Great Depression in the Netherlands
Encyclopedia
The Great Depression was a period of severe economic crisis in the 1930s which affected countries around the world, including the Netherlands . In the United States the Stock Market Crash of 1929 is understood as the start of the Great Depression. But in the Netherlands the depression
started more gradually, in 1929-1931, while the economy had been in a gradual decline for a longer period. In the Netherlands the depression was significantly longer than in most countries, partly because of structural characteristics of the Dutch economy and partly because of the policy of the government. The refusal to drop the Gold Standard
plays a central role. Depending on the variables used the lowpoint of the Great Depression in the Netherlands was between 1933 and 1936, significantly later than in most other countries. The Great Depression led to political instability and riots, and can be linked to the rise of the Dutch national-socialist party NSB. The depression in the Netherlands lessened at the end of 1936, but real economic stability did not return until after World War II
.
in World War I
, the Netherlands didn’t face the problems of war debts, war damage and population loss which caused economic problems in other European countries. But because of the international character of the Dutch economy these problems also had their consequences for the Netherlands. Especially the unrest and economic problems in Germany
, one of the Netherlands’ main trading partners, in the early 1920s plunged the Netherlands into a severe depression until 1925 (lowest point reached in 1923). After 1925, partly because of economic improvements in Germany, the post-war depression in the Netherlands ended and the country rejoined the Gold Standard
. But, among others because of strong trade restriction
s in Germany, this improvement was limited and didn’t cause an economic boom as in some other European countries and the United States (associated with the ‘Roaring Twenties
’).
In spite of these slight economic improvements the Dutch economy struggled with structural problems in the period before the Great Depression. Trade restrictions and economic protectionism
had not fully disappeared after World War I
, and world trade failed to pick up again after the war. The Dutch economy had long been dependent on international trade and finance (in 1929 an estimated 30% of the GNP
came from export), and especially the big shipping
sector suffered from the lack of trading opportunities. Another problem was the combination of high post-World War I birthrates and increasing labour productivity, which meant that any increase of demand
didn’t cause general welfare increase and a fall of unemployment
.
At the start of the depression employed workers still saw their wage cuts matched by strong decreases of the price of consumption articles. But after the first years of the depression they too suffered from a decrease in real income
.
For the increasing numbers of unemployed the situation was much worse. Up to the 1930s the Dutch society did not have the experience and infrastructure needed to deal with mass unemployment. In large parts of society it was felt that unemployed people should above all be stimulated to find work, so only income support at subsistence level should be given. Even though finding work had now become impossible for large numbers of people, social sentiments towards the unemployed only changed slowly. Labour unions had funds for temporary income support for newly unemployed workers, to which the government added some subsidy
. So union members were spared real poverty for a limited period. In the later stages of the depression however these union funds became depleted while the government also reduced its subsidy, forcing unions to steadily decrease the time period and amount of support. Non-unionised workers and workers whose union support period had run out depended on a government poverty fund, which supported them up to subsistence level. This minimal income support came with a heavy social stigma
, which reflected the values of contemporary society. Support receivers had to report at a government agency twice a day, waiting in the endless lines of unemployed which became a symbol of the depression. They also had to allow government inspectors to visit them at home and investigate their daily life, which quickly became a strongly hated practice among the unemployed. Social stigmatisation also took the form of clearly recognisable signs, such as red coloured subsidised clothing and the especially painful sign that a person was exempt from bicycle taxation (to be worn on a bicycle or on one’s clothing).
In addition to scarce government aid there were private initiatives to support the poor. The most important of these organisations was the Nationaal Crisis Comité (National Crisis Committee), established by Princess Juliana
in 1931. But because of the limited scale of this organisation it couldn’t structurally improve the situation.
Statistics of labour strikes
for example show that during the 1931-1937 period strikes were actually less common in the Netherlands than in the previous years of economic stability from 1925 to 1930. At the height of the Great Depression in the Netherlands the number of strikes was lowest. [4] Another form of protest was rentstriking, the refusal by a tenant
to pay rent to a landlord
. This form of protest was also quite limited in scale, partly because of harsh government intervention. More impressive was the strike or mutiny
in 1933 of the sailors of HNLMS De Zeven Provinciën
, an armored ship of the Royal Netherlands Navy
. As earlier in the United Kingdom (Invergordon Mutiny
) the sailors protested a cut of their wages. The mutiny ended when the Dutch army bombed the ship, killing 22 of the sailors and forcing the rest of the crew to surrender. In 1934 another impressive event took place known as the Jordaan riot. A reduction of the already low government unemployment support sparked protest and riots in several cities in the Netherlands, most strongly in the Jordaan
neighbourhood of Amsterdam
. Between July 4 and July 9 the riots and subsequent harsh intervention by police and military police claimed 6 lives and wounded dozens more.
