Question

How were the periods of vefore 1914 versus the period between 1914-1944 in terms of trade and capital flows?

In terms of international trade

Answer 1

The period from the 19th century till the early 20th century ie 1914 was known as the Gold Standard. It was a monetary system across the globe where gold was considered as a standard economic unit of account. International trade was settled between nations by using physical gold. In other words gold was primarily considered as a medium of exchange. Nations that used to have a trade surplus accommodated gold in their reserves. A trade surplus during the gold standard meant increase in the reserves of a nation in the form of gold. On the other hand nations who used to make payments for their imports saw a decline in their gold reserves. During the gold standard a nations currency was fixed and it could be easily converted in to gold. One of the major drawbacks of the gold standard was that nations which has massive reserves of gold were better of than the nations that didn't have any such gold reserves.

International trade during the gold standard was somewhat steady . However the nations which had good amount of gold reserves were better of than those which didn't have that much gold in their reserves. Ther fore International Trade was dominated by such nations and this was among the primary reasons why the Gold Standard was abolished.

The Period from 1914 - 1944 was known as the Interwar Period. It was period of International Turmoil when the two most devastating events of the world happened The World War. In the initial phase of the interwar period US was dominating the world economy and the US continued to embrace high tariffs and was following a strict trade policy against the rest of the nations. The reason behind this move was to increase domestic production but ultimately it hindered the international economic cooperation. High tariffs were not only boosting domestic trade flow but also generating revenue for the federal government. Some nations that were dependent on the US for capital goods had to import them irrespective of the tariffs that were imposed.

After the first world war was over US was the nation that emerged as a super power. Germany and it's allies were defeated and were heavily affected by the financial losses that the countries has to face. After the WW1 ended The Treaty of Versailles was signed in which Germany and it's allies had to pay hefty amount as financial obligations. The Germany economy was going from a bad phase and the Deutsche Mark depreciated heavily against the dollar.

The European Nations were heavily affected by the first World War as a result they couldn't dominate the International Trade as they were under heavy debt. It was only US that dominated the International Trade till the end of the Interwar Period in 1944.