Between the World Wars: 1919.E2.80.931939 International monetary systems

this era saw periods of worldwide economic hardship. image dorothea lange s migrant mother depiction of destitute pea-pickers in california, taken in march 1936.

the years between world wars have been described period of de-globalisation, both international trade , capital flows shrank compared period before world war i. during world war i, countries had abandoned gold standard, and, except united states, returned briefly. 30s, prevailing order fragmented system of floating exchange rates. in era, experience of great britain , others gold standard ran counter need retain domestic policy autonomy. protect reserves of gold, countries need raise interest rates , follow deflationary policy. greatest need arise in downturn, when leaders have preferred lower rates encourage growth. economist nicholas davenport had argued wish return britain gold standard sprang sadistic desire bankers inflict pain on british working class.

by end of world war i, great britain heavily indebted united states, allowing usa largely displace world s number-one financial power. united states, however, reluctant assume great britain s leadership role, partly due isolationist influences , focus on domestic concerns. in contrast great britain in previous era, capital exports not countercyclical. expanded rapidly united states s economic growth in 20s 1928, halted economy began slowing in year. great depression intensified in 1930, financial institutions hit hard along trade; in 1930 alone, 1345 banks collapsed.

during 1930s, united states raised trade barriers, refused act international lender of last resort, , refused calls cancel war debts, of further aggravated economic hardship other countries. according economist john maynard keynes, factor contributing turbulent economic performance of era insistence of french premier clemenceau germany pay war reparations @ high level, keynes described in book economic consequences of peace.