turgot) failed to balance the French crown’s budget and physiocracy
was closely followed by the concept of free trade or laissez-faire from French
which literally means "let do", but it broadly implies "let it be", or "leave it
alone."

These was the basis for the development of free trade:

Free trade, first observed and documented by Adam Smith in the Wealth of
Nations 1776, is a system of trade policy that allows traders to act and or
transact without interference from the government. This policy permits trading
partners mutual gains from trade of goods and services. Under a free trade
policy, prices are a reflection of true supply and demand, and are the sole
determinant of resource allocation rather than the supply and demand altered
by government intervention in mercantilism. Adam Smith also argued that
human labour (not only in agriculture) is the source of wealth and that free
competition on the internal market and free trade in external relations are the
best ways to fully use the human potential and to create wealth. The role of
the government was not to limit the economy, but to take care of the national
defense, police, public works and institutions that would not be profitable for a
private entrepreneur.

Free trade implies the following features:

● trade of goods without taxes (including tariffs) or other trade
barriers (e.g., quotas on imports or subsidies for producers)
● trade in services without taxes or other trade barriers

26
 ● The absence of "trade-distorting" policies (such
as taxes, subsidies, regulations, or laws) that give some firms,
households, or factors of production an advantage over others
● Free access to markets
● Free access to market information
● Inability of firms to distort markets through government-
imposed monopoly or oligopoly power
● The free movement of labor between and within countries
● The free movement of capital between and within countries

I used mostly wikipedia (unfortunately) because the script of Morawski had

only about a sentence about this topic and the information from the
presentation was not very clear, but I think that this should suffice.

16. Industrialization of continental

Europe:
The industrial revolution first started in Britain in 1760 and then spread to
continental Europe, mainly Belgium, France and Germany.
Wallonia, the southern region of Belgium, is considered the birthplace of
the industrial revolution in continental Europe thanks to its rich coal and steel
resources that have been the source of Belgium’s industrial growth since the
middle ages. From the middle of the 1820’s, numerous works comprising blast
furnaces (owens) as well as rolling mills were built in the coal mining areas
around Liège and Charleroi, the centers for heavy industry in Belgium. John
Cockerill, a British industrialist, integrated all stages of production, from
engineering to the supply of raw materials, in factories at Seraing as early as
1825. Verviers, another Belgian town, was home to a thriving wool

27
and textile industry that was renowned for its quality. The industrialization
continued into the 1830’s, but the development of chemical industry came later
– Solvay was a Belgian chemist and industrialist who in 1860’s came up with
the ammonia-soda process.
In France, the industrial revolution came in the 1830’s after the July
Revolution, during which the king of France, Charles X was overthrown. The
centers of heavy industry were Saint Etienne and Lille, where numerous textile
industries were also prominent. Unfortunately France had problems due to
insufficient coal supply, and had to import it from Belgium. Agriculture and
small & medium firms were important in the industrial revolution in France,
which was a deviation form the pattern that was happening in the other
European countries. France experiences the fastest growth in the 1850’s –
1870’s.
Germany started the industrial revolution in the 1940’s. Because it was
not yet united the strong leading position of Prussia was important. The
Ruhrgebiet or the Rhur region was where the industrialization began with the
establishment of several iron works in the late 18th century. Development of the
Ruhr's coal deposits fueled further expansion of its iron and steel industry.
Another region important to the development of industry was Upper Silesia that
took advantage of its plentiful coal and iron ore, but also zinc deposits. (In
Germany feudal aristocracy also played a big role in the industrial revolution. In
Saxony and Prussian Silesia the traditional weaving declined.) Also, in Germany
there were strong ties between banking and the industry.

17. Industrialization of continental

Europe - latecomers.
Problem of central Europe:
 still guild system(until 2nd half o XIXc.)
28
  lack of bourgeois capital

a) Kingdom of Poland = Congress Kingdom

-development of coal deposits (Sosnowiec, Częstochowa, Świętokrzyskie

Mountains, Dabrowa Górnicza)
-since 1817 Stanisław Sztaszic
-since 1824 Ksawery Drucki-Lubecki --- restrictive fiscal measures,
protectionism:
to minimize import – high duty for products from Prussia- effect: trade-war
1823-1825
to develop export- lower export tarifs for Russia- effect: good relations
until November Uprising-1830
1828- Bank of Poland – took oversome economic functions, gave capital for
sugar beet refineries and ironworks(huty żelaza), coalmines in Zagłębie
Dąbrowskie

-main textile industry, mechanisation since 1840 – Łódź, Żyrardów

-Warsaw : infrastructure development, metallurgy,machines,food,textile
industries
pro-export- problems after 1833(conflict with Russia)

b) Prussia

-land reforms: feudal obligations exchanged by cash&land

-merchants,bankers,previous peasants became the new potentats
-since 1840- development of Ruhra Basin and Rehn area- which became the
biggest world center of ironworks, coalmines and factories.

c) Austria, Galicia

-worse situation in Galicia:

-lack of : materials, capitals and markets for export
● -poverty of local society and boundary made by
Carpathians mountains
● - mainly rural indusrty
-Wide autonomy after 1867 reform of Habsburg monarchy as one of the lands
belonging to Austrian part of empire.

-1848 Spring of Nations- land reform including all peasants in Austria

29
Sillesia

-the earliest changes: steam engines in coalmines, coke in metallurgy at the

end on XVIIIc.!
-in Upper Sillesia- arsenal for Prussia

e) Wielkopolska, Pomerania

-agro-industry, cooperating, alcochool production, food industry(Poznao as an

industry centre)
-1848 Polish uprising in Poznao
-Gdaosk-germanized and marginalized as port city, mostly because of
dominance of North Sea ports, important as centre of shipping industry (
shipyard), as Elbląg (Elbing) diverging from rest of formerly Polish lands

f) Eastern Europe

a. in western Russia- slow development becouse of general use of

cheap serfdom work(praca paoszczyźniana)
b. big competitors France& Germany(cheap and relatively good
products), forced Russia to change something
c. 1861 enfranchisement of peasant(uwłaszczenie chłopów)- begening
of development

g) Southern Europe
much slower becouse of lack of natural resources big social differences ex.: in
Italy sauth always behind the north.

18. United States in 19th century.

Economic consequences of civil war.
Until 19th cent.they've beeen producing cotton, exporting it to UK, where
they've been buying ready products.
-----since 1800- started textile industry(mainly in Baltimore area)
-export to China&South America

30
-problem: lack of workers; effect: beside slavery work, need of mechanisation
of work
-since half of XIXc. US- agricultural country(80% of all exported products-from
rural ind.; only 25% of society live in cities)
US devided:
a) agricultural South, with general support of Negros slaves work and
conservatism
b) 'modern' North, against slavery, supporting idea of tarrif barrier for
european products
civil war 1861-1865 (very expensive)
1863 Abraham Lincoln abolished slavery

factors which stimulated to economic development:

-strong protectionism until 1913-The Underwood tarrif- reduction of duties for
imported products; effect:lower costs of living
-immigration from Canada and Europe
-import of foreign capital
-dev. of railways let create new industrial areas, widespread urbanisation
process
-utilization of biggest oil deposits in Pennsylvania
enlargement of chain of commercial banks-strong competitions-1913-
Woodrow Wilson created Federal Reserve System

Historia gosp. XIX i XX w.: str 43-55; 87-89

slajdy: lecture 6 all, lecture 2/3 slides: 11,12,18

19. Latin America in 19th century.

By 1824, most of the countries of present-day Latin America had gained their
independence. Their first years as republics were marked by severe growing
pains, as the people of the region learned to govern themselves. It was a time
of experimentation: Argentina and Paraguay were ruled for a time by maniacal
dictators, Colombia, Venezuela, Ecuador and Panama were one nation for a
while, and Mexico even brought in an unfortunate Austrian nobleman to serve
as Emperor. There were many wars, both civil and foreign, as the young nations
struggled for stability and prosperity.

31
Independence destroyed the old common market that existed under the
Spanish Empire after the Bourbon Reforms and created an increased
dependence on the financial investment provided by nations which had already
begun to industrialize; therefore, Western European powers, in particular
Great Britain and France, and the United States began to play major roles, since
the region became economically dependent on these nations.

The export of natural resources provided the basis of most Latin American
economies in the nineteenth century, which allowed for the development of
wealthy elite. The restructuring of colonial economic and political realities
resulted in a sizable gap between rich and poor, with landed elites controlling
the vast majority of land and resources. In Brazil, for instance, by 1910 85% of
the land belonged to 1% of the population. Gold mining and fruit growing, in
particular, were monopolized by these wealthy landowners. These "Great
Owners" completely controlled local activity and, furthermore, were the
principal employers and the main source of wages. This led to a society
of peasants whose connection to larger political realities remained in thrall to
farming and mining magnates.
In many areas the borders were unstable, since the new states fought wars
with each other to gain access to resources, especially in the second half of the
nineteenth century. The more important conflicts were the War of the Triple
Alliance 1864–1870 and the War of the Pacific 1879–1884.*
By mid-century the region also confronted a growing United States, seeking to
expand on the North American continent and extend its influence in the
hemisphere. In Mexican–American War 1846–1848, Mexico lost over half of its
territory to the United States. In the 1860s France attempted to indirectly
control Mexico.
In South America, Brazil consolidated its control of large swaths of the Amazon
Basin at the expense of its neighbors.
In the 1880s the United States implemented an aggressive policy to defend and
expand its political and economic interests in all of Latin America, which
culminated in the creation of the Pan-American Conference, the successful
completion of the Panama Canal and the United States intervention in the final
Cuban war of independence.
*The War of the Triple Alliance pitted Argentina, Brazil and Uruguay against
Paraguay, which was utterly defeated. As a result Paraguay suffered a
demographic collapse: the population went from an estimated 525,000 persons
in 1864 to 221,000 in 1871 and out of this last population, only around 28,000
were men. In the War of the Pacific, Chile defeated the combined forces of

32
Bolivia and Peru. Chile gained control of saltpeter-rich areas, previously
controlled by Peru and Bolivia, and Bolivia became a land-locked nation.

In the Landes book it is the 20th chapter.

20. China & India in 19th century.

Nineteenth century China—a fabric of social revolutions, halting
industrialization, and questionable "Westernization"—was troubled. China was
a huge area, populous and not modernized in a Western-World sense. Famine
was common in the countryside, corruption frequent in government.
Military force and occasional diplomacy by the British and French and
diplomacy and occasional military force by the United States and Russia caused
much unrest in the complex of lands and governments the Europeans called
"China." In parts of the country, Chinese economy was stagnant, and, by
Western standards, governments were untrustworthy and the society
"backward" and "primitive."
Many upper-class Chinese, naturally, did not agree with such evaluation of
their civilization and wanted to remain independent of outside influence and
control. The main goal of the Western World was to "open" China to
profitable trade—profitable for Europe and the United States. "Opium Wars,"
largely instigated by the British, soon forced Indian opium into China as a step
in trade relations involving, among many things, deals in silk and porcelain,
silver and tea.
Upper-class and ruling Chinese considered Europeans, and most North
Americans, "drug lords" and, simply put, "barbarians." But, for the most part,
the Chinese could not oppose Western weapons. The Chinese lost control of
major ports and tariff protection, foreigners were largely exempt from local
law, and Christianity was forced on the country in the form of a guarantee of
missionary entry and safety. Many economically and socially lower-class
Chinese were delighted by the simple promises of Christian beliefs (which they
combined with their native religions) and the changing economic times (for
some, tomorrow could only be better).
Inside China the power of local government weakened. Internal problems
included everything from economic depression to civil war. Confucian-Taoist-
Buddhist-Islamic-Christian conflicts paralleled ethnic and cultural frictions.
Periods of relative peace alternated with street gang fights and organized
warfare.

33
The India was under the raj of Britain, controlled by the British East India
Company. India was a major player in the world export market for textiles in
the early 18th century, but by the middle of the 19th century it had lost all of
its export market and much of its domestic market, primarily to Britain. British
rule led to the de-industrialization of India. India was an exporter of cotton
manufacture and this was how the Company started its trade but gradually
India became an importer of cotton manufacture and thus Indian artisans,
craftsmen and important trading centers collapsed and whatever
manufacturing activity existed was destroyed under the impact of imports of
cotton manufacture almost exclusively from Britain. As a result, India
witnessed, from the early 19th century onwards, a steady decline in population
dependent on indigenous industries and a consequent over-burdening of
agriculture.

21. Second Industrial Revolution

The Industrial Revolution occurs when the greater part of the economy starts
to operate on the industrial principles (reducing the importance of human
muscle) , the share of agriculture in national product and the proportion of
people not living from agriculture are falling.
Necessary conditions to begin the process:
1. capital
2. free labor
3. markets
Industrial revolutions are not a matter of technological knowledge. but the
conditions of using this knowledge.

It is hard to exactly define a starting date of Second Industrial Revolution, it is

said that it started around 1850, although a method for mass manufacture of
steel was not invented until the 1860s. An alternate starting date of the Second
Industrial Revolution is the beginning of electrification in the 1880s. Logically,
the end date should include mass production around the time of WW I.

The Second Industrial Revolution, also known as the Technological Revolution:

● second wave of huge industrial expansion in XIX century, associated with
commercialization of inventions in electricity physics and chemistry
(electrical and chemical industries)

34
 ● rising role of machine & heavy industry (Bessemer steel, 1856- invention
of new furnace which could make wrought iron and steel in large
quantities- steel mass-production), lowering of textile industry
● steel was commonly used to build railways, bridges, ships and in defense
industry
● Lukasiewicz (polish pharmacist from Lvow) invented oil distillation, with
invention of engine (by Daimler, Benz, Siemens) a huge development of
oil mining and petroleum refining occured
● increased role of patent laws and (in Germany) universities,
● new countries as leading industrial powers in new branches – USA,
unified Germany
● beginning of decentralization of power sources (electrical & combustion
engines) – declining role of the economies of scale
● first assembly lines The savings from mass production methods allowed
the price of Ford’s Model T to decline from $780 in 1910 to $360 in
1916), scientific management (taylorism)- increase productivity by
clarifying the steps and time needed to produce an element

22. Revival of colonialism after 1870.

● New colonies:
http://en.wikipedia.org/wiki/File:Colonial_Africa_1914_map.png

● -technical possibility of European penetration of Africa – ca. 1880

● -colonization of Pacific islands (commercially unimportant but potentially
strategic outposts – France, UK, USA, Germany)
● -new players (Germany, Italy, Belgium, Japan – first extra-European
country to have colonies, USA)

35
 ● -Fashoda Incident- France was colonizing Africa W-E, UK N-S, they
collided in Fashoda village(Sudan), Fashoda Incident (1898) was the
climax of imperial territorial disputes between the United Kingdom and
France in Eastern Africa. It brought the United Kingdom and France to
the verge of war, but ended in a diplomatic victory for the UK.
● -Liberia and Ethiopia - only independent African states in 1914
● -Italian defeat at Adwa (1896)
● -Open-door policy in China
● -Russo–Japanese War 1904-1905
● -Japanese control over Korea 1910

23. Protectionism
Protectionism – a policy, which:
● protect businesses and workers within a country by restricting or
regulating trade with foreign nations.
Methods used:
● tariffs on imported goods (increase the price of imported goods)
● restrictive import quotas (reduce the quantity imported)
● International patent systems

objective: discourage imports and prevent foreign take-over of domestic

markets and companies.

Protectionism: free trade

example: USA in XIX century

protectionism-nothern part
free trade-southern part
differences in trade between those two contributed to the Civil War (1861–
1865)

Since the end of World War II tendency to eliminate protectionism through free
trade policies enforced by international treaties and organizations such as the
World Trade Organization

Neomercantilism - a policy, which:

● encourages exports= positive
● discourages imports= trade balance
● controls capital movement

36
 ● currency decisions made by a central government

objective: increase the level of foreign reserves held by the government

example: USA and Germany in XIX century

Neomercantilism allowed both powers to continue their dominance in world
economics (in 1880 USA passed the British Empire (<=free trade) in economic
strength)

24. Gold Standard and bimetallism.

Gold standard is a monetary system in which the standard economic unit of
account is a fixed weight of gold (ex. $100 an ounce of Gold)
● banknotes are freely converted into gold at the fixed price (both sides)
bimetallism is a monetary system in which the standard economic unit of
account is a fixed weight of gold and silver ( in other words a combination of
the gold and silver standard is known as bimetallism.)

