Nearly two decades after leaving the White House, Herbert Hoover knew precisely where to place the blame for the economic calamity that befell his presidency—and it wasn’t with him. “The primary cause of the Great Depression was the war of 1914-1918,” the former president wrote in his 1952 memoirs. “Without the war there would have been no depression of such dimensions.”

The president scapegoated by many for the economic disaster certainly had the motive to point the historical finger away from himself, but some economists and historians agree with Hoover’s assessment that World War I was the foremost of several causes of the Great Depression.

“There can be little doubt that the deepest roots of the crisis lay in the several chronic infirmities that World War I had inflicted on the international political and economic order,” wrote historian David M. Kennedy. “The war exacted a cruel economic and human toll from the core societies of the advanced industrialized world, including conspicuously Britain, France and Germany.”

“World War I and its aftermath is the dark shadow that hangs over the entire period leading up to the Great Depression,” says Maury Klein, professor emeritus of history at the University of Rhode Island and author of Rainbow’s End: The Crash of 1929. “Pick any policy you want, and you can see how it leads back to World War I.”

America Retreats From the World

While the United States emerged from World War I not only as the world’s leading economic power, but scarred by its involvement in what many Americans saw as a purely European conflict. The disillusionment with World War I led to a retreat from international affairs.

“America was going to make the world safe for democracy and came out disgusted with the whole thing,” Klein says. “The United States emerged as the logical leader on the world stage and then cut out of that role.”

Not wanting to be saddled with the cost of a European war, the United States demanded that the Allies repay money loaned to them during the conflict. “The Allies took the position that if they had to do that, then they would have to collect reparations from Germany that could be used to repay the war loans,” Klein says.

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German Reparations Weigh Down Europe

As a result, the punitive Treaty of Versailles required Germany to pay billions of dollars in reparations to Great Britain, France, Belgium and other Allies. “The Peace is outrageous and impossible and can bring nothing but misfortune,” wrote economist John Maynard Keynes after resigning in protest as the British Treasury Department’s chief representative to the peace conference. In his international bestseller The Economic Consequences of the Peace, Keynes argued that the onerous reparations would only further impoverish Germany and exacerbate the damage caused to the European economy by the war.

What ensued was a vicious flow of money back and forth across the Atlantic as American bankers lent money to Germany to pay reparations to the Allies to repay their debts to the United States. With the Allies refusing to ease reparation terms, Germany defaulted on its payments in 1923, and its economy further crumbled when factories shuttered after France and Belgium occupied the industrial Ruhr region to force German repayment.

To come up with the money to meet its obligations, Germany accelerated its currency printing, which caused such hyperinflation that the German mark became virtually worthless. The exchange rate of the German mark to the American dollar plummeted from 32.9 to 1 in 1919 to 433 billion to 1 by 1924. The paper on which German marks were printed had more value as kindling or children’s building blocks than as currency.

Economic Barriers Restrict Trade

While the crippled European economy whimpered, the American economy roared through the Twenties. However, Klein says social changes to the United States as a result of World War I laid the groundwork for the ensuing economic freefall.

“Due to the role they played during the war, businessmen emerged as knights in shining armor,” Klein says, “and the business of the country is business.” Policies enacted by successive Republican administrations resulted in both large tax cuts for big business owners that widened income inequality and a lack of regulation on banks and Wall Street that some historians connect to the start of the Great Depression.

At the same time, the United States continued its inward turn by curtailing immigration and in 1922 enacting the highest tariff in the country’s history to that point. While global guns remained silent during the 1920s, an international trade war raged around the globe that hindered economic recovery.

By the time of the October 1929 Stock Market Crash, countries such as Germany, Great Britain, Canada and Japan had already fallen into recession. When American credit dried up and banks started to fail, lenders not only stopped lending to Germany, they sought prompt repayment. The added economic pressure only worsened the downturn.

The Global Economy Collapses

Klein says the Great Depression did not take hold until the fall of 1930, and in the interim Hoover signed into law the Smoot-Hawley Tariff Act, which erected the highest trade barriers in American history. “At the very time you need to stimulate spending, these policies put in place a tariff that raised the price of goods and made it more difficult for Europeans to pay their bills and sell their goods in this country,” Klein says.

As another protectionist wave swept across the globe, Germany announced the formation of a customs union with Austria in March 1931. France feared it a step toward annexation and withdrew funds from Austrian banks, igniting a banking panic in Vienna that spread to Germany. In the ensuing months, the European economy imploded.

The inward turn after World War I had now left the United States to confront the Great Depression on its own.

“We are now faced with the problem, not of saving Germany or Britain,” Hoover told congressional leaders in late 1931, “but of saving ourselves.”