The upheaval of the Great Depression can also be linked to a rise of xenophobia
and the, albeit limited, success of the Dutch National Socialist party (Nationaal Socialistische Beweging). Founded in 1931 the NSB gained some popularity during the depression, with a peak of support in terms of its membership in 1936. When the strength of the depression lessened after 1937 support for the NSB fell again.
In the first years of the depression government policy limited itself to supporting the most heavily affected sectors of the economy. In 1931 a corn law was issued (Dutch: Tarwewet), which forced importers of foreign corn to add a quantity of more expensive Dutch corn before sale, to promote the troubled Dutch agriculture. Starting in 1932 a series of ‘crisis laws’ was issued to further subsidise the agricultural and shipping sectors, and to enable a measure of government control on import, export and capital flows. From 1934 onwards the Dutch government also experimented with a Labour Fund (Dutch: Werkfonds) to provide subsidised workplaces for the unemployed, often on large scale public works (comparable with the New Deal
in the United States). The scale of these government interventions was however too small to really change the situation.
While government intervention on the economy was very limited, the Dutch government did lower its spending (including income support to the poor and unemployed) and raised taxes to keep its budget
balanced. The effect of this was that while poverty increased, government support to the poor decreased. Such a government policy is heavily criticised by the Keynesian school of economics, which at that time was still in its infancy. Keynesian economics stresses that governments should play an active role in promoting public and private consumption
during an economic depression, so a balanced government budget should only be aimed at on the long run.
The Dutch government was also very reluctant to intervene in its trade policy. While most industrialised countries strongly increased their trade restriction
s from the early stages of the Great Depression onwards, the Dutch government still hoped for international cooperation to solve the economic crisis. Only after the failed 1933 World Economic Conference, when it became clear that countries had to solve their economic problems by themselves, did the Netherlands increase its trade barriers to a more significant level. But as described earlier the Netherlands was still unwilling to drop the Gold Standard, and instead joined an agreement between the last European countries to maintain the Gold standard. This subjected the Dutch economy to fierce foreign competition, forcing Dutch firms to strongly cut their costs in order to survive this situation. In the process wages and employment were cut, and the depression deepened. While the economic situation gradually improved in most industrialised countries around 1933-1934, the Great Depression was still getting worse in the Netherlands.
.
s among themselves these states tried to survive harsh foreign competition without accepting currency devaluation. Internal trade didn’t solve their problems however, and by 1935 only France
, Switzerland
and the Netherlands remained in this gold bloc. When France finally decided to accept devaluation
in 1936 the Netherlands had no choice but to follow. While the Netherlands had been so reluctant to drop the Gold Standard, it quickly brought an economic boost after years of decline. In 1936 the Dutch stock market
started climbing again, trade slowly recovered and unemployment stopped growing. Finally the country could now profit from the ongoing economic recovery that had been taking place for many of its trading partners.
. Another reason for stagnation were the rising political tensions caused by Germany’s increasingly aggressive behaviour, causing uncertainty and the withdrawal of capital
from European economies. At the same time the effects of the depression became less visible as European states started to rearm themselves in the preamble of World War II
. The Netherlands started its rearmament relatively late and imported much of its weaponry, but by 1938 the artificial economic recovery caused by pre-war preparations also had its effects on the Netherlands. By 1939 large numbers of formerly unemployed people had been drafted
into the army, while rising defence spendings (the budget tripled between 1936 and 1939) artificially revived several sectors of the economy. Just before World War II an event took place which could have been very influential, had it happened earlier. The old conservative statesman Colijn lost the government to the De Geer-cabinet
, which included for the first time in history two members of the socialist party (SDAP). The new cabinet proposed an ambitious strategy to invest large sums of money in public works to finally end the depression. But before this new policy could fully be implemented the Netherlands was dragged into World War II
. On May 10, 1940 Germany invaded the Netherlands, and the Dutch economy transformed into a war economy
.
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
started more gradually, in 1929-1931, while the economy had been in a gradual decline for a longer period. In the Netherlands the depression was significantly longer than in most countries, partly because of structural characteristics of the Dutch economy and partly because of the policy of the government. The refusal to drop the Gold Standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
plays a central role. Depending on the variables used the lowpoint of the Great Depression in the Netherlands was between 1933 and 1936, significantly later than in most other countries. The Great Depression led to political instability and riots, and can be linked to the rise of the Dutch national-socialist party NSB. The depression in the Netherlands lessened at the end of 1936, but real economic stability did not return until after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
.
