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IB DP History Study Notes

3.2.2 Domestic Economic Drivers

The interwar period, a tumultuous era wedged between the aftermath of World War I and the prelude to World War II, was marked by profound economic disturbances. Italy and Germany, two central players in the events that would shape the 20th century, contended with severe economic challenges. The cataclysmic blow of the Great Depression intensified these issues, pushing both nations towards expansionist agendas to safeguard their domestic interests.

Italian Economy During the Interwar Period

  • Post-WWI Economic Aftermath: Following the end of World War I, Italy, like many European nations, grappled with substantial economic challenges.
    • Debt Burden: The war had been a costly endeavour for Italy. The national debt skyrocketed, putting immense pressure on the economy.
    • Inflation and Unemployment: Rampant inflation plagued the lira, Italy's currency, eroding its value rapidly. This scenario not only led to reduced purchasing power for Italian citizens but also escalated the cost of vital imported goods. Concurrently, unemployment levels surged, causing socio-economic unrest.
    • Industrial Sector's Dichotomy: Northern Italy saw a semblance of industrial progression. However, on a national scale, the industrial panorama was grim, with a significant number of factories lying dormant due to reduced demand and capital constraints.
    • Agricultural Stagnation: The agricultural domain, especially in southern regions, encountered a marked downturn. Global economic downturns, coupled with mismanagement at the local level, exacerbated this decline.

German Economy During the Interwar Period

  • Post-WWI Reparations and Restrictions: The Treaty of Versailles, imposed on Germany after World War I, levied heavy reparations. The loss of vital industrial territories further impaired Germany's economic prowess.
    • Hyperinflation Crisis: By 1923, the German economy had nose-dived into hyperinflation. The German mark's value diminished exponentially, leading to scenarios where wheelbarrows full of currency were needed to purchase basic commodities.
    • Dawes Plan Respite: The Dawes Plan of 1924 sought to alleviate Germany's economic burden by reorganising its reparations. It also facilitated the influx of foreign loans, leading to a brief period of relative economic stability towards the latter half of the 1920s.

Impact of the Great Depression

  • Genesis of the Global Crisis: The 1929 Wall Street Crash heralded the inception of the Great Depression, sending ripples across global economies.
    • Germany's Vulnerability: The abrupt collapse of American banking institutions led to the swift withdrawal of crucial American loans from Germany. This external financial shockwave, when combined with intrinsic economic fragilities, plunged Germany into an acute recession. By 1932, unemployment figures had risen staggeringly, eclipsing the 6 million mark.
    • Italy's Economic Strain: The Great Depression exacerbated Italy's pre-existing economic frailties. Both the industrial and agricultural sectors witnessed significant downturns, leading to elevated unemployment rates and fuelling public discord.

Economic Strife Fuelling Foreign Expansion

  • Economic Nationalism as a Policy Pillar: Aimed at achieving economic self-reliance, both Italy and Germany bolstered their aggressive foreign acquisition strategies to secure essential resources and penetrate new markets.
    • Germany's Lebensraum Doctrine: Adolf Hitler championed the notion of 'Lebensraum' (living space). He believed that for the Germanic peoples to thrive and maintain their cultural purity, they necessitated additional territorial space. This idea became a foundational tenet justifying Germany's territorial aspirations.
    • Italy's Imperialist Vision: Benito Mussolini, driven by a blend of economic imperatives and nationalistic fervour, aspired to rejuvenate Italy's imperial stature. His sights were set on Africa, viewing it as a linchpin in Italy's resurgence. Economic incentives, like accessing resources and capturing new markets, further propelled this vision.

Economic Policies Supporting National Expansion


  • Pursuit of Autarky: A cornerstone of Nazi economic strategy was the pursuit of autarky or national self-sufficiency. This was envisioned to reduce external dependencies and fortify the nation's economic infrastructure.
    • Four Year Plan (1936): Orchestrated by Hermann Göring, this ambitious plan sought to militarise and prepare Germany for potential conflict within a short four-year window. It underscored the imperatives of rapid rearmament and achieving self-reliance in food and essential raw materials.
    • Labour Reorientation: The Nazi regime implemented a series of measures to curtail unemployment. This encompassed public initiatives such as the Autobahn construction project and mandating labour services.


  • Battle for Grain (1925): This policy, initiated by Mussolini, was envisaged to slash Italy's reliance on foreign grain imports. By offering financial incentives and subsidies, the regime aimed to bolster domestic wheat output.
    • Unintended Consequences: Although wheat production saw an uptick, this came at the cost of neglecting other agricultural produce, leading to imbalances in Italy's agrarian framework.
  • Mussolini's Corporate State Vision: Mussolini endeavoured to regiment the economy through the institution of 'corporations' representing distinct sectors. This was envisaged to neutralise class antagonisms and foster national cohesiveness.
    • Reality Check: Despite its grand portrayal, the corporate state largely remained a propaganda instrument. It offered little substantive remedy to Italy's intricate economic challenges.