During most of the 1800s the United States had a bimetallic system of money,
however it was essentially on a gold standard as very little silver was traded. A
true gold standard came to fruition in 1900 with the passage of the Gold
Standard Act. The gold standard effectively came to an end in 1933 when
President Franklin D. Roosevelt outlawed private gold ownership (except for
the purposes of jewelery).
The Gold Standard Act of the United States established gold as the only
standard to buy back paper money, stopping bimetallism. It was signed by
President William McKinley. The Act fixed the value of the dollar at 1.5046
grams of pure gold.

25. Banking 19th century:

In 19th century Banks confined themselves to supplying short-term or demand
loans to facilitate real transactions, but the need for long-term investment, led
to the invention of a new financial intermediary, the joint-stock investment
bank.
The first inspiration for such institutions came from bureaucrats as well as
business interests: even before 1820, officials and merchants in Bavaria were

37
calling for a special bank to promote industry. The earliest working examples
were quasi-public institutions—the Société Générale in Brussels and the
Seehandlung in Berlin.
The rise of the commercial banking sector coincided with the growth of early
factories, since entrepreneurs had to rely on commercial banks in order to fund
their own projects. Because of this need for capital, many banks began to arise
by the late 19th Century.
The Bank of England became the biggest British bank and its discount rate
came to be recognised as the minimum short-term interest rate in the money
market and the Bank Charter Act of 1844 established it as the only institution in
England with note-issuing powers. The lifting of restrictions on joint-stock
banking in 1858 led to the emergence of major commercial banks including
Barclays, Lloyds and National Provincial and investment banks including Barings
and Overend Gurney. There were banking crises in 1847, 1857 and 1866 in the
last of which the Gurney-Overend bank collapsed, causing a panic in which
large numbers of people tried to withdraw deposits from their banks; leading
to the collapse of over 200 companies. On that occasion the Bank of England
had refused to help.
In 1890 the Barings bank, then the world's largest investment bank, failed and a
rescue was organised by the Bank of England signalling its acceptance of
responsibility for the stability of the banking system, and from then on it
gradually assumed in full, the role of a modern central bank.
Elsewhere in Europe, the nineteenth century saw the emergence of major
investment banks in Belgium (Société Générale), France (the Crédit Mobilier)
and Germany (the Damstädter bank), and, as in Britain, deposit taking was
concentrated in a few large private companies. European and other industrial
economies except the United States followed the British example and created
monopolistic central banks. The Banque de France was established in 1800, the
German Reichsbank in 1875, and the Bank of Japan in 1882.
In the United States the 1864 National Bank Act encouraged the creation of
privately-owned banks, capital requirements were set low by European
standards, and there began a rapid expansion of an effectively unregulated
banking system and a long period of intermittent financial instability. A large
number of small banks sprang up at the state level, but few of them survived
for more than five years and there were also major failures at the national
level. There was strong Congressional opposition to the establishment of a
central bank on European lines and runs on the banks became a regular feature
of American economic life.

38
 26. Business cycles in 19th century :
major crises of the 19th century:
-1815 – post-war crisis because of evaporation of army demand (England)
Afters years of war and high military spending, England’s victory in the wars
that followed the French Revolution led to a sudden and considerable fall of
military spending. Factories that had been manufacturing arms and uniforms
suddenly found themselves without orders.
-1825 – crisis due to speculation on the prospects of trade with liberated South
America (England), next year crisis in continental Europe (Prussia, Saxony)
The Panic of 1825 was a stock market crash that started in the Bank of England
arising in part out of speculative investments in Latin America

The crisis was felt most acutely in England where it precipitated the closing of
six London banks including Henry Thornton's bank and sixty country banks in
England, but was also manifest in the markets ofEurope, Latin America, and the
United States

The panic has been referred to as the first modern economic crisis not
attributable to an external event, such as a war, and thus the start of modern
economic cycles

-1836-1837 – oversupply in textile industry, end of hand-weaving in English

countryside; England, USA

● The Panic of 1836/7 was triggered by a combination of factors including the

failure of a wheat crop, a collapse in cotton prices, economic problems in
Britain, rapid speculation in land, and problems resulting from the variety of
currency in circulation.
It was the second-longest American depression, with effects lasting roughly six
years, until 1843.
The panic had a devastating impact. A number of brokerage firms in New York
failed, and at least one New York City bank president committed suicide. As the
effect rippled across the nation, a number of state-chartered banks also failed.
The nascent labor union movement was effectively stopped, as the price of
labor plummeted.

39
The depression caused the collapse of real estate prices. The price of food also
collapsed, which was ruinous to farmers and planters who couldn’t get a
decent price for their crops.
-1847-1848 – crisis preceding the Spring of Nations, over investment in British
railroads, potato blight famine (started in 1845), spread of crisis in continental
Europe (France, Germany)

Was started as a collapse of British financial markets associated with the end of
the 1840s railroad boom. The Bank of England had to request a suspension of
the Bank Charter Actto end the crisis. It was caused by excessive monetary
inflation due to the Bank of England and fractional reserve banking.
“As of 1840 credit expansion resumed in the United Kingdom and spread
throughout France and the United States. Thousands of miles of railroad track
were built and the stock market entered upon a period of relentless growth
which mostly favored railroad stock. Thus began a speculative movement
which lasted until 1846, when economic crisis hit in Great Britain.”

Potato blight famine (1845) :

In Ireland nder British rule, the Great Famine was a period of mass starvation,
disease and emigration between 1845 and 1852. It is also known, mostly
outside of Ireland, as the Irish Potato Famine..
During the Famine, Ireland's population fell by between 20 and 25 percent.
Approximately 1 million people died and a million more emigrated from
Ireland. The proximate cause of famine was a potato disease commonly known
as potato blight

The Spring of Nations (1848) :

The European Revolutions of 1848, known in some countries as the Spring of
Nations were a series of political upheavals throughout Europe. Described by
some historians as a revolutionary wave, the period of unrest began in France
and then, further propelled by the French Revolution of 1848, soon spread to
the rest of Europe.
Although most of the revolutions were quickly put down, there was a
significant amount of violence in many areas, with tens of thousands of people
tortured and/or killed. While the immediate political effects of the revolutions
were largely reversed, the long-term reverberations of the events were far-
reaching.

-1857 – crisis after Crimean War, although start in USA (basis for republican
victory in 1860), first of truly worldwide character
40
● The Panic of 1857 was triggered by the failure of the Ohio Life Insurance and
Trust Company, which actually did much of its business as a bank
headquartered in New York City. Reckless speculation in railroads led the
company into trouble, and the company’s collapse led to a literal panic in the
financial district, as crowds of frantic investors clogged the streets around Wall
Street.
● Many United banks failed and there was a run on Bank of England.
● One victim of the Panic of 1857 was a future Civil War hero and US president,
Ulysses S. Grant, who was bankrupted.
● The crisis of 1857 has been called the first world wide crisis and the first that
was purely economic.
● Recovery from the depression began in early 1859.
-1866-1867 – relatively mild, perceived as the last crisis of laissez-faire
economy, fall of Crédit Mobilier in France

The Panic of 1866 was an international financial downturn that accompanied

the failure of Overend, Gurney and Company in London, and the corso forzoso
abandonment of the silver standard in Italy

-crisis of 1873 - speculation in Germany and Austria, financed by French war-

reparations

The Panic of 1873 surrounded a severe international economic depression in

both Europe and the United States that lasted until 1879, and even longer in
some countries. It is nowadays referred to as the Depression of 1873 by
historians. It was triggered by the fall in demand for silver internationally,
which followed Germany's decision to abandon the silver standard in the wake
of the Franco-Prussian war. In 1871Bismarck extracted a large indeminity in
gold from France and ceased minting silver thaler coins. The first symptoms of
the crisis were financial failures in the Austro-Hungarian capital, Vienna, which
spread to most of Europe and North America by 1873. It was one of a series of
economic crises in the 19th and early 20th centuries. In Britain, the result was
two decades of stagnation known as the "Long Depression", which weakened
Britain's economic leadership in the world. In U.S. literature this global event is
usually known as "Panic of 1873", while in Europe it is known as Long
Depression or Great Depression.

41
-1873 - Relative stagnation, deepened by European agricultural crisis (trans-
oceanic flow of commodities), return to protectionism, mainly in agriculture
(1877- Russia, 1878 – Germany), first wave of labour unrest in USA

-1882 – Union Générale bankruptcy in France, end of railroad speculation in

USA (1884), first crisis in Japan, effects: social legislation in Germany (1883-
1884), legalization of trade-unions in France (1884), recovery thanks to boom in
electrical industry

-1890 – fall of Baring’s due to engagement in Argentina, new wave of

investment in Latin America and colonies followed recovery, further instability
in world economy in 1893-1894 (Panama affair in France, crashes in Australia
and USA)

- 1893 – The Panic of 1893 :

The depression set off by the Panic of 1893 was the greatest depression
America had known, and was only surpassed by the Great Depression of the
1930s.
In early May 1893 the New York stock market dropped sharply, and in late June
panic selling caused the stock market to crash.
A severe credit crisis resulted, and more than 16,000 businesses had failed by
the end of 1893. Included in the failed businesses were 156 railroads and
nearly 500 banks.
Unemployment spread until one in six American men lost their jobs.
The depression inspired "Coxey's Army," a march on Washington of
unemployed men. The protesters demanded that the government provide
public works jobs. Their leader, Jacob Coxey, was imprisoned for 20 days.
The depression caused by the Panic of 1893 lasted for about four years, ending
in 1897.

-1900 – Russian crisis after boom financed by French capital, development of

international commodity cartels – next stage of monopolization process,
recovery fueled (among others) by car industry and aluminium production

sources :

-slides from the lecture & wikipedia

42
27. The industrial working class
and labour movements of the 19th
century
Lecture 3 page 19
General
Labour Unions as association of wage earners for the purpose of maintaining or
improving the conditions of their employment. This includes: Wages, working
conditions, security of employment (=rules on firing employees), health and
social securities, working hours. Their origin varies depending on the country
(discussed below), but goes back to far beyond the industrialization. In the
Kingdom of England trade Unions were for example forbidden since 1349
(Ordinance of Labour). But their rise is associated with the Industrial
Revolution. Why:
● Lack of skills necessary to perform a job
● Therefore large pool of workers. This created wage pressure,
Which again created pressure on families and made it necessary
for the whole family to work, including women and children.
● This enlarged pool of unskilled workers once again increased
pressure on wages, job conditions, job security etc.
In the process the entire bargaining power was shifted to employers. This gave
rise to the need of workers to organise themselves. The primary function of
Unions was to provide securities to members – against illness, unemployment,
old-age. This also created pressure on other workers to join the Labour Union.
Collective bargaining power, collective instruments (especially strikes) and
later political organisation are further functions assumed by Unions.
Sometimes associated to guilds. But large difference: Guilds have the aim to
protect their members from outside competition – whereas unions’ aim is to
protect their members from the abusive working conditions.
The reasoning behind prohibiting forbidding workers associations was that
fixing wages distorts the market and the market efficiency. Wages are one of
the input factors that define prices of products. By fixing them and not letting
the market decide on it, the price is influenced and distorts demand (and hence
supply) causing the market to not work at its efficiency level. Obviously NOT
fixing minimal wages may have equally negative consequences - cause large
costs to either the individual or the social institutions. This reasoning is found
by Adam Smith (who was also against employers’ unions!) and continuous
nowadays in economic theory.

43
An important role has to be attributed to the Catholic church. In his Magna
Charta “Rerum Novarum” 1891 the Pope Leo XIII expressed concern for the
living standard of the working class. He discussed the relation between work
and capital as well as between government and its citizens. He rejected as well
communism as well as unlimited capitalism, but affirmed the right to private
ownership. He also made himself strong for the rights of workers to form
labour unions.

Individual regions or Countries

Britain:
History: Organisation of workers was prohibited since 1349 in the Ordinance of
Labourers. The reason was that the plague left a starkly reduced numbers of
workers in the agricultural sector (as an estimated 30-40% of the population
deceased because of the plague). This left owners of land to fight for the
remaining workforce which and resulted in inflation, as costs of production
rose.
In the beginning of the industrial revolution there was a violent clash between
government and workers. Movements of workers were persecuted, sometimes
executed. But also violence from the workers’ side: e.g Luddites (1811): a social
movement in the textile industry. It judged that modern mechanisation of the
textile industry as a threat to workplaces of skilled workforce and destroyed
therefore machinery. In 1812 it came even to clashes with the British army.
Finally in 1871 the Trade-Union Act legalised the labour-unions in the United
Kingdom. (Note that this was before the Magna Charta of Pope Leo XIII). The
act had three major provisions. 1) The purpose of an Union should not neither
be a restraint to trade nor unlawful. 2) But the restraint of trade doctrine
should not make any trade union’s agreement or trust void or voidable. 3) Any
trade union’s agreement are not directly enforceable or subject to claims for
damages for breach. This should prevent to interfere in Union’s activities.
Political Activity: In the United Kingdom the trade unions can be viewed as the
base for the Labour Party (officially created the February 15th 1906 ). There are
two major developments that led to its creation. First, there was an increasing
urban proletariat, which interests were not represented in politics. And second
they gain the suffrage – civil right to vote (also franchise) in 1867 and further
extensions were made in 1885. It became a politically interesting group and
some leaders of trade unions decided to enter in politics. First, some members
run for the Liberal Party and some small other left parties were created. But
due to a lack of success and an increased pressure from government (a law was
passed that allowed employers to recuperate losses from strikes from the

44
employees) led to the unification of major leftist groups, to officially create the
Labour Party.
Continental Europe:
History: In continental Europe, trade unions were not merely a spontaneous
organising of workers but socialist and social-democratic parties had a major
role in founding Labour Unions. This also lead to the fact that they had a better
organisational structure from the beginning on. But also the leftist parties were
better organised. In France of course their history strongly roots in the French
Revolution and later uprising of the workers that lead for example to the
“Commune de Paris”.
Political activity: Germany was behind in the development of liberal workers’
rights, but this lead to the development of strong parties such as the
Allgemeiner Deutscher Arbeiterverein (ADAV, General German Workers'
Association) in 1963 and Sozialdemokratische Arbeiterpartei (SDAP, Social
Democratic Workers' Party of Germany) in 1869. They merged to the
Sozialdemokratische Partei Deutschlands in 1875. Also communist forces were
represented in the party, which in general was very radical. There was a double
approach by the official politics towards the social party, that was perceived as
a threat: Bismarck prohibited the party and its activities – subsequently many
actors fled abroad (e.g Lenin to Zurich ). But at the same time Bismarck
introduced a social legislation. It introduced social welfare systems (such as
social insurances) and forced employers to either increase security measures in
their fabrics or paying elevated contributions to the social security. The system
is actually the base of the social welfare system we have today – and also
responsible for the welfare problems we face today, as it was obviously
designed for the people of the time – a growing population number and a live
expectancy of about 43 to 48. The idea behind the system was to appease the
wishes of the workers without having to grant them political power.
America:
In the USA trade-unions faced less opposition from the state, anti-union
measures were gradually abolished by court verdicts. There are many different
organisations that appeared and disappeared during the beginning of the 19th
century. The reason were shifts in the economy (boom actually helped the
unions, while cohesion was weaker during bust periods) and the civil war. The
first of those organisations were based on skilled workforces. Soon after
nationwide organisation appeared – and disappeared again. Worth mentioning
is the Knights of Labour was one of the largest and most important labour
organisations in the 1880s. It rejected socialism and radicalism but promoted
workers’ rights, such as the 8-hour day. It partially allowed black people and
women to the organisation but was completely exclusive to Asians, as they

45
were perceived as a threat to workplaces. Although acting as a labour union in
some cases – negotiating with employers on working contracts – it was NOT a
trade union and not strongly organised. After a strong increase in importance
and members in the 1880s it suddenly lost its power, becoming a small
organisation once again.
One of the strong moments in the history of labour movements in the Stats is
the Haymarket Massacre of the fourth May, 1886. During a demonstration in
Chicago to show solidarity with a strike of workers that started 3 day earlier on
the first of May, somebody threw a dynamite bomb in the ranks of the
guarding policemen. They opened fired – the result of which was 8 dead police
officers (mainly due to friendly fire) and an unknown number of civilians. In the
subsequent trial eight anarchists were convicted. The Haymarket Massacre was
a major setback to the 8-hour workday – as sympathies towards labour parties
shivered.
Only several years later, in 1888 the American Federation of Labour (AFL)
decided to campaign the 8-hour workday again. A nationwide strike on the 1st
May was planned and communicated to the “Second International” which
subsequently decided to hold international strikes for an 8-hour workday on
that day. And so the Haymarket Massacre became the origin of the May Day.
The American Federation of Labour was actually founded in 1886. As the
power of the Knights of Labour faded away the power of the AFL steadily grew.
It was nationwide (although in practise just important in the industrial cities)
and unified several craft unions. The idea was to increase the power of the
workers by a solidarity of different crafts – and to increase the power of the
Union by special benefits. This meant that strikes of one craft were followed by
strikes of other crafts. And that strikes were made to assure that the
government employs only union members in its projects. Hence an
organisational infrastructure was needed – and Union offices set up all over the
country. The Union supported the World War I.
But the organisation was based on craft unions – hence the grouping of
(skilled) workers of one profession only. Those unions were against the
organising on an industry level, i.e independently of the profession but based
on the fact that as a large number it is easier to force rights. During the Great
Depression in the 1930s, the Unions lost a large amount of members. Some
members came to the conclusion it was necessary to organise in an industrial
manner. Some violent but victorious protests in the industrial sector and the
inability of the AFL to ensure advantages for its members in the crafts, leaded
to a dispute in 1936, which lead to the creation of a subgroup Convention of
Industrial Organisations. But as it was treated as an enemy by the AFL, it came
to a break-up. Only in 1955 the two groups united again to from the AFL-CIO.

