The Second World War and the Americas (1933–1945)

Political and economic causes of the Great Depression

Hoover, Roosevelt and US solutions

Criticism and impact of the New Deal

Mackenzie King and Bennett in Canada

The Depression’s impact on Latin America

Latin American responses to the Depression

Social and cultural impact across the Americas

### The economic setting

The Depression grew out of weaknesses that had built up during the apparent prosperity of the mid 1920s. The United States played a central role as the largest economy in the Americas, the principal creditor and a major source of investment.

Industrial productivity rose faster than many workers’ purchasing power. Wealth and income were unevenly distributed, which made mass consumption increasingly dependent on instalment credit. When confidence faltered, indebted households cut back their spending. Firms responded by reducing production and employment.

Agriculture was already suffering before 1929. Wartime demand had encouraged farmers in the United States and Canada to expand production and borrow money for land and machinery. As European agriculture recovered, excess supply pushed prices down and rural debt up. Latin American producers faced a similar risk. Many economies relied on a small number of exports, including coffee, sugar, copper, nitrates or meat.

### Finance and the Wall Street Crash

Easy credit fuelled speculation in shares and real estate. Investors often bought shares **on margin**: they paid only part of the price and borrowed the rest. Share prices could therefore rise on the basis of debt rather than the companies’ underlying earnings.

Share prices plunged in October 1929, with major selling on 24 October and 29 October. The crash wiped out wealth and confidence, but it did not by itself cause the prolonged Depression. The more serious collapse came afterwards, as banks failed, credit contracted, investment stopped and consumers delayed purchases. Since there was no federal deposit insurance, bank runs could turn fear into insolvency.

The Federal Reserve acted against speculation during the boom, but later failed to provide enough monetary support during the banking crisis. As the money supply shrank, deflation became more severe. Falling prices increased the real burden of existing debts and encouraged people and firms to cut spending further.

### Political choices and international transmission

Government decisions turned a serious downturn into a continental crisis. The international gold standard limited governments’ freedom to expand their money supplies. War debts and German reparations connected the United States, Europe and the wider Atlantic economy. American lending had hidden the system’s weakness during the 1920s.

The US Smoot–Hawley Tariff of 1930 raised import duties. Other countries retaliated, while collapsing demand helped drive a steep fall in world trade. Canada and Latin America suffered especially because their prosperity depended heavily on exporting primary products and attracting foreign capital. American investors also withdrew funds and reduced new lending.

Domestic politics shaped events across the Americas. Many governments initially placed balanced budgets, existing currencies and creditor confidence first. Those priorities could restrict relief and public spending just as private demand was collapsing.

### Weighing the causes

Monetary interpretations focus on banking failures, Federal Reserve policy and the contraction of credit. Demand-based explanations point to unequal purchasing power, weak consumption and inadequate government spending. International interpretations emphasize the gold standard, protectionism and Canada’s and Latin America’s dependence on the US market. The strongest explanation brings these factors together: structural weaknesses left the economies exposed, while political and financial decisions spread the collapse and kept it going.

### Hoover’s approach, 1929–1933

Herbert Hoover took office in March 1929 with a reputation as an effective administrator. He believed the government should coordinate recovery, but not take the place of individual responsibility, local government or private enterprise. His response was therefore more active than the claim that he “did nothing” suggests. Even so, it was too limited for the scale of the emergency.

Hoover first urged employers to keep wages at their existing levels and asked state and local authorities to expand public works. Federal projects included the Boulder Canyon Project, later associated with Hoover Dam. The Agricultural Marketing Act of 1929 established the Federal Farm Board to support agricultural cooperatives and stabilize prices. Continued overproduction, however, overwhelmed its resources.

As the situation deteriorated, Hoover accepted a larger federal role. Established in 1932, the Reconstruction Finance Corporation lent federal money to banks, railroads and other major institutions. The Emergency Relief and Construction Act allowed some RFC lending for public works and relief. Hoover still opposed creating a permanent system of direct federal assistance for individuals.

