The Great Depression Was a World Story: How the 1930s Broke More Than America

Woody Guthrie sang a lullaby about being homeless. It sounds calm and easy, the sort of tune you might sing to get a child to sleep. But the words are about a grown man trying to sleep in the corner of a moving freight car.

Go to sleep you weary hobo, Let the towns drift slowly by. Can't you hear the steel rails hummin'? That's the hobo's lullaby.

He did not write it. A travelling singer called Goebel Reeves did. Guthrie borrowed it, sang it better than anyone had, and by most accounts loved it more than his own songs. He had earned that. He had ridden the boxcars himself, slept rough, and walked from town to town chasing work that kept turning out not to exist. When Guthrie sang about the hobo, he was not playing a part. He was one.

We tend to file the Great Depression under "American." The crash of '29, the breadlines, the dust rolling over Oklahoma until families packed the car and drove west. All of it true, all worth remembering. But it is the story told in English, and it leaves out most of the world. The slump that started in New York did not stay in New York. It ran down the same cables and shipping lanes that had carried the boom, and within a couple of years it was crushing the life out of economies whose people had never owned a single share. To see how big it was, you have to leave America.

The men on the rails

Picture the person before the numbers, because the numbers do not sink in until you can. The years between the wars were meant to be the calm after the storm. What they produced instead was a figure you can find in the photographs of a dozen countries at once: the man with no home and no work, moving all the time, heading toward the next rumour of a wage.

In America he was a hobo. In Britain he stood in the dole queue and marched down from the dead shipyard towns to be politely ignored in London. In Germany he was one of six million, filling the streets of cities that had simply stopped needing him. Change the language and the picture holds. Guthrie's lullaby gets under your skin because it does not play any of this up. It drops its voice and just tells a man where he is sleeping tonight.

It began on Wall Street

The trigger is the part everyone knows. Through the late twenties, American share prices floated up on borrowed money and pure nerve. In October 1929 the nerve gave way, and the prices came down after it.

A crash on its own is survivable. What made this one bottomless was the banks. As savers panicked and queued to pull their money out, thousands of American banks, most of them small and none of them guaranteed, went under and took people's savings with them. Each failure wiped out deposits, cut off lending, and scared the next town into the same run. Money drained out of ordinary life, and prices and wages and jobs all slid down the hole together. By 1933, close to one American worker in four had no work at all.

Fine. That still does not explain why a wheat farmer in Poland or a dockhand in Chile felt it too.

Why the rest of the world caught it

Because the world of the 1920s was bolted together, and the bolts held it just as tight on the way down as they had on the way up.

The biggest bolt was gold. The major economies tied their money to it, which fixed exchange rates and made lending and trade across borders feel safe. The catch was that no government could print its way out of trouble. When the United States tightened up, everyone tied to gold had to tighten up too, cutting hard right into the middle of a slump to protect their reserves. A system built to spread confidence turned out to spread deflation just as well. One after another, governments choked their own economies to keep a promise about metal.

Then there was the debt. The First World War had left the Atlantic strung with IOUs. Europe owed America, Germany owed crushing reparations to the countries that had beaten it, and the whole thing balanced on American loans flowing into Germany so the payments could keep going round. When the American money stopped, and then went into reverse, the circle broke. Germany had been paying its debts, more or less, by borrowing from the people it owed, and that only works until one of them asks for his money back.

And trade. In 1930 Washington put up a wall of tariffs, meaning to save American jobs. Its trading partners put up walls of their own, and the business of buying and selling between countries seized up. Trade did not just sag. Over the next few years it shrank by about two thirds. If your country lived by selling things abroad, the buyers were gone.

Vienna, 1931

If you want a single moment that shows this was a machine and not just an American misfortune, it is not in New York. It is in Vienna.

In May 1931 the Creditanstalt, Austria's largest and proudest bank, admitted it was broke. The fear jumped the border almost overnight into Germany, where the banks locked their doors, and rolled on through the middle of the continent. By autumn it had reached London. Unable to hold on to its gold and defend the pound at the same time, Britain gave up and did the thing that was not supposed to be possible: in September it walked off the gold standard and let the pound sink. For the country that had built the system, it was a humiliation. It was also, though almost nobody could see it yet, the first step out of the pit.