In synthesising the above, the interwar period's volatile economic landscape was instrumental in shaping the aggressive expansionist trajectories of Italy and Germany. Beset by economic hardships and ideological motivations, these nations embarked on expansionist odysseys, precursors to the cataclysmic events of World War II.


While Mussolini's 'Battle for Grain' successfully increased wheat production, its repercussions on other sectors were detrimental. By pushing farmers to prioritise wheat cultivation, other vital crops, like fruits and vegetables, were often sidelined. This led to a decline in the diversity of agricultural produce available. Additionally, as resources and focus were redirected towards wheat, the vineyard and olive farming sectors, traditional strongholds of Italian agriculture, faced neglect. Furthermore, the campaign led to overproduction of wheat, causing prices to drop. In the long run, the lack of diversified agricultural growth made the economy vulnerable and failed to achieve the desired self-reliance.

The Dawes Plan, introduced in 1924, aimed to restructure Germany's reparation payments post-WWI. Recognising that the punishing reparations were unsustainable, the plan proposed more manageable payment schedules and lower annual payments. Additionally, the Dawes Plan facilitated an influx of foreign investments and loans, particularly from the United States, to stimulate the German economy. The Rhineland was to be evacuated by Allied occupation troops, and the Ruhr area — Germany's industrial heartland — was to be reorganised under Allied supervision. By addressing the reparations issue and boosting the economy through foreign investments, the Dawes Plan brought a brief period of economic stability to Weimar Germany.

Italy's industrial and economic landscape during the interwar period exhibited pronounced regional disparities. Northern Italy, especially regions like Lombardy and Piedmont, was relatively more industrialised and economically advanced. These areas witnessed some industrial growth, supported by a developed infrastructure and proximity to European markets. Conversely, southern Italy remained primarily agrarian, less developed, and lagged in terms of infrastructure and education. Factors like land mismanagement, malarial outbreaks, and a lack of industrialisation left the south economically stagnant and underdeveloped. The economic disparity between the prosperous north and the struggling south persisted, further accentuating the socio-economic divisions in Italy during this period.

Absolutely. Nazi economic policies were as much about political ideology and control as they were about economic rejuvenation. The pursuit of autarky wasn't merely for self-sufficiency; it was rooted in the Nazi vision of a self-reliant, racially pure Aryan nation. Labour policies like the construction of the Autobahn or the Reich Labour Service aimed to reduce unemployment, but they also aimed to regiment and control the workforce, instilling Nazi values. The Four Year Plan's focus on rearmament also had clear militaristic and expansionist ambitions, in line with Hitler's worldview. These policies, while addressing economic woes, were deeply intertwined with the Nazis' political and ideological goals.

The hyperinflation crisis in Weimar Germany profoundly impacted daily life. As the value of the German mark plummeted, savings were obliterated, rendering many middle-class Germans impoverished overnight. The prices of basic goods skyrocketed daily, often multiple times a day, causing citizens to rush to spend their wages before they lost even more value. Stories abound of wheelbarrows of money being needed to buy a loaf of bread. Moreover, real assets like property became invaluable. Such financial chaos further eroded public trust in the Weimar Republic and fanned the flames of radical political movements, notably the Nazis, who promised economic stability and rejuvenation.

Practice Questions

How did the economic challenges of the interwar period in Italy and Germany influence their respective foreign expansionist policies?

The interwar period witnessed both Italy and Germany grappling with immense economic challenges, chiefly due to the aftermath of World War I and the devastating Great Depression. For Germany, the reparations from the Treaty of Versailles, coupled with the hyperinflation crisis, cultivated a fertile ground for Nazi ideology which promoted the 'Lebensraum' doctrine, seeking additional territories for Germanic peoples. Italy, facing agricultural stagnation and industrial dilemmas, propelled Mussolini to adopt an aggressive expansionist vision, particularly targeting Africa. In essence, the profound economic hardships of the era served as catalysts, pushing both nations towards aggressive expansionist agendas.

Assess the effectiveness of economic policies implemented by Germany and Italy during the interwar period in supporting their national expansionist objectives.

Germany's pursuit of autarky and the Four Year Plan primarily sought to militarise the nation and achieve self-reliance, preparing the nation for potential conflict. The drive towards self-sufficiency and rapid rearmament indeed set the stage for further territorial ambitions. Italy, on the other hand, attempted to curtail foreign dependencies through the 'Battle for Grain', aiming to boost domestic wheat production. While it did elevate wheat output, it compromised other sectors of agriculture. Mussolini's Corporate State vision, although idealised as a solution to class conflicts, mostly remained a propaganda tool with limited economic impact. In sum, while Germany's policies were relatively more successful in buttressing its expansionist objectives, Italy's measures rendered mixed results.

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Written by: Maddie
Oxford University - BA History

Maddie, an Oxford history graduate, is experienced in creating dynamic educational resources, blending her historical knowledge with her tutoring experience to inspire and educate students.

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