These measures restored neither confidence nor mass purchasing power. The Smoot–Hawley Tariff intensified international trade tensions, and the Revenue Act of 1932 raised taxes during the contraction. The removal of the Bonus Army from Washington in July 1932 damaged Hoover’s public standing even further.

### Roosevelt and the first New Deal

Franklin D Roosevelt took office on 4 March 1933 during a national banking emergency. His New Deal had three overlapping purposes: immediate relief, economic recovery and reform designed to prevent another collapse.

The Emergency Banking Act allowed sound banks to reopen after a national bank holiday. Roosevelt’s radio addresses helped restore confidence. The Glass–Steagall Banking Act separated commercial banking from investment banking and created federal deposit insurance. By suspending domestic gold convertibility and devaluing the dollar, the government gained greater freedom to influence money and prices.

The Federal Emergency Relief Administration, the Civilian Conservation Corps and the Public Works Administration provided relief and employment. The Tennessee Valley Authority brought together dam construction, electrification, flood control and regional development.

The Agricultural Adjustment Administration aimed to raise farm prices by paying producers to reduce output. Through industrial codes, the National Recovery Administration tried to coordinate prices, wages, working hours and competition. Both programmes increased federal management of the economy. Their benefits were uneven, and the Supreme Court invalidated the NRA in 1935 and the AAA's processing-tax and related provisions in 1936.

### The second New Deal

From 1935, Roosevelt focused more heavily on employment, labour rights and social security. The Works Progress Administration directly employed millions in construction, conservation and cultural projects. The Wagner Act protected collective bargaining and established a federal framework for labour relations. The Social Security Act introduced old-age pensions, unemployment insurance and limited assistance for vulnerable groups.

The Fair Labor Standards Act of 1938 set federal rules for minimum wages, maximum hours and child labour in covered industries. These measures created more lasting protections than many emergency programmes.

### Efficacy by 1939

The New Deal stabilized banking, provided relief, improved infrastructure and reduced the human cost of unemployment. It also restored public confidence in democratic government and changed expectations about federal responsibility.

Full recovery did not follow. Unemployment remained high in 1939, while contractionary fiscal, Federal Reserve and Treasury policies contributed to a renewed recession in 1937–38. Supporters argue that New Deal spending was too cautious to restore total demand. Critics argue that regulation and policy uncertainty discouraged private investment. The record shows substantial relief and reform, but only partial economic recovery before the Second World War.

### Conservative criticism

Business leaders and conservative politicians attacked the New Deal because it expanded federal regulation, taxation and spending. Formed in 1934, the American Liberty League argued that Roosevelt threatened property rights and individual enterprise. Republicans also condemned budget deficits and the executive branch’s growing power.

The Supreme Court blocked several important early measures. In Schechter Poultry Corporation v United States (1935), it invalidated the National Industrial Recovery Act. In United States v Butler (1936), it invalidated the Agricultural Adjustment Act’s processing-tax provisions. Roosevelt’s 1937 proposal to appoint additional justices when older members did not retire was widely seen as an attempt to weaken judicial independence. Congress rejected the plan, costing Roosevelt political capital.

### Criticism from the populist left

Other critics thought the New Deal had preserved capitalism without redistributing enough wealth. Senator Huey Long promoted the Share Our Wealth movement. He proposed heavy taxation of large fortunes to fund household grants and guaranteed incomes. His appeal put pressure on Roosevelt until Long’s assassination in 1935.

Dr Francis Townsend called for federally funded pensions for older Americans. Father Charles Coughlin used the radio to attack banks and, increasingly, Roosevelt. Their programmes differed, but each drew on frustration with unemployment and insecurity. The second New Deal and the Social Security Act responded to some of this pressure without adopting their full proposals.

Socialists, communists and militant trade unionists argued that relief programmes left the economic structure unchanged. Many African American campaigners and women’s organizations also criticized discrimination in employment and welfare provision.

