Recently, Christine Lagarde, President of the European Central Bank, compared the present global economy to that of the 1920s. Below I cite some of the highlights:
The global economy is facing rifts comparable to the pressures that resulted in “economic nationalism” and a collapse in global trade in the 1920s and ultimately the Great Depression, the president of the European Central Bank has warned. “We have faced the worst pandemic since the 1920s, the worst conflict in Europe since the 1940s and the worst energy shock since the 1970s,” said Christine Lagarde on Friday, adding that these disruptions combined with factors such as supply chain problems had permanently changed global economic activity. In a speech at the IMF in Washington two days after the Federal Reserve cut interest rates by 50 basis points, pushing US equity markets to record highs, the ECB president argued that several parallels “between the “two twenties — the 1920s and 2020s — stand out”, pointing to “setbacks in global trade integration” and technological advances in both eras. While monetary policy in the 1920s made matters worse as adherence to the gold standard pushed leading economies into deflation and banking crises, “we are in a better position today to address these structural changes than our predecessors were”, stressed Lagarde. A century ago, she said, central bankers learnt the hard way that pegging the currency to gold and fixed exchange rates was “not robust in times of profound structural change” as it pushed the world into deflation, fuelling “economic malaise” and contributing to a “cycle of economic nationalism”. Today, central bankers’ tools for preserving price stability “have proved effective”, she said. Lagarde pointed to the quick fall in inflation once central banks started to raise rates in 2022. Consumer prices had shot up following a surge in post-pandemic demand, global supply chain disruptions and big rises in energy prices after Russia’s full-scale invasion of Ukraine. She described the episode as an “extreme stress test” for monetary policy.
President Lagarde’s focus, on the parallels of the 1920s and the 2020s, was mainly on Europe, although the Great Depression started in the US. The impact of the German hyperinflation that started in the 1920s had no less global impact. The “Roaring 1920s” gave rise to Nazi Germany and WWII, during which I, and many millions of others, lost most of our families. The impact of the present global unrest has yet to be seen. The focus of President Lagarde was the economy, but as she mentioned, political unrest has a major impact on the economy and vice-versa.
A few days after her speech, The United Nations assembled for its annual meeting in NYC; many world leaders were in attendance. Some meetings took place trying to alleviate deadly conflicts but they had very little impact. The United Nations was first assembled on October 24, 1945, in San Francisco, at the conclusion of WWII, with the objective preventing a re-occurrence of the conditions of the 1920s and the disasters they led to. It now finds itself in a crisis:
The United Nations itself has had a turbulent year. A record number of its staff, 220 in total, have been killed in the war in Gaza. Its humanitarian resources, a crucial backbone of the global relief effort, are overstretched and underfunded as needs multiply rapidly because of wars, climate change and natural disasters. At the same time, its leadership struggles to play a meaningful role in conflict mediation.
The wars that are taking place now have the potential to expand into global nuclear conflicts. President Putin, and some other Russian leaders, include this existential threat at every opportunity. Up to now, as far as we know, we are the only planet in the vast universe on which life exists. Humanity’s existence is the exception, not the rule, meaning that a nuclear WWIII could decimate the only spark of life in the universe!
On the political side, in many democracies, the meaning of right and left in terms of the relative role of the state in our political life has lost its meaning. The substitute has become a version of the “replacement theory” (see my previous blog “Immigration and Politics,” March 5, 2024). The “replacements” vary: Black for white, Muslims for non-believers, immigrants for natives, and Jews for non-Jews. In the 1920s it was Jews for Aryans. Today, the people who are hated, feared, and blamed include a broader variety of non-natives, including many without advanced economic qualifications. Whatever their characteristics, immigrants(and people of color)have been the scapegoats for every societal ill—both in the 1920s and today. In many democracies, they became tickets to election victories and power. After the 1920s, Hitler and the Nazi party converted the Weimar republic into a deadly autocracy. Today, Ex-President Trump is threatening to follow suit. I will end this blog with an outline of the process that took place in the pre-WWII period.
