How did the Great Depression change American Foreign Policy

The Great Depression of the 1930s was a global event that derived in part from developments in the United States and U.S. financial policies. As it lingered through the decade, it influenced U.S. foreign policies in such a way that the United States Government became even more isolationist.

The origins of the Great Depression were complicated, and scholars have debated the causes for decades. The initial factor was the First World War, which upset international balances of power and caused a dramatic shock to the global financial system. The gold standard, which had long served as the basis for national currencies and their exchange rates, had to be temporarily suspended to recover from the costs of the Great War. But the United States, European nations, and Japan put forth great effort to re-establish it by the end of the decade.

However, this introduced inflexibility into domestic and international financial markets, which meant that they were less able to deal with additional shocks when they came in the late 1920s and early 1930s. The U.S. stock market crash of 1929, an economic downturn in Germany, and financial difficulties in France and Great Britain all coincided to cause a global financial crisis. Dedication to the gold standard in each of these nations and Japan made the problem worse. The adherence to this standard hastened the slide into what is now known as the Great Depression.

The Depression Wrecked the World Economy

The key factor in turning national economic difficulties into worldwide Depression seems to have been a lack of international coordination as most governments and financial institutions turned inwards. Great Britain, which had long underwritten the global financial system and had led the return to the gold standard, was unable to play its former role. Great Britain was the first country to walk away from the gold standard in 1931.

The United States, preoccupied with its economic difficulties, did not step in to replace Great Britain as the creditor of last resort and dropped off the gold standard in 1933. At the London Economic Conference in 1933, leaders of the world’s leading economies met to resolve the economic crisis but failed to reach any significant collective agreements. As a result, the Depression dragged on through the rest of the 1930s.

The Rise of Isolationism

The Depression caused the United States to retreat further into its post-World War I isolationism. A series of significant international incidents created several international crises. These incidents included Japan's seizure of northeast China in 1931, the Italian invasion of Ethiopia in 1935, and German expansionism in Central and Eastern Europe. Despite these incidents, the United States refused to engage in the crises in a meaningful way. When these and other incidents occurred, the United States Government issued statements of disapproval but took limited action beyond that.

On a more positive note, isolationism manifested in Latin America in the form of the Good Neighbor Policy of Presidents Herbert Hoover and Franklin Roosevelt. The United States reduced its military presence in the region and improved relations between itself and its neighbors to the south.

Presidents Hoover and Roosevelt were constrained by public opinion, which demanded that primary attention be given to domestic problems. The Hoover and Roosevelt Administrations concentrated upon rebuilding the U.S. economy and dealing with widespread unemployment and social dislocation at home, and as a result, international affairs took a back seat.

Fascism in response to Economic Depression

As the United States turned inwards to deal with the lingering effects of the Depression, militaristic regimes came to power in Germany, Italy, and Japan promising economic relief and national expansion. While they achieved some measure of success on the economic front, these regimes began to push their territorial ambitions and received minimal opposition from the rest of the world. The lack of a strong U.S. response to Japan’s invasion of China in 1937 and Germany’s annexation of Czechoslovakia in 1938 encouraged the Japanese and German governments to enlarge their military campaigns.

At the time, most U.S. leaders believed their decision to avoid a more active role was justified because of the domestic context. Some politicians realized that U.S. inaction allowed the conflict to grow. After the fall of France in June 1940, the United States increasingly committed itself to the fight against fascism. Ironically, it was World War II, which had arisen in part out of the Great Depression, that finally pulled the United States out of its decade-long economic crisis.

Conclusion

The Great Depression caused the United States Government to pull back from major international involvement during the 1930s. Oddly enough, in the long run, it contributed to the emergence of the United States as a world leader after that. American policymakers believed that the isolationist policies contributed enabled the horrors of World War II. After World War II, U.S. foreign policymakers decided to play a major role in world affairs after the war to avert similar disasters.

• Republished from Office of the Historian, United States Department of State
• Article: The Great Depression and U.S. Foreign Policy