### Changes to the political system

The New Deal greatly expanded the federal government’s role in economic and social life. Washington took responsibility for banking stability, securities regulation, agricultural support, labour relations, unemployment relief and old-age security. Federal agencies became a normal part of government rather than a temporary wartime exception.

Roosevelt also strengthened the presidency through national communication, emergency legislation and control of a large executive administration. Checks and balances remained: Congress rejected court reform, while the Supreme Court invalidated legislation. Political initiative nevertheless shifted toward the White House.

A New Deal electoral coalition brought many urban workers, trade unionists, immigrants, white southerners, farmers and an increasing proportion of African American voters behind the Democratic Party. The coalition had serious contradictions. Roosevelt relied on segregationist southern Democrats, limiting federal action against racial discrimination and lynching.

### Changes to the economic system

The New Deal regulated capitalism rather than abolishing it. Deposit insurance and banking rules made savings more secure. The Securities and Exchange Commission supervised financial markets, agricultural programmes supported farm incomes, and labour legislation strengthened the bargaining power of organized workers. Social Security created a lasting, though incomplete, federal welfare commitment.

Labour organization grew rapidly, particularly after the Wagner Act. The Congress of Industrial Organizations helped organize workers across mass-production industries. The United Auto Workers led the General Motors sit-down strike of 1936–1937.

The effects were unequal. Domestic and agricultural workers were excluded from important early protections, affecting many women, African Americans and Mexican Americans. Some farm policies benefited landowners, while displaced tenants and sharecroppers suffered. The New Deal therefore made the economic system more regulated and socially protective without eliminating poverty, racial inequality or concentrated private power.

### Historical perspectives

Liberal interpretations emphasize the rescue of democratic capitalism and the creation of durable safeguards. Conservative interpretations focus on federal expansion, deficits and restraints on business. Left-wing interpretations argue that reform was deliberately limited because it protected the existing distribution of wealth. These views can coexist: the New Deal transformed the machinery of government in order to preserve a market-based system.

### Canada’s vulnerability

Canada relied heavily on exports of wheat, timber, minerals and newsprint, particularly to the United States and Britain. As commodity prices fell and world trade contracted, farm incomes, industrial output and employment declined. The Prairie provinces suffered even more severely because drought, soil erosion and crop failure struck at the same time.

Responsibility was split between the federal, provincial and municipal governments. Municipalities had to carry much of the immediate relief burden, yet their tax revenues collapsed as demand for assistance grew. Disputes followed over which level of government should provide the money.

### Mackenzie King’s first response

Liberal prime minister William Lyon Mackenzie King initially saw unemployment relief as mainly a provincial and municipal responsibility. In April 1930, he said he would not give even a “five-cent piece” to provincial governments that had not shown that assistance was necessary. The comment made him seem partisan and out of touch with worsening conditions.

King’s government did offer some support, but it had not created a comprehensive federal programme before the 1930 election. The Conservatives, led by Richard Bedford Bennett, promised vigorous action and won a majority.

### Bennett’s policies, 1930–1935

Bennett began with orthodox remedies. His government raised tariffs to protect Canadian producers, encouraged trade within the British Empire and provided public works and relief grants. The 1932 Ottawa Conference created imperial trade preferences, but no trade agreement could restore demand while the international economy remained depressed.

The federal government set up unemployment relief camps for single, unemployed men. The camps provided food, accommodation and a small daily allowance in exchange for manual labour, often in remote locations. Poor conditions and military-style discipline caused growing resentment. In 1935, protesters began the On-to-Ottawa Trek. The government stopped them in Regina, where the confrontation led to the Regina Riot.

Bennett’s government also established institutions that lasted. The Bank of Canada was established in 1934 and began operating in 1935, giving the country a central bank. Created in 1932, the Canadian Radio Broadcasting Commission increased federal involvement in national broadcasting.