The Netherlands before the Great Depression (1918-1929)
Because of neutralityNeutral country
A neutral power in a particular war is a sovereign state which declares itself to be neutral towards the belligerents. A non-belligerent state does not need to be neutral. The rights and duties of a neutral power are defined in Sections 5 and 13 of the Hague Convention of 1907...
in World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
, the Netherlands didn’t face the problems of war debts, war damage and population loss which caused economic problems in other European countries. But because of the international character of the Dutch economy these problems also had their consequences for the Netherlands. Especially the unrest and economic problems in Germany
Weimar Republic
The Weimar Republic is the name given by historians to the parliamentary republic established in 1919 in Germany to replace the imperial form of government...
, one of the Netherlands’ main trading partners, in the early 1920s plunged the Netherlands into a severe depression until 1925 (lowest point reached in 1923). After 1925, partly because of economic improvements in Germany, the post-war depression in the Netherlands ended and the country rejoined the Gold Standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
. But, among others because of strong trade restriction
Trade restriction
A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, harmful or...
s in Germany, this improvement was limited and didn’t cause an economic boom as in some other European countries and the United States (associated with the ‘Roaring Twenties
Roaring Twenties
The Roaring Twenties is a phrase used to describe the 1920s, principally in North America, but also in London, Berlin and Paris for a period of sustained economic prosperity. The phrase was meant to emphasize the period's social, artistic, and cultural dynamism...
’).
In spite of these slight economic improvements the Dutch economy struggled with structural problems in the period before the Great Depression. Trade restrictions and economic protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
had not fully disappeared after World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
, and world trade failed to pick up again after the war. The Dutch economy had long been dependent on international trade and finance (in 1929 an estimated 30% of the GNP
GNP
Gross National Product is the market value of all products and services produced in one year by labor and property supplied by the residents of a country...
came from export), and especially the big shipping
Shipping
Shipping has multiple meanings. It can be a physical process of transporting commodities and merchandise goods and cargo, by land, air, and sea. It also can describe the movement of objects by ship.Land or "ground" shipping can be by train or by truck...
sector suffered from the lack of trading opportunities. Another problem was the combination of high post-World War I birthrates and increasing labour productivity, which meant that any increase of demand
Demand
- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...
didn’t cause general welfare increase and a fall of unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
.
Poverty and support
Until 1931 the social consequences of the economic crisis had been limited. By decreasing work hours and wages mass unemployment had so far been avoided in most sectors. But around 1931 mass unemployment did start and those workers who could keep their jobs often had to accept very large wage cuts. Rough estimates of unemployment show a surge between 1930 and 1932, and a steady increase up to the end of 1936. Not every sector of the economy suffered equally though. While the shipping and trading sectors were hit especially hard, some specialised sectors such as the tobacco industry survived the first stage of the depression relatively unharmed.At the start of the depression employed workers still saw their wage cuts matched by strong decreases of the price of consumption articles. But after the first years of the depression they too suffered from a decrease in real income
Real income
Real income is the income of individuals or nations after adjusting for inflation. It is calculated by subtracting inflation from the nominal income...
.
For the increasing numbers of unemployed the situation was much worse. Up to the 1930s the Dutch society did not have the experience and infrastructure needed to deal with mass unemployment. In large parts of society it was felt that unemployed people should above all be stimulated to find work, so only income support at subsistence level should be given. Even though finding work had now become impossible for large numbers of people, social sentiments towards the unemployed only changed slowly. Labour unions had funds for temporary income support for newly unemployed workers, to which the government added some subsidy
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
. So union members were spared real poverty for a limited period. In the later stages of the depression however these union funds became depleted while the government also reduced its subsidy, forcing unions to steadily decrease the time period and amount of support. Non-unionised workers and workers whose union support period had run out depended on a government poverty fund, which supported them up to subsistence level. This minimal income support came with a heavy social stigma
Social stigma
Social stigma is the severe disapproval of or discontent with a person on the grounds of characteristics that distinguish them from other members of a society.Almost all stigma is based on a person differing from social or cultural norms...
, which reflected the values of contemporary society. Support receivers had to report at a government agency twice a day, waiting in the endless lines of unemployed which became a symbol of the depression. They also had to allow government inspectors to visit them at home and investigate their daily life, which quickly became a strongly hated practice among the unemployed. Social stigmatisation also took the form of clearly recognisable signs, such as red coloured subsidised clothing and the especially painful sign that a person was exempt from bicycle taxation (to be worn on a bicycle or on one’s clothing).
In addition to scarce government aid there were private initiatives to support the poor. The most important of these organisations was the Nationaal Crisis Comité (National Crisis Committee), established by Princess Juliana
Juliana of the Netherlands
Juliana was the Queen regnant of the Kingdom of the Netherlands between 1948 and 1980. She was the only child of Queen Wilhelmina and Prince Henry...
in 1931. But because of the limited scale of this organisation it couldn’t structurally improve the situation.