46
28. Land reforms in Central and
Eastern Europe in the 19th century
Land reform may be understood here as the transfer of land from one owner or
group of owners to another for political, social, or ideological purposes. It
happened most of the time due to change in power or because it was thought
that land reform could solve social problems – such as change of patterns of
ethnicity, prevention of emigration from rural areas, economic support of poor
people, and settlements for refugees or homecoming soldiers- or political
problems – such as in an attempt to keep power by the reigning forces or as a
measure to strengthen power of parties that just gained political leadership.
Land reform always included other measures, such as the establishment of
rural settlements and the extension of agricultural land, which generally meant
forest clearances or other changes to the landscape. Sometimes the previous
owners were compensated, but quite often they were simply dispossessed.
Intellectual reasoning: The intellectual discussion about reforms in ownership
in the 19th century started actually in the United Kingdom. One important
thinker was James O'Brien (1805–1864), who called for total socialization of
private property. The argument was that unequal distribution of land was the
root of many social problems. These claims became influential within the rising
socialist movement in Europe. Authors, politicians, and philosophers such as
Karl Marx (1818–1883), Karl Kautsky (1854–1938), and Eduard Bernstein
(1850–1932) were critical of private landownership, and many called for the
nationalization of land.
Henry George (1839–1897) was another influential thinker. He didn’t argue
against private ownership of land –as for example Marx did- but he argued that
the ownership of land should be taxed and thus build the economic bases of
the society and not only some individual. His book Progress and Property
(1877) was translated in several languages and influenced many other
intellectuals to bring up ideas on limits of land possession and protection
against misuse, speculation and monopoly of land. As a consequence of his
ideas many tax systems have been developed. In Germany Oppenheimer – one
of the strongest promoters of a system between communism and capitalism –
published a book in 1894 called Freedom in Germany. It gained some
recognition in Europe but proved to be especially influential for Zionism.
Actual Land Reform Actual Land reforms can be divided into such with a social
background – dividing the property and distribute it to increase the overall
amount of people participating in ownership- and such with a communist

47
background – to abolish ownership altogether. In the 19th centuries land
reforms ownership was never abolished but only the proprietor changed.
Ownership changes in southern eastern Europe were greatly the in response to
the withdrawing Ottoman empire – that left a vacuum in ownership.
Bulgaria: Upon independence in 1878 the overwhelmingly ottoman estates
were redistributed to peasant smallholdings. Further reforms took part.
(Further reforms were implemented in 1920-23 and a maximum ownership 30
hectares was fixed.)
Greece: At independence in 1835 the ottoman estates were redistributed as
peasant smallholdings
Montenegro and Serbia: At independence in 1830 the ottoman estates were
divided up among peasant smallholdings
In north-eastern Europe almost all of the important land reforms took but place
after 1900 and were either in view to joining the Soviet Union or at the hand of
communist idealists. Although it has to be stated that most of these reforms
still respected the private ownership but handed it over to people from the
proletariat. Also former landowners were rarely compensated. E.g Lithuania:
the major land reform was initiated in 1919 and launched in 1922. Land was
taken from the major landowners, mostly aristocracy, and redistributed among
new landowners, primarily soldiers, or small landowners.
Central Europe: The reforms in France go back to the French Revolution (1789).
In Germany a powerful land reforming organisation was established in 1888. It
based on the ideas of George Henry (see above) and hence wanted a reform
without abolition in private property. Land should be ownd by the state but no
redistribution should take place. The previous owners should keep the right of
using the land but pay a fee for it. Those ideas formed the basis for the reform
in 1920, but were soon after changed by the Nazis that were swept to power.
Northern Europe. Ireland: after the Irish Famine, land reform became the
dominant issue in Ireland, where almost all of the land was owned by the
Protestant Ascendancy. The Irish Parliamentary Party pressed for reform in a
largely indifferent British House of Commons. Reform began tentatively in 1870
and continued for fifty years during which a number of Irish Land Acts were
passed.
Denmark: In 1849 a section in the constitution had forbidden the creation of
new fiefs (latifundi in the medieval system) and promised the abolition of
existing fiefs. However fiefholders dominated the government and it was not
until 1919 that the necessary legislation could be passed. This legislation
transferred the fiefs to ordinary property that could be bought, sold and
inherited like all other property. The landholders had to pay a tax on the land if
they didn’t sell and repurchase it. The tax rose each year so the fiefs quickly

48
disappeared. As part of the reform the state was entitled to take over one third
of the land for a compensation that has since been criticised for being too
small. This land was later handed over to smallholders. The tax levied on the
estates as well as the division of land by inheritance meant that the large
estates as well as the estate holder class disappeared from Danish society and
politics.
Finland: In the general reparcelling out of land, begun in 1757, the medieval
model of all fields consisting of numerous strips, each belonging to a farm, was
replaced by a model of fields and forest areas each belonging to a single farm.
In the further reparcellings which started to take place in 1848, the idea of
concentrating all the land in a farm to a single piece of real estate was
reinforced. In these reparcelling processes, the land is redistributed in direct
proportion to earlier prescription. Both the general reparcelling and the further
reparcelling processes are still active in some parts of the country. In 1918,
Finland fought a civil war resulting in a series of land reforms. These included
the compensated transfer of lease-holdings to the leasers and prohibition of
forestry companies to acquire land.

29. Polish lands and their

industrialization before 1914
Situation:
Economic and political decline caused by wars lead to rising
political dependence from Russia. The short term of reversal of
economic trends after 1720 (recovery from population and
economic losses of Great Northern War) was ended by Russian
intervention in 1792.
Polish territory after 1795: 62% of lands – Russia, 20% - Prussia,
18% - Austria (disintegration and heavy fiscalism of new rulers)

49
Political and economic reforms attempts (many of them blocked by Russia)

● The fight for independence: Kosciuszko uprising against Russia &

Prussia 1794
● 1st attempt at the beginning of reign of Stanislaw August
Poniatowski – stopped by Russian intervention [1st partition of
Poland in 1772]
● 2nd wave of reform attempts during Russian engagement in
conflict with Turkey [1788-1792 – the Great Sejm, constitution of
May 3rd, 1791]
● Economic and population life concentrated in Warsaw – revival of
city life, development of banking, trade companies and
entertainment

1807 creation of Duchy of Warsaw (6 initial departments – after 1809 increased

to 10)
On January 16, 1816 the administrative division was reformed from the
departments of the Duchy of Warsaw into the more traditionally Polish

50
 voivodeships, obwóds and powiats.

Congress of Vienna (1815)

Polish lands again divided among 3 powers but gained significant doses
of autonomy. Administrative division of the country differentiated
territories. Most disadvantageous situation of Poles under Austrian rule
(isolated by mountain barrier caused deepening of economic
backwardness)
industrial policies:
Industry of Poland lands depended on occupiers – mainly subordinated
to Russian strategic defensive plans. Reforms were not possible as the
financial decline. Development of cities and urbanization caused a
development of infrastructure such as a paved roads system. Creation of
Bank of Poland in 1828 gave opportunity for the financial support by
money issuance combined with active credit policy. Occupiers controlled
administrative reforms and introduced high tariff barrier (between
Kingdom and Russian Empire) Slow development of railways was due to
military doctrine, thought this fast industrialization in 1870’s-1880’s
concentrated industry.
Industry:
Congress Poland experienced rapid and extensive socioeconomic change
during the nineteenth century. Although the vast majority of Poland’s
population remained rural, urban settlements grew notably. As in other
countries, the “push” of poverty and overpopulation in the countryside
and the “pull” of new job opportunities brought many people to the
developing cities in search of better lives. A boom in industry and

51
 commerce began in midcentury, the result in part of administrative
decisions taken in the 1820s, when the Russian authorities encouraged
German weavers and industrial workers to settle in a number of towns in
the Łódź region by guaranteeing them special privileges. Thanks to this
action, Łódź, Zgierz, Pabianice, and other nearby locales gradually
developed into major centers of mechanized textile production. By the
mid-1860s, many factories had been established.

30.Modernization attempts and

backwardness in 19th century
- openness to trade gradually decreased by rising protectionism (neo-
mercantilism), almost no extra-tariff barriers, lowering transport costs level-off
impact of rising tariffs
- free capital flows under Gold Standard, developed capital markets for
government debt and stocks
- free labour movement facilitated by declining transport cost (especially after
1870); intercontinental flows but also big migrations inside great Eurasiatic
landmass
- rising intergovernmental cooperation (Hague Conventions)
- economic and social interpretations of roots of war: arms race as solution to
satisfy interests of big industry and junkers (Prussian landed aristocracy),
nationalism as means of preserving national unity and solving internal
problems in age of mass society and labour movement; relative decline of
Britain due to spread of industrialization; relative rise of Germany and the will
of Weltpolitik
- industrialization policies enhanced by creation of Bank of Poland in 1828
(money issuance combined with active credit policy)
- new industrial ventures planned from the beginning under Drucki-Lubecki as
more ambitious and capital intensive than in the years of Staszic (source of
future problems)
- economic modernization not paired by political counterpart – November
uprising 1830-1831
- after Polish defeat Kingdom’s constitution suspended (rule of marshall
Paskevitch)
- economic policy subordinated to Russian strategic defensive plans
- Bank of Poland failures in industrial finance under count Łubieoski
- tariff barrier between Kingdom and Russian Empire until 1850 – capital jumps
52
the border – development of textile industry around Białystok
- mechanization of textile industry in Łódź (1840’s – Ludwig Geyer, 1850’s – Karl
Scheibler) – rapid technological advancement
- sugar beet refineries (1830’s & 1840’s) – rich landlords, often with financing
from Bank of Poland, industrialization not followed by urbanization
- hope for political reform after Crimean War (1853-1856)
-Centereuropean tendencies
-Organic work
-Beginning of mass production and urbanization
-Development of railway(territories of Austria-Hungary and Morawy in Czech),
Germany and UK most of all
-Colonialism
-Development of French constitutions (backbone behind modern european
constitutions)
-between bourgeoise and workers in capitalist economies, growing unevenness
of capital distribution

31.World War I
a) Economic reasons of WW I:

- rivalry for the colonies, resources, colonial trade and trade routes between
the most successful empires (Britain, France) and the emerging economic
powers (Germany, Austria-Hungary, Italy and Russia)

- division of the continent into two opposed political and economic alliances –
the Triple Entente (GB, FR, RU) and the Triple Alliances, also known as the
Central Powers (Germany, Italy, Austria-Hungary)

- German belief in the possibility of ending the war in the fast and effortless
way (Blitzkrieg)

b) Trench warfare and economy:

● French resistance during the battle of Marna in 1914 and

surprisingly fast Russian reaction to the war forced Germany to
start a long-lasting exhausting trench war demanding the huge
ammounts of force and capital. The confict increasingly

53
 influenced the economies and populations of European
countries.
● Trench war demanded a full economic mobilization of both
sides of the conflict.

c) Mobilization potential of Entente:

● common view that accumulated reserves and increased

production of a specialised arms sector will be sufficient to lead
the war contributed to the increasing expenditures on the
armies in all the states – in 1914 it varied from 3% GDP in
Britain to 4% GDP in France
● factual costs of war turned out to be many times higher due to
the wide-scale usage of modern technologies such as tanks,
submarines, aviation, machine guns and artillery (f. e. 10 times
more ammunition was needed than 1914 estimates)
● France, Britain and Russia owned 28% of world industry but
they produced smaller quantities of the startegic materials such
as steel. After USA joinef the war in 1917 their potential was
increased by 24% reaching the level of 52% and allowing the
Entente to win the war
● The French and British Empire intensively exploited their
colonies food, coloured-metals, iron and phosphorites reserves
as well as human and financial resources. Thousands of people
were forced to join the army. The Entente had also an easy
access to US resources.

● mobilization potential of Germany:

1. preparations started in the last two decades of XIX century

2. three times increased expenditures – 3,7% of GDP in 1914
3. Germany and Austria-Hungary owned 19% of world industry,
controlling more strategical sectors (f. e. majority of steel
production)
4. no access to the reserves of other countries were the reason of
Central Powers' isolation and the need to exploit their own
economic potential
5. failed hopes for an express victory in the war thanks to the
huge reserves accumulated during the peace forced Germany

54
 to transform its economy to the typical war model – creating
the Hindenburg's Programme (1916)

e) Hindenburg's programme:

● main purpose was to prepare the country to the reality of total

war
● extremely fast increase of the quantity of weapons supplied –
double increase of explosives, triple increase of machine guns
as well as significantly increased production of aviation and
trucks. Significant increase of raw materials exploitation
● whole industry controlled by the war government, many key
enterprises under the direct and forced management of
Kriegsamt
● reglamentation of production and distribution of industrial
goods, setting the level of prices and wages
● contingents in the agriculture, state-managed sharing of food
● all the above is called state monopoly capitalism – generally
speaking it means strict connections between the private
industry working for the needs of front with the state
institutions

f) Economic situation of Western Europe countries:

● The Entente had a free access to the world market what's the
reason of the interventionism aspirations being smaller – unlike
Germany where literally everything was controlled by state, in
Britain it was limited to the railway, sailing, coal mining, arms
industry and strategic raw materials exploitation. France
controlled fleet and allocation of workforce
● British Ministry of Munition had the right to confisquate all the
factories connected with the arms industry as well as those that
could switch from the peace- to wartime production
● Building state-owned arms industry factories and supporting the
modernisation of existing private ones

g) Economic situation of Russia:

● supervision over the industry working for the front

55
● coordinating of distribution of food, fuel and raw materials;
contigents for food and the strategic raw materials for the prices
set by the state
● mobilization of 2/5 male workforce in the age of 15-49 resulted in
the lack of workers in the industry; soon the missing males were
replaced by the females, kids and retired as well as captured
prisoners of war
● priviledged arms industry significantly increased its productivity
but still couldn't cover the army's needs because of the law quality
of the produced weapon and lack of modern machines in the
factories
● Russian retreat from the industrialised Kingdom of Poland over the
German offensive in 1915 was a great loss for the country – the
general industrial production decreased by 20%, the efficiency of
work fell too

f) German policy on the occupied Polish lands:

● the production continuosly decreased, many factories (Łódź

region, Zagłębie Dąbrowskie) were destroyed in order not to
compete with the German enterprises after war; raw materials
confisquated
● strict contingents of food, usage of Poles as soldiers
● creation of Polish National Loaning Cash emitting Polish mark
(1916)

g) Role of the American economy:

● US benefited from the wartime conjuncture providing Europe with

food, cotton, oil and industrial goods (often on credit)
● Loans on the level of $20 billion for the Entente and $20 million for
the Central Powers
● The main reason of US joining the war were the German
submarines actions against US fleet what resulted in blocking
American access to Europe and made the trade impossible
● 1917 – intrduction of the elements of the wartime economy –
regulations of production profile in the industry, licensioning the
food suppliers, controlling the level of prices, railway and sea
transports, rationalising the production.