### Bennett’s New Deal

In radio broadcasts in January 1935, Bennett proposed a Canadian “New Deal”. The measures included unemployment insurance, minimum wages, limits on working hours, better working conditions, farm credit and tighter regulation of business. The programme marked a late shift away from his earlier caution. It also reflected electoral pressure and the influence of Roosevelt’s example.

Implementation remained limited before the October 1935 election, which brought King’s Liberals back to office. Courts later invalidated important social legislation because it intruded on provincial jurisdiction. Bennett’s change of direction came too late to overcome public anger or Canada’s constitutional divisions.

### King’s return, 1935–1939

King moved cautiously after returning to power. His government introduced the National Housing Act of 1938 and the National Employment Commission, while maintaining relief and public works. Appointed in 1937, the Rowell–Sirois Commission examined the financial imbalance between federal responsibilities and provincial capacity, although its report appeared after the period covered here.

By 1939, recovery was gradual and incomplete. King’s cautious federalism avoided the level of executive experimentation seen in the United States, but it also led to less extensive social reform.

### Judging efficacy

Bennett was more interventionist than his later reputation sometimes suggests. Even so, tariffs, limited relief and institutional reform could not compensate for the collapse in external demand. His 1935 programme was politically and constitutionally weak. King was hesitant at first and remained cautious after 1935. Economic nationalists emphasize Canada’s dependence on exports and foreign capital. Political interpretations focus on fragmented federalism and both leaders’ reluctance to create permanent national welfare responsibilities.

### Economic shock

Most Latin American economies depended on exporting a small range of primary commodities while importing manufactured goods. After 1929, both prices and demand for products such as coffee, sugar, copper, nitrates and meat fell sharply. Foreign lending contracted, customs revenues dropped and external debt became harder for governments to service.

The impact differed according to each country’s export structure and the size of its domestic market. Brazil was hit by the collapse in coffee prices. Cuba depended heavily on sugar and was closely tied to the United States. Chile’s nitrate and copper sectors contracted severely, while Argentina faced falling demand for its meat and grain exports, as well as stronger protectionism abroad.

Falling export earnings and the loss of external finance forced governments to cut spending. Many also suspended debt payments. Urban factories, mines, ports and transport systems dismissed workers. In the countryside, producers faced lower prices, foreclosures and reduced wages. Unemployed workers returning from the cities added to the pressure on rural communities.

### Social consequences

The Depression deepened poverty, malnutrition, housing insecurity and unemployment. Landless labourers, miners, industrial workers and people relying on casual urban employment had little protection. Middle-class professionals and public employees suffered too, as businesses failed and governments reduced salaries.

Economic hardship encouraged migration and intensified conflict between landowners, workers and peasants. Existing racial and class inequalities affected access to relief. Indigenous and Afro-Latin American communities were often politically marginalized and especially vulnerable when rural incomes fell.

### Political instability

The crisis undermined confidence in liberal, export-led governments. Military officers, nationalist movements, labour organizations and new political coalitions challenged the established elites. In Argentina, General José Félix Uriburu overthrew President Hipólito Yrigoyen in September 1930. This began a period of conservative rule supported by electoral fraud.

In Brazil, the 1930 revolution prevented Júlio Prestes from taking office and brought Getúlio Vargas to power. Vargas ended the political dominance of São Paulo and Minas Gerais and gradually built a more centralized state.

Chile faced severe unrest as export income collapsed. Carlos Ibáñez del Campo left office in 1931. Rapid changes of government followed, including the short-lived Socialist Republic in 1932. Arturo Alessandri returned to the presidency later that year and restored some stability.

In Cuba, opposition to Gerardo Machado grew as the economy collapsed and repression continued. Machado was forced from power in 1933, but continued military intervention and the influence of Fulgencio Batista restricted stable constitutional rule.

### Challenges to democracy

The Depression did not lead to the same political result everywhere. In some states, it contributed to coups and authoritarian government. Elsewhere, it widened mass politics and strengthened demands for social reform. Traditional parties lost credibility because they appeared unable to protect employment or national economic independence.

