After World War I, most European states hoped to return to the liberal ideal of a market economy largely free of state intervention. But the war had vastly strengthened business cartels and labor unions, making some government regulation of these powerful organizations necessary. At the same time, reparations and war debts had severely distorted the postwar international economy, making the prosperity that did occur between 1924 and 1929 at best a fragile one and the dream of returning to a self-regulating market economy merely an illusion. What destroyed the concept altogether was the Great Depression. Two factors played a major role in the coming of the Great Depression: a downturn in European economies and an international financial crisis created by the collapse of the American stock market in 1929. Already in the mid-1920s, prices for agricultural goods were beginning to decline rapidly as a result of the overproduction of basic commodities, such as wheat. In 1925, states in central and eastern Europe began to impose tariffs to close their markets to other countries’ goods. And an increase in the use of oil and hydroelectricity led to a slump in the coal industry. Much of the European prosperity in the mid-1920s was built on American bank loans to Germany, but in 1928 and 1929, American investors began to pull money out of Germany to invest in the booming New York stock market. When that market crashed in October 1929, panicky American investors withdrew even more of their funds from Germany and other European markets. The withdrawal of funds seriously weakened the banks of Germany and other central European states. The Credit-Anstalt, Vienna’s most prestigious bank, collapsed on May 31, 1931. By that time, trade was slowing down, industrialists were cutting back production, and unemployment was increasing as the ripple effects of international bank failures had a devastating impact on domestic economies. Economic downturns were by no means a new phenomenon in European history, but the Great Depression was exceptionally severe and had immediate political repercussions. In Great Britain, the Labour Party, now the largest in the country, failed to resolve the crisis (at one point in the early 1930s, one British worker in four was unemployed) and fell from power in 1931. A new government dominated by the Conservatives took office and soon claimed credit for lifting the country out of the worst stages of the depression, primarily by using the traditional policies of balanced budgets and protective tariffs. British politicians largely ignored the new ideas of a Cambridge economist, John Maynard Keynes (1883– 1946), whose 1936 General Theory of Employment, Interest, and Money took issue with the traditional view that depressions should be left to work themselves out through the self-regulatory mechanisms of a free economy. Keynes argued that unemployment stemmed not from overproduction but from a decline in consumer demand, which could be increased by public works, financed if necessary through deficit spending to stimulate production. Such policies, however, could be accomplished only by government intervention in the economy, a measure that British political leaders were unwilling to undertake. France did not suffer from the effects of the Great Depression as soon as other countries because its economy was almost evenly divided between urban and agricultural pursuits, and a slight majority of French industrial plants were small enterprises. Consequently, France did not begin to face the crisis until 1932, but then it quickly led to political repercussions. During a nineteen-month period from 1932 to 1933, six different cabinets were formed as France faced political chaos. The European nation that suffered the most damage from the depression was probably Germany. Unemployment increased to over four million by the end of 1930. For many Germans, who had already suffered through difficult times in the early 1920s, the democratic experiment represented by the Weimar Republic had become a nightmare. Some reacted by turning to Marxism because Karl Marx had long predicted that capitalism would destroy itself through overpopulation. As in several other European countries, communism took on a new popularity, especially with workers and intellectuals. But in Germany, the real beneficiary of the Great Depression was Adolf Hitler, whose Nazi party came to power in 1933. After Germany, no Western nation was more affected by the Great Depression than the United States. The full force of the depression had struck the United States by 1932. In that year, industrial production fell to 50 percent of what it had been in 1929. By 1933, there were fifteen million unemployed. Under these circumstances, Demo- crat Franklin Delano Roosevelt (1882–1945) was able to win a landslide victory in the presidential election of 1932. Following the example of the American experience during World War I, his administration pursued a Keynesian policy of active government intervention in the economy that came to be known as the New Deal. Initially, the New Deal attempted to restore prosperity by creating the National Recovery Administration (NRA), which required government, labor, and industrial leaders to work out regulations for each industry. Declared unconstitutional by the Supreme Court in 1935, the NRA was soon superseded by other efforts collectively known as the Second New Deal. Its programs included the Works Progress Administration (WPA), established in 1935, which employed between two and three million people building bridges, roads, post offices, airports, and other public works. The Roosevelt administration was also responsible for new social legislation that launched the American welfare state. In 1935, the Social Security Act created a system of old-age pensions and unemployment insurance. At the same time, the National Labor Relations Act of 1935 encouraged the rapid growth of labor unions. The New Deal undoubtedly provided some social reform measures and may even have averted social revolution in the United States; it did not, however, solve the unemployment problems of the Great Depression. In May 1937, during what was considered a period of full recovery, American unemployment still stood at seven million; a recession the following year increased that number to eleven million. Only World War II and the subsequent growth of armaments industries brought American workers back to full employment.