56
 h) War expenditures:

● Total cost of war for the Entente was nearly $60 billion, for the
Central Powers - $ $25 billion. Consumption and investment were
limited in order to increase the expenditures on arming and
equiping the armies. In the end of war total expenditures reached
the level of 50% GDP in Russia and 30% in Britain and Germany.
● The countries participating in the war experienced a profound
crackdown on their budgets, their revenues couldn't cover
majority of expenditures. The other source of funds was needed.
● Germany used mainly the conception of the internal loans –
forcing its citizens to buy the special state obligations. 9 internal
loans of that kind took place what covered 90% of the budget
expenditures. The public debt increased 30 times. Currency-to-
gold exchange rate was cancelled. Money supply increased 9 times
causing the strong, 500% inflation.
● The Entente used the conception of internal loans as well –
increasing taxes, exploiting colonies („war gifts” - f. e. $100 million
obtained from India) and spending reserves. At the same time it
took advantage of external loans from the US offering its goods on
credit – 7$ billion debt emerged. Expenditures were funded by
internal loans (57%), taxes (28%) and American loans (15%).
increased supply of money contributed to 500% inflation.
● US became a main debtor, owning the vast majority of world's
gold reserves.

i. Living conditions:

● shortage of food, famine in many areas

● lack of workforce - usage of children, women, old people and
prisoners of war as workers
● strikes in many German factories

j) Aftermath:

● 9 million soldiers dead, 20 million wounded. 3 million civilians

dead as a result of famine, diseases and war actions. Harsh loses in
Serbia (20% of population dead) and Poland (25% of population
dead). France and Germany lost 10% of all well-educated

57
 specialists necessary in the economy. In total – 7% of Europeans
dead.
● Significant material and financial losses – infrastructure, factories,
gold and foreign currencies reserves
● Neutral countries benefited from the war – economic situation in
Scandiavia, Swiss Spain and the Netherlands was much better than
in 1914.
● German fleet and foreign investments confiscated. The country
had to pay $33 billion war reparations what turned ut to be
impossible and in the long perspective led to the outbreak of WW
II
● Limiting the role of the European economy which became
dependant on the external sources of capital and raw materials.
The US was the main winner but Canada, Brazil, South Africa,
India, Australia and Japan also benefited and significantly
deeloped their industries.
● Four major geopolitical empires disappeared – German, Austro-
Hungarian, Russian and the Ottoman.
● Women's war effort contributed to granting them vote rights.

32. Polish hyperinflation and

stabilisation:
High inflation was the main concern of European economies after
1918.Originally it was caused by the wartime rise in prices and afterwards by
the persistent budget deficit connected with the world military conflict and the
problems of the economical rebuildment. High inflation rate reaching the level
of hyperinflation occured in the number of countries including Germany,
Austria, Poland and Hungary.
First years of the reborn Polish state were connected with the harsh
fights for the borders with the neighbouring countries, especially with the
Bolshevist Russia. The war expenditures accounted for 50-60% GDP in 1920.
The government has very limited tax revenues so it had to take advantage of
external and internal loans (Polish National Loaning Cash emmiting Polish
mark). American Polonia granted help. Contingents, reglamentation of food
were employed. Government had a control over trade and industry.

58
 Increased supply of Polish mark (from 50 milliards in 1920 to 125 bln in
1923) caused 6000% inflation. State-owned credits and the tax revenue were
depreciating. Banks lost huge sums of money as a result of decrease in value of
the loans provided earlier to the private sector. People were interested in
exchanging mark for gold and foreign currencies through the speculants what
propmted the exchange rates. Tensions in the society (riots in Cracow in 1923)
and the end of wars with the neighbours forced the government to reform the
financial sector.
The prime minister Władysław Grabski started a wide-scale reforms.
Polish National Loaning Cash was replaced with the National Bank of Poland
and worthless currency – mark – with the new Polish zloty. The government's
strategy first aim was to repair the public finances. The expenditures and
administrative costs were significantly cut. At the same time the budget income
was being increased – f. e. the new property tax was introduced for the period
of 3 years – owners of all the estates of the value biggest than 10 thousand
swiss franks had to pay. The reform went without any help from Britain and
France.
In April 1924 the National Bank of Poland started its activity. Polish zloty
was introduced. Its exchange rate was set at the level of the swiss frank. The
exchange rate was based on the accumulated reserves of gold and foreign
values and it could cover 30% of the value of all the new banknotes.
In 1919 only 14% of workforce employed before war in the factories of
Kingdom of Poland had their jobs. The situation was changed by incorporating
the Upper Silesia to Poland. Another factor was the development of
infrastructure at the Baltic seaside, especially building the port in Gdynia. The
significant ammounts of the coal were exported. The major companies,
factories and industries remained the state's property.

33. World finances in the interwar

period.
- The European economy was devastated by the war, while the United States
economy grew in response to the demands of the war. Economic leadership
shifted from the England and London to the United States and New York. The
United States became the creditor nation of the world while England, for the
first time since the beginning of the industrial revolution, became a debtor
nation.

59
- The most fundamental problems of the period were inconvertible currencies
in all belligerent countries, the inability of states to construct a viable
international financial system, economic crisis in 1920-1933.
- Immediately after the war, there was a period where inconvertibility of the
currencies and fluctuating exchange rates prevailed.The industrial countries
realised the need to stabilise the prices and exchange rates, basically toimpose
the conditions needed to expand trade and therefore, to return to a growing
economy.The dominant idea was that of a return to the gold standard. This
meant rebuilding the pre-wareconomy. The leader for this objective was Great
Britain, which in the Twenties promoted first the Brussels Conference, and then
the Genoa Conference.
-League of Nations, created after the First World War with the intention of
maintaining world security and peace and encouraging economic growth
between member countries. After the end of the war, the economic and
financial conditions in all European countries were close to total collapse.
Within this context, the League organized a large conference in Brussels in
September – October 1920. The goal was to find a solution to monetary
problems and facilitate the circulation of goods and funds. Following the
conference the League established an Economic and Financial Organisation,
including several Committees (Financial, Economic, Fiscal, Statistical). During
the following years the League assisted many European countries: Austria,
Hungary, Greece, Bulgaria, etc. In October 1929 the Great Depression started in
the USA and soon contaminated Europe. In 1933, the LON organized a new
Economic Conference in London to find a common solution to the protection of
national economies. The conflict between the international political goals of
the major powers and their views on economic welfare prevented from any
concerted solution. - England and France and other debtor nations could not
pay their debts unless they received reparations from Germany. Germany, also
devastated by war, could not finance its own recovery and pay reparations too.
- Conference of Genoa 1922, at Genoa, Italy. Representatives of 34 nations
convened on Apr. 10 to attempt the reconstruction of European finance and
commerce. It was the first conference after World War I in which Germany and
the Soviet Union were accepted on a par with other nations. Negotiations
broke down when France and Belgium, Russia's main creditors, insisted on
repayment of prewar loans and restitution of confiscated foreign-owned
property in Russia. Announcement of the German-Soviet Treaty of Rapallo
further strained relations. With the Genoa Conference Resolutions, the gold
exchange standard was begun.
- When Germany defaulted in 1923, and experienced massive inflation,
financial reforms had to be introduced to stabilize the German economy. The

60
only way to accomplish that was to create the means by which American
investment could be made in German recovery.
- The Dawes Plan (1924) was the result of negotiations between Germany and
the US Government. The plan allowed the co-ordination of reparations
repayments, making these more manageable. This involved paying reduced
payments until 1929, when the situation would be reappraised. The scale of
the reassessment is worthy to note, reparations payments in 1922 had been
some $2 billion, the figure for 1914 was set at $50million. This large reduction
in reparations payments was accompanied by a loan of $200 million from the
US government which would allow for heavy investment in the German
infrastructure. Linked to this agreement was the introduction of the new
Reichsbank and the replacement of the old German Mark with the
Rentenmark. The Dawes plan also provided for the gradual removal of French
and Belgian troops from the Rhineland.

34. Soviet Union and the centrally

planned economy before World
War II
The World War I totally exhausted the tsarist government of Russian Empire.
Liberals, bourgeoisie, aristocracy and military – everyone was preparing to
overthrow it. In many ways Russia's disastrous participation in World War I was
the final blow to Tsarist rule. In the very first engagement with the Germans
(who had sided with the Austro-Hungarian Empire), the Battle of Tannenberg,
the Russian army was comprehensively beaten suffering 120,000 casualties to
Germany's 20,000. The mismanagement and failures of the war turned the
people – and importantly the soldiers – against the Tsar, whose decision to
take personal command of the army seemed to make him personally
responsible for the defeats. In March 1917, the Tsar lost control first to streets,
then of the soldiers, and finally of the Duma, resulting in his forced abdication.
The power was held by the Provisional Government.
One person keen to take advantage of the chaotic state of affairs in St.
Petersburg was Vladimir Ilyich Ulyanov - aka Lenin. With the Tsar under arrest
and Russian politics in chaos, Lenin saw the opportunity to lead his party, the
Bolsheviks, to power. At first his uncompromising stance served to isolate Lenin
61
and the Bolsheviks, however with powerful slogans like 'Peace, land and bread,'
Lenin begin to win the hearts of the Russian people - who were increasingly
unable to stomach war and poverty.
In October Bolsheviks took up crucial positions in Petrograd (now St.
Petersburg) By the 25th October every key building in St. Petersburg was under
Bolshevik control, except the Winter Palace where Kerensky and the other
Ministers were holed up with a small guard. On the 26th the Palace was taken
with barely a shot fired, and Lenin's October Revolution had been achieved
with the bare minimum of drama or bloodshed.
Despite being allowed to seize power so easily Lenin soon discovered that his
support was far from absolute. His Peace Policy with the Germans (Brest-
Litovsk Treaty March 3, 1918 between Russia and the Central Powers, headed
by Germany, marking Russia's exit from World War I) was particularly
unpopular as it ceded large amounts of Russian territory. Shortly after the
October Revolution, the Russian Civil War broke out between the 'Reds'
(Communists) and the 'Whites' (Nationalists, Conservatives, Imperialists and
other anti-Bolshevik groups).
In 1920 bolsheviks won the Civil War, but the price was high: 13 mln people
dead and big devastation. In 1921 Lenin introduced New Economic Policy (NEP)
that made it possible for russian economy to achieve its prewar level in 1925.
Syndicates in industry and private capitals were liquidated, was created
centrally planned system of managing the economy (narkomats).
The main contents of NEP: introducing taxes into agriculture, involvement of
foreign funds, monetary reform (1922-1924). NEP in agriculture: at first the tax
established at the level of 20%, in October 1922 the Land Code was introduced,
according to which all the land was nationalized. The welfare of peasants rose
in comparison with prewar period, the middle class took the biggest part. NEP
in industry: creation of trusts (association of interconnected enterprises) that
had economic and financial independence, no less than 20% of trusts’ income
should have been sent to reserve funds; appearance of syndicates (association
of trusts) that dealt with sale, provision, lending, foreign trade operations;
appearance of private sector; development of cooperation. All in all, the index
of industrial production grew 3 times, agricultural production – 2 times.

62
Lenin and the Reds established the Soviet Union in 1922. In 1923 Lenin died
and Stalin took over the Communist Party, which continued to rule Russia until
1991 when the USSR was dissolved.
In 1928 Stalin introduced the five-year plan of industrialization (first heavy
than development of light industry) and after a year he started forced
collectivization of agriculture (small private rural household were converted
into big kolhozes). Stalin believed that the goals of collectivization could be
achieved voluntarily, but when the new farms failed to attract the number of
peasants hoped, the government blamed the oppression of the kulaks and
resorted to forceful implementation of the plan, by murder and wholesale
deportation of farmers to Siberia. In 1932-1933, an estimated 3.1–7 million
people, mainly in Ukraine, died from famine after Stalin forced the peasants
into the collectives. Under the Second Five-Year Plan (1933-37), the state
devoted attention to consumer goods, and the factories built during the first
plan helped increase industrial output in general. The Third Five-Year Plan,
begun in 1938, produced poorer results because of a sudden shift of emphasis
to armaments production in response to the worsening international climate.
Although the First Five-Year Plan called for the collectivization of only 20% of
peasant households, by 1940 approximately 95% of all peasant households had
been collectivized and private ownership of property almost entirely
eliminated.

35.The Great Depression

The Great Depression was an economic slump in North America, Europe, and
other industrialized areas of the world that began in 1929 and lasted until
about 1939. It was the longest and most severe depression ever experienced by
the industrialized Western world.

The Great Depression began with a catastrophic collapse of stock-market prices

on the New York Stock Exchange in October 1929 (Black Tuesday). As stock
prices plummeted with no hope of recovery, panic struck. Masses and masses
of people tried to sell their stock, but no one was buying. The stock market,
which had appeared to be the surest way to become rich, quickly became the
path to bankruptcy.

63
Started in the United States the Great Depression quickly turned into a
worldwide economic slump owing to the special and intimate relationships that
had been forged between the United States and European economies after
World War I. The United States had emerged from the war as the major
creditor and financier of postwar Europe. So once the American economy
slumped and the flow of American investment credits to Europe dried up,
prosperity tended to collapse there as well. The Depression hit hardest those
nations that were most deeply indebted to the United States, i.e., Germany and
Great Britain.
In Germany, unemployment rose sharply beginning in late 1929, and by early
1932 it had reached 6 million workers, or 25 percent of the work force. Britain
was less severely affected, but its industrial and export sectors remained
seriously depressed until World War II. Many other countries had been
affected by the slump by 1931.

Almost all nations sought to protect their domestic production by imposing

tariffs, raising existing ones, and setting quotas on foreign imports. The effect
of these restrictive measures was to greatly reduce the volume of international
trade: by 1932 the total value of world trade had fallen by more than half as
country after country took measures against the importation of foreign goods.

THE MAIN AREAS OF DEPRESSION

The US economy had experienced rapid economic growth and financial excess
in the late 1920s, and initially the economic downturn was seen as simply part
of the boom-bust-boom cycle. Unexpectedly, however, output continued to fall
for three and a half years, by which time half of the population was in
desperate circumstances (map1). It also became clear that there had been
serious over-production in agriculture, leading to falling prices and a rising debt
among farmers. At the same time there was a major banking crisis, including
the "Wall Street Crash" in October 1929.

Map 1

The economic situation in Germany (map2) was made worse by the enormous
debt with which the country had been burdened following the First World War.
It had been forced to borrow heavily in order to pay "reparations" to the
victorious European powers, as demanded by the Treat of Versailles (1919),

64
and also to pay for industrial reconstruction. When the American economy fell
into depression, US banks recalled their loans, causing the German banking
system to collapse.

Map 2

Countries that were dependent on the export of primary products, such as

those in Latin America, were already suffering a depression in the late l920s.
More efficient farming methods and technological changes meant that the
supply of agricultural products was rising faster than demand, and prices were
falling as a consequence. Initially, the governments of the producer countries
stockpiled their products. but this depended on loans from the USA and
Europe. When these were recalled, the stockpiles were released onto the
market, causing prices to collapse and the income of the primary-producing
countries to fall drastically (map3).

Map 3

THE GOLD STANDARD

The gold standard linked currencies to the value of gold, and was supported by
almost every country in the world. From 1931, however, countries began to
leave the standard, leading to its total collapse by 1936. Although at the time
this was seen as a disaster, it actually presented opportunities for recovery in
many countries, allowing governments to intervene to create economic
growth.

POLITICAL IMPLICATIONS

The Depression had profound political implications. In countries such as

Germany and Japan, reaction to the Depression brought about the rise to
power of militarist governments who adopted the regressive foreign policies
that led to the Second World War. In countries such as the United States and
Britain, government intervention ultimately resulted in the creation of welfare
systems and the managed economies of the period following the Second World
War.

65
THE COLLAPSE OF WORLD TRADE

The German case is an extreme example of what happened virtually

everywhere in the 1930s. The international economy broke up into trading
blocs determined by political allegiances and the currency in which they traded.
Trade between the blocs was limited, with world trade in 1939 still below its
1929 level. Although the global economy did eventually recover from the
Depression, it was at considerable cost to international economic relations and
to political stability.

66
36.The Great Depression in Poland
The Great Depression severely affected central Europe, Poland in particular,
where the economic crisis started slightly later than in the US, but it lasted
longer: 1930-1935. From the perspective of the World War II which followed
Poles tend to see thirties as good years. But the big economic crisis brought lots
of misery and poverty, especially in the regions which were poor already,
mainly in Southeastern Poland. The unemployment rate in Poland rose to 20%
while output fell by 40%. By November 1932 the country had increased tariffs
and introduced import quotas.

In general, years 1926-1928 were successful for Polish economy. The export
grew, especially coal export due to the long strike of British miners. The
unemployment was low. But the economic crisis affected Poland quite soon
after the New York stock crash. Foreign banks withdrew credits given for
development of Polish economy, the foreign investments stopped. The crisis
affected the most agriculture which was giving jobs to 60% of Poles. In 1929
Polish economy was in 79% agrarian and in 21% industrial. This was one of the
main reasons why Polish crisis was longer than in industrially developed
countries.