The 1920s started the process that put Hitler in power. One of his most important tools was his call to “replace” the Jews of Eastern Europe with the “pure-race” of Aryan Germans:
Hitler did not invent the hatred of Jews. He capitalised on antisemitic ideas that had been around for a long time.
Hitler was born in Austria in 1889. He developed his political ideas in Vienna, a city with a large Jewish community, where he lived from 1907 to 1913. In those days, Vienna had a mayor who was very anti-Jewish, and hatred of Jews was very common in the city.
During the First World War (1914-1918), Hitler was a soldier in the German army. At the end of the war he, and many other German soldiers like him, could not get over the defeat of the German Empire. The German army command spread the myth that the army had not lost the war on the battlefield, but because they had been betrayed. By a ‘stab in the back’, as it was called at the time. Hitler bought into the myth: Jews and communists had betrayed the country and brought a left-wing government to power that had wanted to throw in the towel.
The United States entered WWI against Germany on April 6, 1917. It was a decisive turning point:
The entry of the United States was the turning point of the war, because it made the eventual defeat of Germany possible. It had been foreseen in 1916 that if the United States went to war, the Allies’ military effort against Germany would be upheld by U.S. supplies and by enormous extensions of credit. These expectations were amply and decisively fulfilled.
After the war and the resulting Treaty of Versailles was signed on June 28, 1919, The German people needed a scapegoat; Hitler and the new Nazi party offered the Jews.
The US serves as a model of Nazi Germany on several different levels. One important level was the US territorial expansion since independence, as shown in Figure 1. The vast territory was occupied by immigrating European at the expense of a native population. For Germany to do the same in Europe they needed to vacate important sections of Europe and populate them with “pure” Aryans. Jews were the best candidates to be replaced.
The Holocaust Encyclopedia says this of the
in Europe at the beginning of the 1930s:
Jews have lived in Europe for more than two thousand years. The American Jewish Yearbook placed the total Jewish population of Europe at about 9.5 million in 1933. This number represented more than 60 percent of the world’s Jewish population, which was estimated at 15.3 million. Most European Jews resided in eastern Europe, with about 5 1/2 million Jews living in Poland and the Soviet Union. Before the Nazi takeover of power in 1933, Europe had a dynamic and highly developed Jewish culture. In little more than a decade, most of Europe would be conquered, occupied, or annexed by Nazi Germany and most European Jews—two out of every three—would be dead.
The replacement plan got the name of Lebenstraum (“living space”):
Following Adolf Hitler’s rise to power, Lebensraum became an ideological principle of Nazism and provided justification for the German territorial expansion into Central and Eastern Europe.[5] The Nazi policy Generalplan Ost (lit. ’Master Plan for the East’) was based on its tenets. It stipulated that Germany required a Lebensraum necessary for its survival and that most of the populations of Central and Eastern Europe would have to be removed permanently (either through mass deportation to Siberia, extermination, or enslavement), including Polish, Ukrainian, Russian, Czech, and other Slavic nations considered non-Aryan. The Nazi government aimed at repopulating these lands with Germanic colonists in the name of Lebensraum during and following World War II.[6][7][8][9] Entire populations were ravaged by starvation; any agricultural surplus was used to feed Germany.[6] The Jewish population was to be exterminated outright.
Hitler’s strategic program for Greater Germany was based on the belief in the power of Lebensraum, especially when pursued by a racially superior society.[7] People deemed to be part of non-Aryan races, within the territory of Lebensraum expansion, were subjected to expulsion or destruction.[7] The eugenics of Lebensraum assumed it to be the right of the German Aryan master race (Herrenvolk) to remove the indigenous people in the name of their own living space. They took inspiration for this concept from outside Germany.[7] Hitler and Nazi officials took a particular interest in manifest destiny, and attempted to replicate it in occupied Europe.[9] Nazi Germany also supported other Axis Powers‘ expansionist ideologies such as Fascist Italy‘s spazio vitale and Imperial Japan‘s hakkō ichiu.[10]
The result was the genocide of 6 million Jews.
“Replacement theory” has never made anyone or any country “Great.” We don’t need to repeat it in the 2020s.