Weak civilian institutions and fears of labour or socialist mobilization made military intervention easier. Some elites accepted authoritarian rule as a defence against social revolution. At the same time, unions, peasant leagues, students and nationalist groups demanded wider participation.

Structural interpretations stress Latin America’s dependence on foreign markets and investment. Political interpretations focus on weak institutions, military traditions and elite resistance to reform. The Depression acted as a powerful catalyst rather than the sole cause of instability. It exposed and intensified conflicts that already existed.

### Import substitution industrialization

**Import substitution industrialization (ISI)** meant producing manufactured goods at home instead of importing them. As export earnings collapsed and foreign currency became scarce, imports were harder to pay for. Tariffs and exchange controls then shielded local industry from outside competition.

ISI developed through both deliberate government policy and improvised responses to disrupted trade. Governments backed domestic producers with tariffs, state credit, currency controls, public investment and government purchasing. Brazil, Mexico and Argentina were especially well placed because they had larger populations and existing urban industries.

Light industry expanded first, particularly textiles, foodstuffs and consumer goods. As industry grew, urban workers and manufacturers gained political importance, while dependence on imported consumer products fell in some areas. However, these economies still relied on foreign machinery, capital and export earnings. Smaller economies also faced limited domestic markets.

### Brazil under Vargas

Getúlio Vargas centralized political authority while promoting economic diversification. His government bought and destroyed surplus coffee to restrict supply and support prices. At the same time, fewer imports created space for domestic manufacturing.

Vargas built support among urban workers through labour regulation and state-supervised unions. His government portrayed itself as a mediator between labour and employers, although independent organization remained restricted. The Estado Novo dictatorship, established in 1937, dissolved political parties, censored opposition and concentrated power in the executive. Social incorporation went hand in hand with political repression.

### Mexico under Cárdenas

President Lázaro Cárdenas, who took office in 1934, combined economic nationalism with mass mobilization. His government redistributed land through the ejido system, supported organized labour and reorganized the governing party. Workers, peasants, the military and the popular sector were brought into it.

The nationalization of the oil industry in 1938 asserted control over a strategic resource and became a symbol of economic sovereignty. State support for infrastructure and domestic production created stronger foundations for industrial development. Mobilization still operated through the governing party. Organized groups gained influence, but they also became tied to the state.

### Argentina and Cuba

Argentina used tariffs, exchange controls and bilateral trading arrangements to protect export markets and domestic industry. The Roca–Runciman Agreement of 1933 maintained Argentine beef’s access to the British market, while giving major advantages to British commercial interests. Critics saw the agreement as evidence that conservative governments had protected elite exporters rather than national independence.

Industrial employment increased, but the Concordancia maintained political rule through fraud, patronage and repression. Economic adjustment therefore took place without a democratic opening.

In Cuba, the instability of 1933 produced labour and nationalist demands for reform. Under the political influence of Fulgencio Batista, the state offered selective social concessions while controlling unions and repressing opponents. Dependence on sugar and the US market restricted economic diversification.

### Social policy, mobilization and repression

Across Latin America, governments increasingly appealed to workers and the urban lower classes. Labour codes, minimum-wage provisions, social insurance, land redistribution and state-backed unions could widen political participation. They also gave rulers ways to supervise popular organizations and present the state as the source of social benefits.

**Corporatism** placed recognized occupational groups—such as workers, employers and peasants—under state direction instead of allowing fully independent political competition. This could bring groups previously excluded from politics into the system. At the same time, it weakened autonomous unions and opposition parties.

Governments therefore combined economic nationalism, social reform and coercion. Supporters viewed stronger states and ISI as necessary ways to escape foreign dependence. Critics emphasize that the benefits were uneven and that popular mobilization was often controlled from above. By 1939, the larger economies had begun to diversify, but primary exports remained essential.