The first sign of the crisis was a drastic decrease of the food prices due to
overproduction and decrease of the consumption by urban population.
Farmers had to sell much more products to pay taxes, buy tools, cloths, salt or
matches. The lower food prices and higher supply caused further decrease of

67
food prices and more hardship for farmers. With a time it led to a high
inequality between food, very cheap, and industrial products, very expensive.

The industrial slow down caused rapid decrease in production. This led to the
development of monopoles which limited the competition and led to increase
in prices.

The total industrial production in 1932 was about 40% less than in 1928. 1932
was the worst year for Polish economy, the unemployment beyond farming
was estimated at 44%.

Initially Polish government did very little to improve the economic situation
besides fighting for duty barriers for imported products and for easing of
barriers for Polish products. The course of Polish currency was kept high, the
access to the credit was low, the investments were low and the budget
expenses were cut. This led to lower industrial production, lower prices and
lower standard of life of population. The more complex program to fight the
crisis was introduced at the end of 1932. It helped to increase the value of
farming products and to lower the prices of industrial goods, especially these
produced by monopoles. The government initiated steps against
unemployment and to increase the export. People were hired for public works.
My mother remembered that some barracks which were build for temporary
road workers. The safe work for many people was a job in public institutions.
The lowering unemployment decreased the number of strikes. Many
corporations become public, since they were unable to repay their credits.

Falling prices and demand induced by the crisis created an additional problem
in the central European banking system, where the financial system had
particularly close relationships with business. In 1931 the Creditanstalt bank in
Vienna collapsed, causing a financial panic across Europe.

Industrial projects were kicked off to alleviate differences between better

developed western and central Poland, so called "Poland A" and poor "Poland
B" which included Easter and Southeastern regions, predominantly a farmland
inhabited by minorities. The biggest project was so called Central Industrial
Region (COP) was initiated in 1936 in the central Poland just between Poland A
and Poland B. The COP project was interrupted by the outbreak of War World II
in September 1939. One has to wonder how Poland would look like in the
present time if not the biggest human and economic devastation and then forty
years of communism brought by the war and Soviet occupation.

68
37. The new states of central and
eastern Europe before World War
II
1.Aftermath of World War I
After the fall of Russian Empire, Austro-Hungary and Turkish Empire new
countries were established
● Finland
● Estonia, Latvia, Lithuania
As a result of the fall of Russian Empire
● Austria and Hungary (two independent countries as a result of the fall of
Austro-Hungary, though initially Austria was called “German Austria”)
● Romania
● Albania
● Yugoslavia (initially “State of Slovenes, Croats and Serbs”)
● Bulgaria (as a result of the fall of Turkish Empire)
2. Poland’s case
After the end of World War I, the Central Powers' surrender to the Western
Allies, the chaos of the Russian Revolution and the Treaty of Versailles
finally allowed and helped the restoration of Poland's full independence
after 123 years. It reappeared on the map of the Europe and it was granted
access to Baltic Sea (Please note that Gdaosk which is the main Polish port
was known as a “Free city of Gdansk” and it was under the control of the
League of Nations).
3. Situation of these countries before WW II
After the war, almost all of the countries declared to be democracies. Hungary
was the only exception (dictator Miklos Horthy). Unfortunately these
democracies didn’t last. As a result of the lack of political elites, inexperienced
society couldn’t create efficient parliamentary system. This lead to creation of
dictatorships. Only Czechoslovakia was able to sustain democracy until WW II.
In most of these countries , the economic situation was very poor. The poverty
lead to frustration and started the search for someone to blame. Ethnic
conflicts and open conflicts with neighbors were impossible to avoid. Hungary
for example lost lots of its territories and had a huge diasporas in Slovakia,
Yugoslavia and Romania which gave birth to many ethnic conflicts. It can be
considered one of the reasons for these countries to take part in World War II

69
38.Franklin Delano Roosevelt and
New Deal
Intoduction
The New Deal is a series of economic programs implemented in the United
States between 1933 and 1936. The New Deal was Roosevelt's way to solve the
problems caused by the Great Depression, including unemployment and
agricultural overproduction. The New Deal is often split into two smaller New
Deals: the First New Deal and the Second New Deal. During the First Hundred
Days of Roosevelt's presidency, Roosevelt and his administration proposed
many plans to fix the economy.
Causes : see question n.35- The great depression
When Roosevelt was inaugurated March 4, 1933 (32 days after Hitler was
appointed Chancellor of Germany), the U.S. was at the worst depression in its
history. A quarter of the workforce was unemployed. Farmers were in deep
trouble as prices fell by 60%. Industrial production had fallen by more than half
since 1929. Two million were homeless. By the evening of March 4, 32 of the 48
states, as well as the District of Columbia had closed their banks.] The New York
Federal Reserve Bank was unable to open on the 5th, as huge sums had been
withdrawn by panicky customers in previous days. Beginning with his
inauguration address, Roosevelt began blaming the economic crisis on bankers
and financiers, the quest for profit, and the self-interest basis of capitalism
In one day, legislation from Congress permitted reopening of most banks under
certification by the federal government that they were sound. Later banking
reforms included insuring of deposits through the Federal Deposit Insurance
Corporation.
Active social programmes
The New Deal provided large sums of federal money for direct payments to
needy citizens through grants (rather than loans) to the states. It also
established various new agencies to provide government-sponsored work for
the unemployed. Through the Works Progress Administration (WPA) special
projects were devised to provide employment for skilled and unskilled labor
and for such persons as writers, artists, actors, and musicians. A vast program
of public works—the construction of public buildings, highways, and similar
projects—was begun under the Public Works Administration (PWA).A basic
goal of the New Deal was to raise both wages and prices, which had dropped
lower and lower as the depression continued.

70
Interventionism
The National Industrial Recovery Act called for the cooperation of labor and
management in setting prices, minimum wages, and working hours within
various industries. The act also gave workers the right to join unions without
interference from employers.To increase the income of farmers, the
Agricultural Adjustment Act was passed. It included provisions for paying
farmers to reduce the acreage of certain crops and to limit livestock holdings.
To sum up, many social programmes and highly interventional economic policy
(as opposed to previous policy which wasn’t that strict) were introduced in
order to stimulate the economy.
Later on, Supreme Court rejects part of New Deal as unconstitutional .Return of
recession in 1937 which results in the Second New Deal (1937-1938) –
agricultural subsidies for soil preservation & other solutions designed to be
constitutional which leads to the return of good business climate – after
American entry into the war
● Lack of theoretical basis for interventionism, John M. Keynes General
Theory of Employment, Interest and Money (1935-1936) commonly
accepted after the war
For overcoming the difficult challenges of a depression and a world war,
historians generally consider F.D Roosevelt to be one of the best U.S.
presidents. He was one of the most popular presidents ever (he won the
elections 4 times in a row)

39. Totalitarian and democratic

economic policies in 1930’s.
(From Mr Dwilewicz presentation) - State interventionism – economic policies
after WWI and the Great Depression

State interventionism – democratic countries:

● F.D. Roosevelt in USA: bank holidays (March 6, 1933) – after 9 days 75%
banks restart their activity; Glass-Steagall Act (1933) separating
commercial & investment banking & creating Federal Deposit Insurance
Corporation

71
 ● additional spending in different sectors of economy: Agricultural
Adjustment Administration (May 1933 -1936, $ 1.5 bn of expenditures),
Federal Emergency Relief Administration (May 1933 - relief payments
for unemployed), National Recovery Administration (June 1933-1935 –
557 basic & 208 supplementary codes of conduct regulating specified
industrial branches on voluntary basis – in exchange for Blue Eagle
symbol of fair industrial practice), Public Works Administration (1933-
1939 – $ 4 bn spent on public construction projects), Works Progress
Administration (1935-1943 – employment program similar to PWA),
Tennessee Valley Authority – economic reconstruction of Tennessee
River region, Civilian Conservation Corps – forestry improvement
program for unemployed youth
● $ devaluation Jan 21, 1934: from $21 to $35/troy ounce Au; Gold
Reserve Act (Jan 30, 1934)
● May 1934 – intervention on silver market – damaging effects for China
● Securities & Exchange Act (1934) – Securities and Exchange Commission
(1934), Banking Act (1935) – strengthening of Fed’s position against
government and state banks
● Social Security Act (August 1935) – old age pensions
● Supreme Court rejects part of New Deal as unconstitutional – 1934-1936
● Return of recession in 1937
● Second New Deal (1937-1938) – agricultural subsidies for soil
preservation & other solutions designed to be constitutional
● Return of good business climate – after American entry into the war
● Lack of theoretical basis for interventionism, John M. Keynes General
Theory of Employment, Interest and Money (1935-1936) commonly
accepted after the war

State interventionism – totalitarian states:

● Italy: concept of totalitarian state – Mussolini

● corporatism (corporativism) as ideology of ensuring national unity by
avoiding conflicts resulting from market system, syndicates – sole
representation of labour from October 1925,strikes& lockouts illegal;
Constitution for corporate state - April 1926, creation of 22 nation-wide
corporations - 1934, Council of Corporations as supreme legislative body
- 1936 (also basis in social teaching of the Catholic Church - Pius XI -
Quadrogesimo Anno, 1931, hence corporatism in Spain & Portugal)
● public works projects before 1929 (mostly in backward agriculture)

72
● Istituto Mobiliare Italiano – IMI, Istituto per la Riconstruzione Industriale
– IRI, 1933, created on the basis of big banks, source of finance for big
industrial projects (private & public) and bailing out failing firms (without
nationalization)
● Autarky in foreign trade, especially after League of Nations sanctions
resulting from 1935 invasion of Ethiopia, at the same time rising role of
state-licensing, reallocation of resources to military industry: war
machine at the expense of standard of living
● Germany – fighting high unemployment as source of legitimacy for
Hitler’s regime
● The concept of Grossraumwirtschaft (big area economy)
● Delegalization of trade-unions, Deutsche Arbeitsfront instead - May 1933,
Robert Ley (role in labour mobilization during the war)
● Reduction of market’s role in the economy – government price-fixing,
bank-licensing, creation of Reich’s Economic Council (Generalrat der
Wirtschaft)
● State planning associated with private property, Reich’s Ministry of
Economy – Hjalmar Schacht, from 1938 Walter Funk, Reichsbank -1933-
1939 Schacht, from 1939 Funk, War Economy Office of Wehrmacht –
Georg Thomas, Office of Plenipotentiary General for 4-year Plan –
Hermann Göring; constant rivalry between administrative bodies
● Cannons instead of bread – reallocation of capital towards armaments,
rising role of collective consumption (KdF, Strength Through Joy), big
public works (highway networks, Organisation Todt), 1937 – labour
shortage, no rise of level of living
● mass production of industrial consumption goods on fordist patterns –
Volkswagen, Volksempfänger
● Autarky in agriculture
● Different source of financing: state robbery of Jewish property, pre-paid
Volkswagen program, asymmetric foreign trade relations with Balkan
countries, Mefo bills-of-exchange; despite that imbalances in German
pre-war finance
● Japan – industrial policies similar to those of Germany – armaments
expenditure at 17% in 1938, partially because of military expansion in
China
● Dependence from imported supplies implied concept of Great Asian
Zone of Coprosperity
● Neutrality pact with Soviet Union – April 1941, clear path for southern
expansion

73
 ● Summing up: totalitarian regimes intervening in economy in order to
build war machine for ensuring wealth thanks to future conquests,
democratic governments focused directly on wealth of citizens,
especially those most affected by Great Depression, in part to avoid
social radicalism

From H. Kalioski book:

USA
– big economic crisis, social problems, ignored by economists and
governments (they were waiting and hoping it will become better with time),
protectionism to limit international trade, Hawley – Smoot Tariff Act 1930
(import tariffs increasing)
- interventionism: overcoming the crisis by increasing demand, investments,
decreasing interest rates and taxes,
- Roosevelt’s interventionism called “New Deal” and “brain trust” (it clustered
professors from Columbia University) – hangup o the gold standard; 1934 (Gold
Reserve Act), 05.03.1993 – all banks closed for a week, emergency Banking Act,
- to “heal” the industry in 1933 the National Recovery Administration crated
(supporting the industry and actions against unemployment)
- 1935 – NRA resolved, National Labour Relations Board created to negotiate
between employers and employees,
- Fair Labor Standards Act – minimum age for trade workers and number of
working hours regulated,
- agriculture 1933 – Agriculture Adjustment Administration,
- 1933 – banning of prohibition (from 1920) – source of crime, robbery,
administration cost of the department responsible,

Germany -
- preparing for a war to realize Nazi desires,
- Grossrauwirtschaft – extended economy – plan to create it after winning the
war,
- centralized economy under Hitler, labor unions liquidated, Deutsche
Arbeitsfront instead
- Reichsgruppen – economic groups including industry (without armament),
trade, banks, insurances, power industry, craft,
- marker economy mixed with central planning
- H. Schacht – preparing the country to the war - > Walter Funk, Goring
(Goring’s 4 year plan),

74
- desire to liquidate unemployment, economic self – sufficiency, country’s
motorization (Volkswagen), Autobahn ( motorways),
- Kristallnacht, or the Night of Broken Glass – a pogrom or series of attacks
against Jews (1938) – 7.5. thousand Jewish shops destroyed,

39. Polish economic policy in

1930’s
From H. Kalioski book:
● 1933 – Labor Fund (Fundusz Pracy) was created to finance public works
and decrease the unemployment rate; it had the following aims: job
mediacy organization, extemporaneous help for unemployed,
● From the Fund means transport, land improvement, flat building were
developed,
● 2nd aspect of the economic policy – desire to decrease the prices of
investment goods to revitalize the economic trend
● actions against cartels (excessive prices); cartels dissolved:
Centrocement,
● cement, paraffin, iron, coal prices decreased,
● the government was forced to run enterprises important for the country,
but actually going bankrupt: industrial mills in Gdaosk and Łódź,
● 1935 – “pump priming” (“nakręcanie koniunktury”) -
Deputy Prime Minister and Treasury Minister Eugeniusz Kwiatkowski :
coordinated the Port of Gdynia building, was for the industrialization of
the country by using private and public means,
● Industrialization – to increase economic standards in Poland and
strengthen its defence

75
● 4 - year plan from July 1936 – June 1940, fulfilled in 3 years, was to
realize:

The Central Industrial Region (Polish: Centralny Okręg Przemysłowy,

abbreviated COP), is an industrial region in Poland. It was one of the
biggest economic projects of the Second Polish Republic. The 5-year long
project was initiated by a famous Polish economist, deputy Prime
Minister and Minister of the Treasury, Eugeniusz Kwiatkowski. Its goal was
to create a heavy industrial center in the middle of the country, as far as
possible from any borders, strengthen the Polish economy and
reduce unemployment. The four-year plan for the development of COP was
scheduled from 1 September 1936 until 30 July 1940 and was interrupted by
the outbreak of the Second World War and the German invasion of
Poland on 1 September 1939. Nonetheless, the COP project succeeded in
vastly expanding Polish industry, and after the end of the war in 1945 COP
was rebuilt and expanded under the People's Republic of Poland.
● area: provinces around Krakow, Lvov, Kielce, Lublin (center Sandomierz),
because of 1) afar from the borders, 2) excess of people to work,
diverse raw materials,
● effects: Stalowa Wola – steal mill producing cannons, Rzeszów, Mielec –
airplane factories, Lublin – car factories, Radom, Starachowice – weapon
factories
● CIR – modernized the industry, crated 107 thousand workplaces
● 2nd long – term plan for 1939 – 1954 – to modernize industry, agriculture,
communication, urbanization, - to integrate parts A and B of the
country,

76
Poland A and B (Polish: Polska "A" i "B") refers to the historical distinction
between west and east areas of Poland, with the west being significantly more
developed than the east.

Historically, the source of Poland A and B can be traced to the period of

the partitions of Poland, and different policies of the partitioners, which
resulted in a much larger industrial development of the Western Prussian
partition.

