The Great Depression not only had a major impact on domestic life in the United States, it strongly affected America’s relationships with other nations. The peace treaties that had been painstakingly developed after World War I were based on the premise that the worldwide economy would function smoothly now that the war was over. But because of America’s predominant role in the interdependent world market, the U.S. stock market crash of 1929 affected other countries as well. In some countries — Germany, Russia, Spain, and Japan in particular — these turbulent economic conditions allowed authoritarian leaders to take control of their nations.
As Germany and Japan became more aggressive toward other countries, President Roosevelt continued to use international economic means, rather than political or military ones, to try to stop them. International politics and economics were to become interwoven as the world moved unavoidably, it seemed, toward the brink of another global war.
The Manchurian Crisis
The post-World War I peace treaties specified, among other things, that Germany pay reparations to the countries it had invaded and that Britain and France repay the money they had borrowed from the United States to fight World War I. In June 1931, with the world economy became increasingly unstable, President Hoover attempted to stabilize the western money market by proposing at least a one-year moratorium on the payments of reparations and war debts. His proposal was rejected, and later that summer, several of the major economies of the world began to fall apart: Germany’s banking system collapsed, Great Britain went into a depression, and the French government fell.
For its part, Japan had been especially hard hit by the worldwide Depression because its economy depended so heavily on selling to overseas markets. As the Depression deepened, other countries had no money to buy Japanese goods. A group backed by the Japanese army took over the civilian Japanese government, promising to get its economy back on track. It declared that Japan should not depend on the financially troubled West, but should build its own empire in Asia. As a first step, in 1931-1932, Japan invaded the Chinese territory of northern Manchuria.
During the twenties, the United States was pretty much on its own in developing a foreign policy in Asia. The other great world power, Great Britain, was more concerned with developments in Europe; also, it was no longer a power in the Pacific. The cornerstone of American policy in Asia had been cooperation with Japan. The United States preferred to deal with Japan rather than with the unpredictable China or with Russia, which was considered too revolutionary. Besides, Japan was an important trading partner; by 1939, it had become America’s third largest customer, placing large orders for goods such as oil and metals.
So when Japan invaded northern Manchuria, President Hoover and Secretary of State Henry L. Stimson were faced with a dilemma. Although they wanted to condemn this aggression, they feared that forceful action would give the Japanese army an excuse to take full control of the government and mobilize for war. So Hoover and his foreign policy advisors made some vague threats to the Japanese but basically stayed out of the troubled situation.
