The Great Depression that occurred after World War I had far-reaching political implications in the United States and abroad. The war had disrupted agriculture and manufacturing to an extent that countries were hard pressed to recover. Many nations were steeped in debt from the conflict. The loss of millions of potential laborers on the battlefield also wreaked havoc on industrial potential. In the United States, citizens were unhappy but chose to work within their democracies to fix the economic issues at hand. In other countries around the world, fledgling democracies fell under the weight of unemployment and inflation. While the United States stayed with their system of democracy, major reforms to the system were made to deal with the misery that was the Great Depression.
In many respects, the Depression marked a significant political change in the United States. It marked a shift to an interventionist federal government. The laissez-faire government approach towards the economy was now viewed as ineffective. The American people spoke loud and clear in the election of 1932 as a new political coalition overwhelmingly chose the democrat Franklin D. Roosevelt to the presidency. This coalition, which would endure to the present day, included urban ethnic groups, organized labor, and African-Americans. Roosevelt would transform the federal government to make it more responsive to the economic needs of a struggling nation.
Roosevelt challenged many political norms in instituting his New Deal. For most of America's history, the government felt that the economy should manage itself, with minimal oversight. By allowing big business to prosper unabated, jobs would be created for the masses. The unprecedented growth in the stock market in the 1920's seemed to confirm this on the surface. When the market crashed in 1929, the need for government intervention was made clearer. Roosevelt's first act as president was to fix the banks. He closed all of the banks and set up commissions to review the health of the banks. The ones that could fail were not permitted to re-open. The actions of Franklin D. Roosevelt during this bank holiday indicated a clear shift away from a laissez-faire approach toward American financial institutions.
The federal government during this period took an aggressive approach to fixing unemployment. This was accomplished by creating agencies to hire Americans for massive public works projects. Direct aid was granted through the Social Security Act and unemployment compensation. Many of the safety net programs that exist today to help Americans were instituted during the Great Depression. These concepts included aid for dependent children, minimum wage, and public housing. The political change would inspire further reforms for the poor in the years to follow World War II. The age-old American convention of pulling yourself up "by the bootstraps" seemed quite dated during the Great Depression.
Around the world, the economic depression that followed World War I had a dramatic effect. After the Great War, many countries felt that democracy was a system of government that could ensure peace and prosperity. Because of their inexperience with representative government, these attempts at democracy failed. There were too many political parties in countries like Italy and Germany to solve the issues of inflation and unemployment. Citizens felt that authoritarian rule was more efficient and they turned to radical leaders. In Japan, democracy failed to solve the issue of unemployment and the people turned to an aggressive military structure to govern them. The economy had dictated a change to the far left in these countries, which would eventually plunge the world into another war.