### Women and the household economy

Women’s experiences differed according to race, class, marital status and location. Married women were often expected to give up scarce paid work so that men could act as breadwinners. Some public authorities and private employers barred married women from employment, even though many families relied on their earnings.

Female employment did not simply disappear. Domestic service, clerical work, teaching and other jobs associated with women’s work still needed workers, although pay remained low and employment was insecure. Women also kept household budgets going through unpaid labour. They took in laundry or boarders, grew food and organized relief for their families or communities.

New Deal programmes recognized some women as welfare professionals, teachers, artists and administrators. Frances Perkins, secretary of labor from 1933, became the first woman to serve in a US cabinet and played an important part in labour and social security reform. Even so, relief usually assumed that a man headed the household, and women remained underrepresented in work programmes.

### Racial and ethnic minorities in the United States

African Americans encountered discrimination when seeking jobs, receiving relief and dealing with programme administrators. Agricultural policies could benefit landowners while forcing Black sharecroppers and tenants off the land. Roosevelt depended on southern Democrats, so his administration did not secure federal anti-lynching legislation.

Political change did take place. Federal agencies offered some employment and assistance, while Black advisers pushed the administration to confront discrimination. Many African American voters also moved towards the Democratic Party during the 1930s. This was a realignment, not an end to segregation.

Mexican Americans and Mexican immigrants faced repatriation drives that involved pressure, raids and deportation. US citizens of Mexican descent were removed as well. They experienced discrimination in both relief and employment. Asian Americans continued to face exclusionary immigration rules and racial barriers.

Indigenous peoples experienced severe poverty, but federal policy also shifted through the Indian Reorganization Act of 1934. The act ended the allotment policy and encouraged limited tribal self-government. Implementation was uneven, however, and the policy remained paternalistic.

### Minorities elsewhere in the Americas

In Canada, Indigenous communities received limited relief within an already restrictive system of federal control. Black and Asian Canadians also faced discrimination. Relief rules and local prejudice often decided who received assistance and the terms on which it was provided.

In Latin America, Indigenous, Afro-Latin American and landless rural communities were especially vulnerable to falling commodity prices and declining wages. Land reform or labour organization programmes could create new opportunities, particularly in Mexico. Their benefits, though, depended on local power relations and state priorities.

### Arts and culture in the United States and Canada

The economic crisis encouraged documentary and socially engaged art. Federal US programmes employed writers, actors, musicians, photographers and visual artists. The Federal Writers’ Project recorded regional life and oral testimony. The Federal Theatre Project took performances to wider audiences, while government-supported photography documented rural poverty and migration.

Literature, photography, murals, theatre and folk music examined unemployment, displacement and inequality. John Steinbeck’s *The Grapes of Wrath* (1939) portrayed the migration and exploitation of a farming family displaced from the Great Plains. Such work could create sympathy, although documentary images also reflected choices made by artists and sponsoring agencies.

Radio and cinema provided inexpensive information and entertainment. Roosevelt’s fireside chats showed the political importance of radio, while Hollywood films offered both escapism and social commentary. In Canada, public broadcasting through the Canadian Radio Broadcasting Commission and then the Canadian Broadcasting Corporation, established in 1936, strengthened national cultural links.

### Latin American culture

Mexican muralism used public art to present national history, revolution, workers and Indigenous identity to a mass audience. Diego Rivera’s murals linked modern economic conflict to wider stories of conquest, class struggle and national renewal. Governments could support this culture while using it to build legitimacy.

Across the Americas, cultural production did more than reflect hardship. It shaped how the public understood poverty, recorded communities often excluded from official politics and advanced competing ideas about national identity, social justice and the proper role of the state.

The Mexican Revolution (1884–1940)

History

IB History develops students' understanding of significant historical events, themes, and interpretations across different periods and regions.Students learn to analyze historical sources critically, understand complex historical narratives, and develop sophisticated historical thinking skills.

HL2.12 The Great Depression and the Americas (mid 1920s–1939)

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