Out of work everywhere

Wherever the slump landed, it went for work first. A quarter of Americans lost their jobs. Nearly a third of Germans did. The mill towns of northern England and the valleys of south Wales emptied out. And it reached far past the factory gate.

For the countries that lived by shipping the world its raw materials and its food, and that meant most of Latin America, much of Africa and Asia, Canada and Australia, the collapse of trade simply killed their incomes. Coffee, wheat, copper, sugar, rubber, nitrates: the prices dropped through the floor. Chile, which sold minerals to a world that had stopped building anything, was reckoned one of the hardest-hit places on earth. In Brazil, growers who could not sell their coffee shovelled it into locomotive fireboxes and burned it, because burning it cost less than storing it. On the American plains the rain stopped and the topsoil lifted off in black clouds, and the families it ruined became Guthrie's migration west.

What people could never quite forgive was the shape of the hunger. Nobody went short because the world had run out. They went short because it had too much. Grain rotted in the silos, farmers poured milk into ditches to hold the price up, and the men who had grown the food stood in line for bread. Plenty on one side of the fence, want on the other, and no working way to get one to the other. That picture discredited the old economics more thoroughly than any argument could.

The way out was letting go

Since gold was the chain, the escape was dropping it. This is about as close to a settled verdict as economic history offers: the countries that came off gold early, and gave themselves room to put money back into their economies, climbed out first. The ones that hung on longest, France among them, sat in the cold longest.

Britain, off gold from 1931, began its slow recovery. Japan came off early too, spent on purpose, pushed its currency down, and bounced back quicker than almost anyone. In America, Roosevelt arrived in 1933, cut the dollar loose from gold, put a federal guarantee behind bank deposits to end the runs, and opened the New Deal, a decade of public works and relief and new rules that never quite cured the Depression but did stop the bleeding and put millions back to work. Nobody found a clean fix. What worked, roughly, was cheaper money and a government willing to spend. What did not was thrift, the gold peg, and patience.

Then the politics

Here a story about money becomes the hinge of the century. Idleness on that scale is not only an economic problem. It eats away at politics. Enough hungry, humiliated, out-of-work people will stop listening to the respectable parties presiding over their ruin and start listening to whoever promises them work, order, and somebody to blame.

Germany is the case that mattered most. The slump hit a young and shaky democracy like a hammer, and as the jobless count climbed past six million the centre caved and support drained to the edges. In January 1933, at the very bottom, Hitler was made chancellor. That is not the whole account of how the Nazis took power, but you cannot give an honest one without the Depression underneath it. In Japan, hard times and the pull of conquest pushed the army toward the wheel; the seizure of Manchuria came in 1931, in the depths of it. Right across the decade, democracies wobbled and strongmen got a hearing they had been refused in better years. The line from the crash to the war is neither short nor straight. But it is there.

The lullaby

Told properly, the Depression is not an American story that happened to leak abroad. It is the failure of the whole set-up that lashed the world's economies together, one that carried ruin around the globe as neatly as it had carried money. A crash in one place turned into a decade of misery everywhere because gold and debt and trade delivered it there, and because the people in charge met it with exactly the wrong instincts: hold the peg, balance the books, raise the walls, sit tight, wait it out. The waiting cost ten years, tens of millions of jobs, and a good stretch of the road to the worst war in history. The people who built the world after 1945 had watched all of it happen, and they built the thing to stop it happening the same way twice.

The face it left behind is still that quiet song. A lullaby for people with nowhere to lie down, sung low over the hum of the rails, about a world that had more than enough of everything and could not, for the life of it, work out how to share.

Sources

• Federal Reserve History, "The Great Depression".
• Encyclopaedia Britannica, "Great Depression".
• History, "Great Depression History".
• Wikipedia, "Great Depression" (on its global spread and the role of the gold standard).
• Wikipedia, "Hobo's Lullaby" (written by Goebel Reeves; recorded and popularised by Woody Guthrie).