41. Japanese economy from Meiji to WW

II.
Before: Japan is backward, but liberal. Foreign people not allowed to enter.
Catholics murdered. Large tariffs. ( taryfa celna).
1867- Mitsuhito becomes the emperor of Japan and the Meiji era commences.
1868-9 - the shogunate ( power lying in the hands of the chief of the amry) in
Japan is overthrown

Important changes until WW I

● The conversion of the fiefs (han) into prefectures(ken) administered by

government.:
● Japanese peasants did pay taxes to their daimyo, instead they paid
them to the central government.
● Major ports opened for foreign trade
● A change in army’s policies:
● General duty of military service to eliminate class differences
● The role of samurais depreciated – received government securities
instead of salaries
● Ministry of Industrialization founded with European experts brought into
it.
● Industry focused on food and textiles:
● Lacked from the beginnings any vital raw materials but the
development of industry was rapid.
● Silk, cotton, but also conversion of rare nurtures: sake, miso, soya
sauce etc.

77
 ● From 1877-1900 economic growth based in 45% on food
production and in 35% on textiles.
● Beginning of the 80’s of XIX century all factories being sold to
private companies.
● Manual work replaced with machines and automaticity.
● Import of these products being stopped and exports beginning to
spread
● This all led to the fact that in 1913 almost ¼ of the overall cotton
came from Japan which became a significant danger to e.g. Great
Britain in this branch of industry.
● First steelworks opened in Yawata and first private steel works
(Kobe Steel and Nippon Kokan) opened shortly before the WW I.
● TELC – Tokyo Electric Light Company born in 1887 – supplying the
country with electricity:
● Factories in Kobe, Kioto, Osaka, Nagoi and Yokohama
● In 1920 it has brought 52,3% of power into industry in comparison
to US 31,6% and British 28,3% ( in 1924!)
● Railway between Tokyo and Yokohama built in 1872
● Change of policy and stabilization of yen in 1882:
● Bank of Japan founded which used the organizational formula of
the Belgian National Bank
● Yen became a currency for gold.
● Credit market dominated with native banks: Mitsui, Mitsubishi,
Yasuda, Sumimoto.
● In 1901 there were almost 2 thousands bans many of which
became joint-stock companies.
● As mentioned earlier private companies replaced government factories,
but:
● They were simply private monopoles in replacement for the
government ones and it was backed by the country.
● Urban migrations
● Influence of rich families started to grow:
● Mitsui and Mitsubishi families involved into many branches of
industry, while Sumimoto took power over heavy industry.
● Immense work exploitation:
● Low wages made the production cost low and attractive on the
market
● Peasantry decided about the production and sales of their output:
● No agrotechnical methods introduced
● Outdated agricultural methods cultivated

78
 ● Agriculture did not develop simultaneously with other branches of
economy
● Some exports had to be cancelled e.g. tea or even rice ( rice being
imported sic!)

Brief summary:
● Japan in a short time from a backwards country with active feudal
system became the most industrialized Asian country before WW I.

From WWI to WWII:

● Japanese followed Hitler policies to increase the heavy industry

expenditures from 7% from 1932 up to 17% in 1938
● State interventionism to limit the market structures in economy
● 1937 – Planning Agency founded.
● Five-Year Plan for industry:
● Control over prices, workforce, foreign trade and raw materials
● Usurpation of lands, factories etc.
● Private companies had limit control over their assets and profits
● Japan wanted to form Greater East Asia Co-Prosperity Sphere:
● They had no raw materials nor fuels
● Had to create their own economy over a big territory which
could grant them such raw materials:
● Chinese steel, nickel || Phillipines copper || Indochinese
rubber etc.
● Countries that were conquered like Manchuria were to
give access to raw materials, place to emigrate and
guarantee a market for Japanese products
● War preparations:
● Import of raw materials and fuels increased to 42%
● Textile industry exports replaced by heavy and chemical
industry.
Sources:

9. David S.Landes “Wealth and poverty of nations” : “Meiji era” chapter

10. Morawski lecture – p.16
11. Kalioski “ Economic history of 19th and 20th century” p. 96-97 , 178

79
42. Land reforms in Central &
Eastern Europe (1918 – 1939)
Background:

● Agriculture did not develop as it was though it would ( lack of assets)

● Biggest changes ( peasants taking over the lands belonging to state) in
Latvia and Romania
Italy:

● Wanted to possess the economic space in Nothern Africa and Southern

Europe
● “Battle of the Wheat”:
● Commenced in 1925
● Encouraged farmers to concentrate on wheat production ( eliminate the
import of wheat)
● Part of self-sufficiency ( autarky )
● Results:
● 1935 – wheat imports cut by ¾.
● Made in the expense of dairy and arable farming.
● Failure for the farmers:
● Southern climate suitable for grazing (pasad zwierzęta) rather for
wheat
● They had to occupy themselves of what was not as profitable for
them as grazing ( pasanie) and orchards. ( sadownictwo)
● Agriculture remained inefficient
● Farm labourers were the poorest class in country:
● Italy had dualist economy:
● North:
● Industrial and prosperous
● South:
● Agricultural, poor and backward
● Self-sufficiency did not work as it was planned to.

80
● Programme of land reclamation:
● Draining marshes
● Irrigation
● Planting forests in mountainous areas
● Drive to improve and increase agricultural yield
● Pontine Marshes near Rome were a great example of drying fields which
increased significantly ( by thousands of ha) the area for tillages (
uprawy)
● Still, only one-tenth has been carried out in 1939

Russia:

Lenin era:

● War communism ( 1918-1921)

● Took grain from peasants
● Social property instead of private property: nationalization of land –
peasants divide landlords’ estates perceiving government decree as land
reform,
●
● New Economic Policy ( 1921-28):
● Peasants allowed to keep surplus after payment of tax representing
certain proportion of the surplus.
Stalin era:

12. The collectivization of agriculture (1929-1937):

a. Main idea:
i. Small farms and holdings belonging to the peasants should
be merged to form large collective farms ( kolkhoz) jointly
owned by peasants.
b. Stalin’s reasons for collectivization:
i. Existing system of small farms was inefficient.
ii. Large farms under state direction( use of tractors, comine
harvesters) would vastly increase grain production.
iii. Elimination of the class of the prosperous peasants called
kulaks:

81
 1. NEP encouraged them.
2. Stalin thought they held up the progress
3. Political reason = Stalin saw the kulaks as the enemy
of communism “ Strike hard (...) so they would never
stand on their feet again”.
c. Conduction:
i. Launched in 1929.
ii. Carried through sheer brute force, because the resistance
on the countryside was determined.
iii. A disaster for all time.
iv. No problem in collectivizing landless labourers.
v. Problems with all peasants, even not the kulaks:
1. Hostile to the plan
2. Had to be forced to join by armies of party members:
a. They urged poorer peasants to seize the cattle
and machinery.
b. Hand it to the collectives.
vi. Kulaks responded by:
1. Slaughtering cattle
2. Burning crops
3. Did not allow state’s interference.
vii. Collectivized peasants tried to sabotage the system by
producing enough grain for their own needs.
viii. The officials insisted on seizing the required quotas which
caused starvation.
ix. 90% of all farmland collectivized by 1937.
d. Collectivization was Stalin’s success:
i. Allowed greater mechanization
ii. Substantial increase in production in 1937.
iii. Amount of grain taken by the state increased impressively
along with grain exports.
iv. 1930 & 1931 – great years for export of Russian grain;
higher than ever and without the reach of past years.

82
 e. Collectivization under Stalin was a failure:
i. Animals slaughtered = 1953 it recovered to its actual, pre-
collectivisation state.
ii. Human life and suffering enormous.
iii. Total grain production did not increase at all (except 1930)
= Less in 1934 than in 1928.
iv. Why?:
1. Kulaks were excluded from the collective farms= lack
of best producers, instead party members knowing
not much about agriculture.
2. Kulaks left their kolkhoz to look for job in the cities.
3. Arrests, deportations = Fewer peasants to work the
land
4. Not enough tractors; serious problems in getting
ploughing in time ( peasants killed the horses or
anything that helped them )
5. Peasants were allowed to have their small private plot
for their own use – work harder for their own and did
the minimum to get away with the kolkhoz.
f. Results:
i. Famine in the countryside, especially in Ukraine.
ii. 1,75 mln tons of grain exported
iii. 5 mln peasants died of starvation.
iv. 1 mln died of removal, executions – no resistance from
countryside.
v. No longer kulaks endangered the socialist state = no food
shortages in cities.
vi. Stalin welcomed it = broke peasant resistance.
Poland:

● 1920 - land reform adopted in Poland but with many errors:

● Was contradictory with the 1921 Constitution because it fostered the
condemnation of landed territories ( wywłaszczenie terenów
obszarniczych) with the compensation costs being equal to the half of its
actual market price – Constitution guaranteed the full compensation
● 1925 – change of the reforms:
83
 ● Voluntary parceling of landed areas in accordance to market prices.
● After 1925 until 1929 :
● Increase of land prices
● Exceeded the 200 thousands of ha parceled annually
● After 1929:
● Deterioration – farms not making profits
● Effects:
● 154 thousands individual households created and over 500 thousands
had their actual size increased.
Others:

● International Agricultural Conference in Warsaw in 1930:

● Bulgaria, Czechoslovakia, Estonia, Yugoslavia, Latvia, Poland, Hungary
created the agrarian block:
● Increase grain export by agreeing trade actions on the
international market
● Scandinavians approached offering and promoting cooperation
between northern countries.
Sources:

● Kalioski, “Historia gospodarcza…”, p. 133-138, 143-146, 179

● Lecture presentation 8.
● Own ( matura exam) notes

43. World Agriculture 1918-1939

● Economic revival just after World War I was not so sufficient in
agricultural as it was in ndustry. It is often called as a agricultural
stagnation and it depended generally from the protectionist policies of
countries.
● “Little crisis” early 20s of XX c.
● so called “little crisis” affects country, prices of crops and livestock(
żywiec ) decrease.
● Good economic climate after 1923.

84
 ● in the early 1924 agriculture was at the same level as before war,
● during the next years, output of crops increased essentially, in
general, thanks to progress in modernization of methods of field-
work. In many countries, husbandry( hodowla ) of ‘dairy animals’
became very important and profitable. Farmers were thinking about
export of their products to redouble their benefits.
● the demand for rural products increased and it was a great
perspective for medium developed countries like ESTONIA,
LITHUANIA, LATVIA,
● In Poland, revival of rural market was also very profitable, progress in
this sector made Poland self-sufficient, even with some surpluses.
● higher prices lead to increased in income and, thanks to that,
increased in investments in inventory and equipment,
● Economic downturn 1929-1933
● depression in industry had a great impact on agriculture, demand
from country decreased and so on conditions of living there,
● rural market became an isolated one
● prices of crops decreased significantly due to the large amount of
surpluses,
● 38/1000 farms went bankrupt,
● huge price scissors, to disadvantage of agriculture
● 1930, International Agriculture Conference in Warsaw( Bulgaria,
Hungary, Estonia, Czechoslovakia, Poland, Yugoslavia, Latvia ) created
rural block whose the main aim was to increase export of crops
thanks to some operations in the global market,
● The next economic revival 1934-1939
● during this period, economic growth accelerated due to some
positive changes in the industry, oncoming war,
Modernization of agriculture during the period 1918-1939, generally, relied
on mechanization and introduction some new technologies. Agriculture have
been always in close relation with industry so it is a very important issue for
country’s welfare. Greater supply of rural goods accelerated demand for
resources. It is crucial to notice, that modern agriculture stayed focus not only
on traditional methods of planting but it developed also new methods of
planting new inputs. In some European countries subject of land reform was

85
also very popular, and many governments had to deal with this issue very
quickly to stay present in the global agriculture market. That is why, some of
this land reform were introduced inadequate which led to overpopulation in
lands. Faster development of industry was also a general reason, why
agriculture had lost its importance among some richer countries.

Sources:

13. Slides lecture 9( slide 4 )

14. J. Kalioski – Historia Gospodarcza XIX i XX w. p.163,165,167,192.193

44. World industry after 1918-

1939
● Economic revival just after World War I.
● abolition of state control accelerates production and increases
employment
● adjustment military production to civilian
● Inflation( hyperinflation in Germany, Poland, Austria, Hungary )-main
reason of blocking the economic revival.
● “Little crisis” early 20s XX c.
● Good business climate after 1923.
● USA-economic growth thanks to country’s electrification,
development of car industry and architecture engineering,
● JAPAN-revival and introduction of new methods in shipbuilding, car,
airplane, energy industry,
● EUROPE-a big economic growth in France, Germany, Belgium and in
some countries in Middle Europe
( Hungary, Romania ),
● GERMANY-fueled by inflow of American capital,
● Worse conditions of economic growth in Denmark, Great Britain,
Norway, Italy,

86
 ● POLAND-a big economic growth after 1926, negative contacts with
neighbors,
● Further concentration of industry, often at international level

Generally, economic prosperity in the second decade of XX c. was

made by growth and development of new branches of industry(
shipbuilding, car, energy, media, metallurgy industry). In 1929,
world industrial production exceeds pre-war level by 45 %.

● Economic downturn 1929-1933

15. world industrial production and demand decreases in some European
countries,
16. the collapse of the building market and the real estate market in the
USA,
17. GREAT DEPRESSION 1929!
18. bankruptcy of over 5 thousand American banks,
19. due to the economic links, crisis arrived in Europe, bankruptcy of
thousands of entrepreneurs,
20. the biggest economic collapse in highly developed countries,
21. crisis in Japan(1930,31), the collapse of export
22. Poland-similar results of crisis like in other countries all over the
world, bankruptcy of many, many enterprises, failure of industrial
production
23. characteristic feature of economic downturn: bigger failure of
production of capital goods( dobra inwestycyjne) than consumer
goods( dobra konsupcyjne ) which means a very strong suspension of
investment,
24. huge unemployment
25. the collapse of international trade by 60%, crisis in finance market
force some countries to exchange one sort of goods for another,
26. replacing free trade principles by state protectionism
27. world crisis leads to some problems with countries’ budget.
Depression in industry means fewer money from taxes what is equal
to fewer money on education and administration. It is easy to see
that this whole chain of results has a horrible effects on social mood.

87
 ● The next revival 1934-1939.
After 1933 in most of countries, economic revival started again
its growth but it is hard to compare this rate of growth with the
previous one because of armaments race( wyścig zbrojeo ) and
oncoming war.

● German economy accelerated by development of military

production,
● Increasing role of Finland and Sweden thanks to huge level of export,
● UK got out from economic depression thanks to its absorptive(
chłonny ), internal market,
● A Huge economic growth in Japan thanks to free access to precious
resources in conquered Manchuria,
● A Very dynamic growth in South America, the next stage of
industrialization,
● Growth in Poland thanks to some new investments and incorporation
of “Śląsk Zaolziaoki”, rich in coal mines and steelworks ( huty )
● A Very small economic growth in USA, accounts for only 6 %,
Whole period between the First World War and the Second World War was
plagued by crises, these smaller, and those bigger. In result, economic growth
in general was very slow and people’s conditions did not change significantly.

Sources:

● Slides lecture 9( slide 4 and 5 )

● J. Kalioski – Historia Gospodarcza XIX i XXw. p.158-170

45. World War II and it’s

consequences
23.08.1939-The Molotov–Ribbentrop Pact (the Treaty of Non-Aggression
between Germany and the Soviet Union) (It remained in effect until 22 June
1941, when Germany started its invasion of the Soviet Union, called Operation
Barbarossa.)

88
The September Campaign (an invasion of Poland by Germany, the Soviet Union,
and a small Slovak contingent that marked the start of World War II in Europe.
The invasion began on 1 September 1939, one week after the signing of the
Molotov–Ribbentrop Pact, and ended 6 October 1939 with Germany and the
Soviet Union dividing and annexing the whole of Poland.):

31 August 1939 - The Gleiwitz incident - a staged attack by Nazi forces posing as
Poles on 31 August 1939, against the German radio station Sender Gleiwitz in
Gleiwitz, Upper Silesia, Germany

1.09.1939 - Germans attack Westerplatte with the battleship Schleswig-

Holstein (the first battle of WWII).

3.09.1939-The Western Allies declare war against Germany (not fullfield)

17.09 Soviet army unannounced crosses the eastern frontier; mistakenly

welcomed by they were moving into action against the Germans

28.09.1939 – capitulation of Warsaw, emigration of the government. Army

formations ordered to disperse and fend for themselves. Poles could only fight
abroad or in the Underground.

Soviet Union Policy

April 1940 – Denmark and Norway conquered; Norway received help from
Great Britain

30 XI 1939 Russia attacks Finland; as a result becomes excluded from the

League of Nations

August 1940 – Lithuania, Lativa, Estonia ennexed by Russia

Germans invasion on France

10 V 1940 – Germany attacks neutral countries: Belgium, The Neatherlands,

Luxembourg

Offensive in the West: goal was to pass round Maginote line

89
1940-ceasefire with France and Italy; France divided into north part-occupied
by Germans and south-Vichy France with Marshal Philippe Pétain

The Battle of Britain

Based on air operations; importance of polish contribution; the first failure of

the Third Reich in WWII

The tripartite treaty

27 IX 1940 - Germany, Italy and Japan sign a tripartite treaty (the "Axis") against
the USA. Romania, Bulgaria, Slovakia and Hungary also joins, Greece not.

22 VI 1941 - the Germans launch a surprise invasion of the Soviet Union

("Operation Barbarossa"); failure

Asia

7 XII 1941 - the Japanese navy attacks the USA fleet at Pearl Harbor; USA starts
the war with Japan. Japanese advantage until the Midway battle (4 VI 1942).
Final failure - 6 & 9 VIII 1945 the nuclear bombing of Hiroshima & Nagasaki

Attack on Russia caused a change in the attitude towards the Third Reich; USA
and Great Britain ready to help the SU-treaties with Russia, Czechoslovakia,
Poland (The Sikorski-Mayski Agreement, 30 July 1941)

14 VIII 1941 The Atlantic Charter signed by the USA and Great Britain
(recognition of each country’s sovereignty, renouncement from violence after
the end of war)

1 I 1942 The Declaration by United Nations (USA and Great Britain + 26

members of anti-Nazi coalition)

XI 1943 The Tehran Conference - Roosevelt and Churchill accept polish

boundary at Curzon Line

90
4 - 11 II 1945 The Yalta Conference - It was agreed to reorganize the communist
Provisional Government of the Republic of Poland that had been installed by
the Soviet Union "on a broader democratic basis."

17 VII - 2 VIII 1945 The Potsdam Conference – division of Germany into four
occupation zones

Economic consequences:

● Great expenses - 1,2bln dol (USA-0,4bln dol, Germany-272mld, Soviet

Union-192mld, Great Britain-120mld)
● Inflation, inbalanced economy, growth of state interventionism in
countries with free market
● Development of heavy industry, chemistry, transport
● Russia-full militarization of economy
● Reduction of consumer goods production possibilities (except from
Scandinavian countries, Great Britain and Switzerland)
● Decrease in agricultural production (crops half times smaller than
before39’)

Consequences for Poland:

● Territory loss greater than territory gain

● Poland’s eastern borders (Wilno, Lwów) abandoned to Soviet Union
● The Recovered Lands (Breslau-Wrocław, Stettin-Szczec in, Danzig-
Gdaosk) acquired from Germany (rich in coal&iron deposits)
● Post-war repatriations and expulsions (fall of population by
almost1/3)
● Repopulation of entire Western Territories by refugees transferred
from the Soviet Union
● Decimation of the intelligentsia and Jewry
● Almost disappearance of the national minorities

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46. Keynesian economic polices
Keynesianism is a macroeconomic theory based on the ideas of 20th century British
economist John Maynard Keynes

Opposition to classical economics

Keynesians advocate an activist stabilization policy to reduce the amplitude of the business
cycle, which they rank among the most serious of economic problems.

Stimulating economy by state interventionism (e.g. during the Great Recession):

● reduction in interest rates

● government investment in infrastructure (rather by National Debt than taxation)
(->injects income -> more spending in the general economy ->more production and
investment involving still more income and spending and so forth) . The initial
stimulation starts a cascade of events, whose total increase in economic activity is
a multiple of the original investment.

47. Bretton Woods System

Background

During the Great Depression of the 1930s, countries attempted to shore up their failing
economies by sharply raising barriers to foreign trade, devaluing their currencies to compete
against each other for export markets, and curtailing their citizens' freedom to hold foreign
exchange. These attempts proved to be self-defeating. World trade declined sharply and
employment and living standards plummeted in many countries.
● During the Great Depression, countries tried to 1) raise trade barriers, 2)
devalue currencies for the competitiveness, and 3) keep their citizens from
holding foreign exchange. (Why? If their citizens hold more foreign exchange,
the value of their currencies would increase.)
28. “Beggar thy neighbor” policies!!!
● However, these attempts were self-defeating. They resulted in 1) an overall
decline of the world trade, 2) plummeting national income, 3) shrinking
demand, and 4) mass unemployment.
Preparing to rebuild the international economic system as World War II was still raging, 730
delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton
Woods, New Hampshire, United States, for the United Nations Monetary and Financial
Conference. The delegates deliberated upon and signed the Bretton Woods Agreements
during the first three weeks of July 1944.

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For the international economy, planners at Bretton Woods all favored a regulated system, one
that relied on a regulated market with tight controls on the value of currencies. Although they
disagreed on the specific implementation of this system, all agreed on the need for tight
controls.
● This breakdown of the international economic system led 44 nations to gather
in Bretton Woods, New Hampshire, United States and signed the Bretton
Woods Agreements.
● They all agreed on the need for the regulated system which could control the
currency value.
Setting up a system of rules, institutions, and procedures to regulate the international
monetary system, the planners at Bretton Woods established the International Monetary Fund
(IMF) and the International Bank for Reconstruction and Development (IBRD), which today
is part of the World Bank Group. These organizations became operational in 1945 after a
sufficient number of countries had ratified the agreement.
● In addition to setting up the system, the planners at Bretton Woods established
the International Monetary Fund (IMF) and the International Bank for
Reconstruction and Development(IBRD) to regulate the international monetary
system.
Feature
The chief features of the Bretton Woods system were an obligation for each country to adopt a
monetary policy that maintained the exchange rate of its currency within a fixed value—plus
or minus one percent—in terms of gold and the ability of the IMF to bridge temporary
imbalances of payments.
● The Bretton Woods System forced countries to keep their exchange rates
pegged at rates that could be adjusted only to correct a “fundamental
disequilibrium” in the balance of payments, and only with the IMF’s
agreement.
29. Par value system ( the Bretton Woods system)!!!
● They pegged the value of their currencies in terms of the U.S. dollar and, in the
case of the United States, the value of the dollar in terms of gold.
Collapse
On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to
gold. This action, referred to as the Nixon shock, created the situation in which the United
States dollar became the sole backing of currencies and a reserve currency for the member
states.
● The United States terminated convertibility of the dollar to gold in 1971.
30. The Nixon shock!
By the early 1960s, the U.S. dollar's fixed value against gold, under the Bretton Woods system
of fixed exchange rates, was seen as overvalued. A sizable increase in domestic spending on
President Lyndon Johnson's Great Society programs and a rise in military spending caused
by the Vietnam War gradually worsened the overvaluation of the dollar.
● Why did the United States suspend convertibility of the dollar to gold?
31. The U.S. dollar’s fixed value against gold was overvalued!

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 (In this case, if all countries try to change dollars to gold, the United States
cannot give them gold at the fixed value which they decided under the Bretton
Woods system.)
● Why was the U.S. dollar overvalued?
32. 1) President Lyndon Johnson’s Great Society programs and 2) the Vietnam
War
33. The Great Society programs increased the domestic spending and the
Vietnam War the military spending! (the government spending ↑ )
Since the collapse of the Bretton Woods system, IMF members have been free to choose any
form of exchange arrangement they wish (except pegging their currency to gold): allowing
the currency to float freely, pegging it to another currency or a basket of currencies, adopting
the currency of another country, participating in a currency bloc, or forming part of a
monetary union.
● Since the collapse of the Bretton Woods system, countries were allowed to
choose any form of exchange arrangement.

48. Marshall Plan

Background

By the end of World War II much of Europe was devastated. A large portion of
the 60 million deaths among World War II casualties were residents of Europe.
Fighting had occurred throughout much of the continent, encompassing an area
far larger than that in World War I. Sustained aerial bombardment had badly
damaged most major cities, and industrial facilities especially hard-hit. Many of
the continent's greatest cities, including Warsaw, London and Berlin, laid in
ruins. The region's economic structure was ruined, and millions were homeless.
The general devastation of agriculture had led to near-starvation conditions in
several parts of the continent, which was to be exacerbated by the particularly
harsh winter of 1946–1947 in northwestern Europe.
Especially damaged was transportation infrastructure, as railways, bridges, and
docks had been specifically targeted by air strikes, while much merchant
shipping had been sunk. Although most small towns and villages in Western
Europe had not suffered as much damage, the destruction of transportation left
them economically isolated. None of these problems could be easily remedied,
as most nations engaged in the war had exhausted their treasuries in its
execution.
The only major power whose infrastructure had not been significantly harmed
in World War II was the United States. Its industrial base expanded rapidly
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during the war, and by the war's conclusion was significantly bigger and
stronger than in 1939. The war years had seen the fastest period of economic
growth in the nation's history, as American factories supported both its own
war effort and that of its allies. By 1947 the industrial sector had retooled to
produce consumer goods, stimulated by a boom in consumer spending. Exports
were a small factor in the American economy; much of the Marshall Plan aid
would be used by the Europeans to buy manufactured goods and raw materials
from the United States.
● By the end of World War II, the Europe was almost destroyed.
34. Many people died in the War.
35. The economic structure was ruined: 1) the devastation of agriculture,
which led to starvation and 2) the destruction of the transportation
infrastructure
● However, the United Sates experienced the fast economic growth during
the war as American factories supported both its own war effort and
that of its allies.
Europe's economies were recovering very slowly, as unemployment and food
shortages led to strikes and unrest in several nations. In 1947 the European
economies were still well below their pre-war levels and were showing few signs
of growth. Agricultural production was 83% of 1938 levels, industrial production
was 88%, and exports only 59%. In Germany, homes went unheated and
hundreds froze to death. In Britain the situation was not as severe. Germany
received many offers from Western European nations to trade food for
desperately needed coal and steel. The Allies were however not willing to let the
Germans trade.
In addition, the power and popularity of indigenous communist parties in
several Western European states worried the United States. In both France and
Italy, the crisis of the postwar era had provided fuel for their Communist
Parties, which had become well organized in the resistance movements of the
war. These parties had seen significant electoral success in the postwar
elections. Though today many historians feel the threat of France and Italy
falling to the communists was remote, it was regarded as a very real possibility
by American policy makers at the time.
● Europe’s economies were recovering very slowly due to the severe
unemployment and food shortages.
● In both France and Italy, this crisis of the postwar let communist parties
gain electoral success in the postwar elections.
The American administration of Harry Truman began to believe this possibility
in early March 1946, with the Soviets' violation of the withdrawal deadline in

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Iran, and Churchill's Iron Curtain speech, given in Truman's presence a few days
later. In the administration's view, the United States needed to adopt a definite
position on the world scene or fear losing credibility. The emerging doctrine of
containment (as opposed to rollback) argued that the United States needed to
substantially aid non-communist countries to stop the spread of Soviet
influence. There was also some hope that the Eastern European nations would
join the plan, and thus be pulled out of the emerging Soviet bloc, but that was
not to happen.
● The American administration of Harry Truman thought that they needed
to substantially aid non-communist countries to stop the spread of
Soviet influence.
Features
The Marshall Plan (officially the European Recovery Program, ERP) was the
primary program, 1947–51, of the United States for rebuilding and creating a
stronger economic foundation for the countries of Europe. The initiative was
named after Secretary of State George Marshall (primarily due to President
Harry S. Truman's suspicion that the Republican Party would oppose anything
proposed by himself, a Democrat, and his administration) and was largely the
creation of State Department officials, especially William L. Clayton and George
F. Kennan. Marshall spoke of urgent need to help the European recovery in his
address at Harvard University in June 1947.
The reconstruction plan, developed at a meeting of the participating European
states, was established on June 5, 1947. It offered the same aid to the Soviet
Union and its allies, but they did not accept it. The plan was in operation for
four years beginning in April 1948. During that period some US $13 billion in
economic and technical assistance were given to help the recovery of the
European countries that had joined in the Organization for European Economic
Co-operation. This $13 billion was in the context of a U.S. GDP of $258 billion in
1948, and was on top of $12 billion in American aid to Europe between the end
of the war and the start of the Plan that is counted separately from the
Marshall Plan.
The ERP addressed each of the obstacles to postwar recovery. The plan looked
to the future, and did not focus on the destruction caused by the war. Much
more important were efforts to modernize European industrial and business
practices using high-efficiency American models, reduce artificial trade barriers,
and instill a sense of hope and self-reliance.
● The Marshall Plan, established in 1947, was the primary program for
rebuilding and creating a stronger economic foundation for the
countries of Europe.
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 36. It is officially called the European Recovery Program (ERP).
● The plan operated from 1948 to 1951 for four years.
● During that period, the United States provided the European countries
with economic and technical assistance which amounted to $13 billion.
● The Marshall Plan (ERP) made efforts to 1) modernize European
industrial and business practices using high-efficiency American models,
2) reduce trade barriers, and 3) instill a sense of hope and self-reliance.

Result
By 1952 as the funding ended, the economy of every participant state had
surpassed pre-war levels; for all Marshall Plan recipients, output in 1951 was
35% higher than in 1938. Over the next two decades, Western Europe enjoyed
unprecedented growth and prosperity, but economists are not sure what
proportion was due directly to the ERP, what proportion indirectly, and how
much would have happened without it. The Marshall Plan was one of the first
elements of European integration, as it erased trade barriers and set up
institutions to coordinate the economy on a continental level—that is, it
stimulated the total political reconstruction of Western Europe.
● The Marshall Plan resulted in a success. The economy of every
participant state surpassed pre-war levels in 1951, when the output was
35% higher than in 1938.
● The Western Europe experienced the growth over the next two decades.

49. European integration after

World War II.
Excerpts from the course: European Integration:
Integration means unification of economic structures and approximation of
laws; integrated states work as they were one country (one economy). This was
achieved through elimination of barriers and common actions (common
policies).Countries integrate because they want to achieve advantages:
economies of scale, higher efficiency, increased market, more efficient
allocation of resources (free trade advantages).
The Integration was born in Western Europe:
Economic reasons: small countries were interested in the increase of markets

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 (economies of scale, increased efficiency);
competition on the part of stronger American producers
high costs of technological progress

Political reasons: threat of the socialism in Central and Eastern Europe,

threat of the increased military power of Germany
Open-minded people: (advocates of gradual economic integration: as an
instrument of peaceful co-operation and of increased benefits): Jean Monnet,
Robert Schuman

The stages of European integration:

• Free trade area (FTA)
• Customs union (CU)
• Common market (CM) = internal market = (IM)
• Monetary union (EMU)
• Political union
FTA
• Member states (MS) abolish import duties and other barriers to free
movement of products manufactured in the territory of their partners
• Each country retains its own external tariff (& other barriers) vis-avis third
countries
• Examples
CU
• No barriers to internal trade • Common external customs tariff (common
commercial policy = uniform instruments on external borders)
• Means – countries loose part of national sovereignty
Common markets
CU plus free circulation of services, capital and people
Economic and monetary union
Common currency and close coordination of economic policies
Political union
Common internal policy(immigration, protection of borders), common foreign
policy, common institutions.

Stages of development:

1. 1950-1958: birth of integration ideas; European Coal and Steel Community,

heated discussions on the integration institutions (European Defence
Community, European Political Community),

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2. 1958-1973: EEC established, customs union created, first common policies
introduced (CAP, common trade policy), first enlargement in 1973 (UK,
Denmark, Ireland),
3. 1973-1985: europesimism (eurosclerosis), small interest in further deepening
of integration, European Monetary System created in 1979 as an answer to the
collapse of the Bretton Woods system; Greece joined the EEC in 1981

4. 1985-1993: acceleration of the integration process, Spain and Portugal join

the EEC in 1986, White Paper of 1985 on the timetable and means of creation
of the single European market, Single European Act (the first amendment to
the Treaty of Rome), Treaty of Maastricht signed in 1992 (entered into force on
November 1, 1993),

5. 1993-2004: European Union created progressively, subsequent stages of

Economic and Monetary Union implemented, 1995– enlargement (Austria,
Finland, Sweden); March 31, 1998- beginning of negotiations on eastward
enlargement of the EU, January 1, 1999– third stage of EMU started,

50. Soviet Union after 1945.

Nikita Khrushchev: (1953;1957 – 1964)

1) Rise to power:

a) Khrushchev came to power in 1953, although he was fully responsible for

all Russian policies since 1957.
b) In the beginning of this 4 year period,he met the same situation as after
Lenin’s death (Stalin did not allow any initiative of other rivals)
c) The leading members of the Praesidium, former Poltiburo, were in
charge.
d) Malenkov-Chairman of the Council of Ministers,Khrushchev Party
Secretary, Voroshilov Chairman of the Preasidium,Beria the Chief of the
Secret Police
e) In 1955- Beria was executed due to his record of cruelty and Malenkov
resigned due to the disputes concerning industrial policies.
f) Khrushchev gained benefits from the Spech he delivered at the
Twentieth Communist Party Congress, where he condemned Stalin for
his cult of personality, revealed the informations about the purges and

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 the conduct of the war, indicated that socialism could be different from
the Stalinist one, suggested that peaceful coexistence with the West is
vital to avoid nuclear war. Khrushchev knew that sooner or later people
would get to know about the crimes of the Communist Party, therefore it
would be better if the party itself have confronted with this information.
He gained large approval from his partners, but also indicated them as
guilty, as he joined the party later, than they did.
g) Khrushchev made it difficult for other person to become such a leader as
Stalin, due to his condemning of Stalin, moreover he thought that Stalin
reduced and slowed the progress; he felt as an enlightened dictator.
h) Khrushchev has been secretly filling the posts in the party with his
partners and cooperatives, so that when Malenkov and Molotov
opposed to him(the Hungarian Revolution) they were retired(1957).
Khrushchev had also serious influence in the army structures.
i) Decline of Power- 1964. He was not supreme as Stalin, as he was under
the charge of the Central Committee of the Party and could be voted out
as in 1964.

2) Policies:

Khrushchev has met serious problems when he came to power. Low standard
of living among the workers; inefficiency of agriculture. HIS POLICIES ARE
KNOWN AS “DESTALINIZATION”.

a) Industrial policies:
i) Five Year Plans- no.6 in 1955; focused on light industries producing
consumer goods like (TV, radios, washing machines, sewing
machines).
ii) Regional Economic Councils set up to make decisions and organize
local industries- part of decentralization programme
iii) Make profits rather than satisfy the quotas;wages depended on
output
iv) Housing programme in 1958;wage increases, minimum wage, tax cuts
on low incomes; shorter working week;increase in pensions;disability
allowances; abolition of all tuition fees in secondary and higher
education- improvement in the living standards.

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 v) After several years;slowing down of economic growth - > Economic
Councils inefficient.
vi) Enormous cost of armaments, techonological and space programmes,
resulted in the reduction of progress and a further decrease in the
standards.
vii) Uri Gagarin-1961-manned on orbit-success for USSR

b) Agriculture:
i) Collectivization- serious damage, food production obligation.
ii) Khrushchev toured around the country talking with peasants and
disputed about problems
iii) Virgin Lands Scheme(1954)- cultivation of huge areas of land in
Sibeiria and Kazakhstan.
iv) Young volunteeres implemented, government giving 100 000 tractors.
v) Increase of yields in the collective farms:peasants could keep or sell
crops from private plots; lower taxes; increase of payments for the
crops from collectives->incentives to produce more.
vi) 1958- dramatic increase in the farm output; from 1963- decrease due
to the virgin lands scheme failure; criticism in the party about the
spenditure on agriculture;
vii) Why? Lands of poor quality, not enough fertilizers, interference from
party officials - >grain imports from USA and Australia = humiliation of
Khrushchev

c) Political:
i) Return to party control
ii) Reduction in secret police activities:no executions, instead
retirements; labour camps emptied and people rehabilitated.

d) Cultural and social:

i) More freedom for people
ii) Higher standard of living
iii) Writers allowed to publish works with criticism to Stalin, but not to
the Party or Soviet life. Then banned. Writers overstepped were
expelled from writers union, but not executed.

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 iv) Othodox Church was banned, churches closed down and no religious
gatherings allowed.
v) 1962- riot in Novocherkassk factory about the increase of prizes of
meat and dairy products; troops killed 23 people

e) Foreign policies:
i) Peaceful coexistence with West and a thaw in the Cold War; different
roads to socialism in the satellite states- Khrushchev aims
ii) Chinese accusations of revisionism due to his departures from strict
Marxist-Leninist ideas
(a) Biggest crisis:
(i) 1962 Cuban Missile Crisis- installed to test Kennedy, prove
their solidarity with Cuba, response to the missiles in
Turkey, brink of nuclear war, afterwards missilies withdrew
and Nuclear Test Ban treaty signed.
(ii) June 1956 – crisis in Poland from the workers due to the
poor living standards, wage reduction and high taxes.
“Bread and freedom” and enormous anit-Soviet stress.
Crowds dispersed by troops, and in October Russian tanks
surrounded Warsaw. Compromise reached, as Gomułka,
earlier imprisoned, was reappointed as the Secretary of the
Communist Party. Russians agreed that communism in
Poland can develop in its own manner if the Poles
cooperated with USSR. Smooth relations, although different
versions of socialism. In Poland – collectivization did not
occur on a large scale and traded with western countries.
1970- Gomułka resigned.
(iii) Hungarian Revolution of 1956.After Stalin’s death,
Rakosi(procommunist) replaced by Imry Nagy(moderate
communist). Rakosi interfered and overthrew Nagy.
Resentment of public opinion caused a general rising in
October 1956. It was due to: Rakosi brutal regime;
worsening living standards in contrast to high standards of
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 communist party leaders; anti-Russian feeling; situation in
Poland and Khrushchev ‘s speech encouraged the
resistance. Rakosi has been overthrown, Nagy became
Prime Minister and the Russians did not interefere. Agter he
announced plans for a multi party government and wanted
to get Hungary out of Warsaw Pact. Afterwards, Russians
send tanks, surrounded Budapest and opened fire. Many
people fought bravely, Russians obtained control and
executed Nagy. Janos Kadar became new leader. Russians
were fearful, that Hungary might be a non-communist state,
enemy to USSR and encourage other states to do the same.

3) Khrushchev’s fall:
a) October 1964 voted out due to the ill-health. Reasons were: failure of his
agricultural policies; loss of prestige due to the Cuban missile crisis;
breach with China; conflicts with :bureaucracy due to the
decentralization and efficiency issues;military due to cuts in defence
spending and limit of nuclear weapons;extrovert personality
b) Assessment: outstanding personality; approachable and human style;
comparatively civilized politics along with the improvement of living
standards and social policies.; also peaceful coexistence; his failure was
due to the greed of party officials Martin McCauley.

Leonid Brezhnev: (1964;1977 – 1982)

1) Rise to power:
a) After Khrushchev departure, Brezhnev, Kosygin and Podgorny were in
charge in 1964.
b) Kosygin leading figure at first, foreign affairs, the other two internal
affairs.

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 c) In early 1970s Kosygin eclipsed by Brezhnev due to the disagreements
over economic policies. Kosygin wanted decentralization, CP3 fearful
about the demands for independence from satellites.
d) Control establishment in 1977 and remained the leader until his death in
1982.

2) Policies:

Khrushchev policies were abandoned, economic problems ignored; less

tolerance towards criticism; nomenklatura (ruling elite and bureaucracy)
need to be happy.

a) Economic policies:
i) Slow economic growth rate; although incentives and wages were
kept.
ii) System centralized.
iii) Old-fashioned industry in need of changes and developments.
iv) Failure of coal and oil industries- no out put increase.
v) Building industry slow and poor quality
vi) Low agricultural yield, therefore dependence on American wheat.
vii) Successful production of military hardware; new missiles invented
and the race with USA kept. Americans managed to produce much
modern and deadly missiles, the USSR crossed the barrier to do so as
well.
viii) Basic problem of Soviet economy: vast defence spending
comparing to lack of investments in other areas of economy.
b) Foreign policies:
i) WEST:
(1) Peaceful coexistence;
(2) Russian invasion of Afghanistan
(3) Soviet aid to Cuba, aid to Angola,Mozmbique and Ethiopia
(4) Continuing arms race increase of Soviet arms forces, particularly
navy and SS20 missiles

3
Communist Party

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 ii) EAST
(satellites had their own versions of communism, the ideas from USSR
could be dropped; Russians reluctant to interfere as no threat
occurred;) :

(1) Czechoslovakia in 1968: Antonin Novotny procommunist in charge

in Czecholovakia. Escalation of opposition due to: Czechs industrial
and cultural development was high and much more advanced in
comparison to other satellites and they did not wanted the over-
centralized Russia to control their economy and indicate e.g. to
import expensive iron-ore from Siberia, rather then good one from
Sweden;Czechoslovakia has been an independent state from 1918-
1938 and resented restrictions on personal freedom;no protets
could take place. In January 1968 Novotny resigned and Alexander
Dubcek was appointed as the FSotCP4. He had an entirely different
programme: CP would no longer dictate policies; de-centralization
of industry control by the works councils; no collectivized farms
instead there would be independent co-operatives; trades unions
more power; more freedom with the West travels abroad and
trade; freedom of speech and of press so the government criticism
was encouraged, Dubcek wanted “socialism with human face” so
that the government is responsible for people’s wishes;
Czechoslovakia would be in Warsaw Pact and remain an ally for
USSR. In 1968 programme was carried. The Russians created a
massive invasion consisting of Warsaw Pact
troops(Pl,Bulg,Hun,East Ger). Czechs decided not to press more
and resisted passively; they did not want any bloodshed to take
place. Several peaceful demonstrations ans stikes were held, but
the programme had to be abandoned and Dubcek was replaced by
Gustav Husak, a procommunist leader.
(2) Afterwards, Brezhnev invented the Brezhnev Doctrine-
intervention in the internal affairs of any communist country was
justified if socialism was threatened. So this could not take place in

4
First Secretary of the Communist Party

105
 Czechosloviaka, that other nations including in the USSR would
demand for the same. Protests may flow to East Germany.
(3) Riots in Poland- Gomułka resigned. Gierek appointed causing
industrial unrest and shortage of food. Government allowed the
formation of an independent trade movement known as Solidarity.
Russians threatened but no invasion took place.
(4) The Helsinki Agreements(1975)- decided about the freedom and
laws of humans and caused unrest within the society. USSR signed
them , but disobeyed them.

c) Social and human policies:

i) Improvement in living conditions.
ii) Elimination of unemployment\.
iii) Social security.
iv) Accomodation, so people moved from apartments to flats.
v) Limits of personal freedom. No criticism of Stalin or system itself.
vi) KGB(secret police) invented the method of psychiatric hospitals and
mental asylums, where they kept the ones, who opposed or caused
problems.
vii) Formation of Human Rights Committee by Andrei Sakharov and Valeri
Chalidze to demand freedom of speech and human rights. In 1975,
Helsinki Agreements signed but disobeyed by Brezhnev, therefore the
members of the committee were deported,arrested even Sakharov
sent to Siberia.

Andropov and Chernenko(1982-1985):

1) Rise to power and policies:

a) Andropov ruled from Nov 1982 to February 1984). He modernized and
streamlined Soviet system. Anti-corruption and programme of economic
reforms, hoping to increase production and create decentralization.
Older party officials replaced with younger ones; died from illness and
bad health condition.
b) Chernenko ruled from February 1984 to March 1985. Former Brezhnev
assistant, abandoned anti-corruption. No relaxation on human rights.

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 Trade unions members were arrested, along with religious groups
members.

Mikhail Gorbachev(1985-1991):

Gorbachev did not want to end communism, he wanted to replace the existing
system, that was still basically Stalinist, with a socialist system which was
humane and democratic.

1) Policies:
a) Glasnost- so the openness. Areas of human rights and cultural affairs.
Release of dissidents (Sakharovs from Gorky). Made innocent all leaders
disgraced and executed by Stalin. Freedom of press(Pravda criticism on
Brezhnev). Prevent sending dissidents to mental asylums. Political
meetings like NPC5 in 1988 or CoPD6 in 1989 were televised.
Developments in medias; UofSF7 and UoW8 were allowed to choose their
own leaders. Anti-Stalinist films, books were published and news were
also reported to public knowledge(Chernobyl catastrophy). The aim of
glasnost was to : show the inefficiency of the regime, educate public
opinion,mobilize support for new policies. Glasnost did not accept
criticism towards the Party.

b) Perestroika- so the restructurization of the Party,economy and

government.
i) Economy:
(1) Small scale enterprises allowed . (family restaurants, TV repairs
etc.)
(2) Workers cooperatives of maximum 50 workers.
(3) Wanted to create competition and stimulate the inefficient and
slow services from the state.
(4) Job alternatives had to occur, as the automatization took place.
5
Nineteenth Party Conference
6
Congress of People’s Deputies
7
Union of Soviet filmmakers
8
Union of Writers.

107
 (5) Quality control responsibility would be taken over by independent
state bodies, rather the industrial committees.
(6) The Law on State Enterprises in June 1987 removed control over
raw materials, quotas and trade from the central planners and
allowed the orders from customers.
ii) Politics:
(1) January 1987- Gorbachev announces democratic moves. Local
soviet were to be elected by people and there was a choice of
candidates, but not of parties. Secret elections for high ranked
party positions.
(2) 1988- Parliament of Supreme Soviet(Supreme Soviet-
Praesidium,Council of Ministers) was replaced by the Congress of
People’s Deputies who elected a smaller Supreme Soviet, meeting
regularly during the entire year. Chairman of the Supreme Soviet
would be head of the state.
(3) Elections in 1989- Yeltsin elected, earlierly forced to resign by
traditionalists .Seats for the Communist Party abolished and
Gorbachev elected as the President of the Soviet Union in 1990.
He had two councils to help him- one of his assistants, one of the
representatives of the Republics.
(4) Party has lost its privileged position and the leaders were exposed
towards public choice.

2) Gorbachev’s failure:
a) Opposition from radicals and conservatives:
i) Some people thought that reforms were not drastic enough(radicals -
Yeltsin), and wanted complete western market; some indicated that
the changes were too drastic.(conservatives;traditionalists –
Ligachev). Divisions in the Party occurred and Gorbachev could not
satisfy none of the groups. He sympathized with Yeltsin, but had to be
fair against Ligachev, who controlled Party apparatus.
ii) Conservatives were in majority; and Yeltsin was not elected. Protests
occurred and they were allowed due to Glasnonst. Beginning of the
end of CP.

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 b) Economical reforms were not immediate and effective enough:
i) National income fell
ii) Economic growth remained the same.
iii) Law on State Enterprises – the wages dependent on output, factories
focused on expensive goods, because they increased the output, so
that inflation occurred and government’s budget deficit. Basic
consumer goods were in shortage and this caused unrest among
people due to their expectations of Gorbachev’s reforms. Strikes as
e.g. in Donbass and Kazakhstan occurred. This was the first strike
since 1917 and the miners wanted 42 demands. They wanted a trade
union like Solidarity and improvement of living conditions; supply of
food, share in profits and local control over mines. They demanded
end to the Communist Party;
iv) In 1990 the society was living below the poverty line and Gorbachev
was losing control of the movement he started.

c) Nationalist pressures:
i) USSR consisted of 15 different republics. They were held under sever
control, but Gorbachev’s policies encouraged their hopes for
independence. Gorbachev allowed these tensions, if the republics
obeyed the Communist Party of the Soviet Union.
ii) Nagorno-Karabakh- Christian republic wanted to join Armenia from
Azerbaijan, fightings broke out and Moscow lost control.
iii) Lithuania,Latvia and Estonia declared independence in 1990 due to
what happened in other satellites.
iv) Yeltsin who wanted independence for the countries willing so, was
appointed President of the Parliament/
d) Rivalry between Gorbachev and Yeltsin:
i) Unions should be voluntary
ii) Traditionalists pressures , Party should be changed and Gorbachev
hoped for a peaceful party.
iii) Market economy in comparison to Gorbachev’s cautioness.

3) The coup of August 1991.

a) Gorbachev had to make multi-party free elections.

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b) Unrest from conservatives- loss of eastern Europe, East Germany.
c) Yeltsin resigned and Gorbachev was losing control.
d) Georgia declared independence, although Gorbachev persuaded them to
form a new, voluntary union.
e) Coup against Gorbachev launched, when he was on holiday. Kept under
house arrest and eight-member committee was in charge. Declaration of
emergency state, abandoning of Gorbachev’s policies and surrounding of
troops in major areas. Coup poorly organized, Yeltsin was not arrested.
He climbed onto the tanks and called the peole to rally in support. Army
was sympathetic towards the reformers and confused which side to
support. No casualties occurred-army was fearful. 21 August Coup
leaders admitted failure. Communist Party disgraced and discredited,
banned in the Federation. Yeltsin became a hero and Gorbachev was
sidelined(was a Party-General Secretary). New Union o the Republic,
known as Commonwealth of Independent States with Ukraine and
Belorussia. Gorbachev resigned as the President of the USSR on 24
December 1991.

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