Social unrest
As most other countries the Netherlands experienced significant social unrest during the Great Depression. But except for a number of impressive events this unrest was actually quite limited in scale.Statistics of labour strikes
Strike action
Strike action, also called labour strike, on strike, greve , or simply strike, is a work stoppage caused by the mass refusal of employees to work. A strike usually takes place in response to employee grievances. Strikes became important during the industrial revolution, when mass labour became...
for example show that during the 1931-1937 period strikes were actually less common in the Netherlands than in the previous years of economic stability from 1925 to 1930. At the height of the Great Depression in the Netherlands the number of strikes was lowest. [4] Another form of protest was rentstriking, the refusal by a tenant
Leasehold estate
A leasehold estate is an ownership of a temporary right to land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord....
to pay rent to a landlord
Landlord
A landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...
. This form of protest was also quite limited in scale, partly because of harsh government intervention. More impressive was the strike or mutiny
Mutiny
Mutiny is a conspiracy among members of a group of similarly situated individuals to openly oppose, change or overthrow an authority to which they are subject...
in 1933 of the sailors of HNLMS De Zeven Provinciën
HNLMS De Zeven Provinciën
Eight ships of the Royal Netherlands Navy have been named HNLMS De Zeven Provinciën or similar, after the original seven provinces of the Netherlands forming the Union of Utrecht:*Zeven Provinciën , ship of the line of the Amsterdam Admiralty;...
, an armored ship of the Royal Netherlands Navy
Royal Netherlands Navy
The Koninklijke Marine is the navy of the Netherlands. In the mid-17th century the Dutch Navy was the most powerful navy in the world and it played an active role in the wars of the Dutch Republic and later those of the Batavian Republic and the Kingdom of the Netherlands...
. As earlier in the United Kingdom (Invergordon Mutiny
Invergordon Mutiny
The Invergordon Mutiny was an industrial action by around 1,000 sailors in the British Atlantic Fleet, that took place on 15–16 September 1931...
) the sailors protested a cut of their wages. The mutiny ended when the Dutch army bombed the ship, killing 22 of the sailors and forcing the rest of the crew to surrender. In 1934 another impressive event took place known as the Jordaan riot. A reduction of the already low government unemployment support sparked protest and riots in several cities in the Netherlands, most strongly in the Jordaan
Jordaan
The Jordaan is a district of the city of Amsterdam in the Netherlands. The area is bordered by the Lijnbaansgracht canal to the west, the Prinsengracht to the east, the Brouwersgracht to the north and the Leidsegracht to the south...
neighbourhood of Amsterdam
Amsterdam
Amsterdam is the largest city and the capital of the Netherlands. The current position of Amsterdam as capital city of the Kingdom of the Netherlands is governed by the constitution of August 24, 1815 and its successors. Amsterdam has a population of 783,364 within city limits, an urban population...
. Between July 4 and July 9 the riots and subsequent harsh intervention by police and military police claimed 6 lives and wounded dozens more.
The upheaval of the Great Depression can also be linked to a rise of xenophobia
Xenophobia
Xenophobia is defined as "an unreasonable fear of foreigners or strangers or of that which is foreign or strange". It comes from the Greek words ξένος , meaning "stranger," "foreigner" and φόβος , meaning "fear."...
and the, albeit limited, success of the Dutch National Socialist party (Nationaal Socialistische Beweging). Founded in 1931 the NSB gained some popularity during the depression, with a peak of support in terms of its membership in 1936. When the strength of the depression lessened after 1937 support for the NSB fell again.
Government policy
An important difference between the Great Depression in the Netherlands and the situation in most other affected countries was the role of the government. Until the late 1930s the Dutch government, headed from 1933 to 1939 by the conservative statesman Colijn, could be described as non-interventionist and strongly internationalist. Its economic policy focussed mainly on keeping a balanced budget for government spending and income. While this government policy was typical for contemporary European and American governments, it was applied especially strictly in the Netherlands until the late stages of the depression.In the first years of the depression government policy limited itself to supporting the most heavily affected sectors of the economy. In 1931 a corn law was issued (Dutch: Tarwewet), which forced importers of foreign corn to add a quantity of more expensive Dutch corn before sale, to promote the troubled Dutch agriculture. Starting in 1932 a series of ‘crisis laws’ was issued to further subsidise the agricultural and shipping sectors, and to enable a measure of government control on import, export and capital flows. From 1934 onwards the Dutch government also experimented with a Labour Fund (Dutch: Werkfonds) to provide subsidised workplaces for the unemployed, often on large scale public works (comparable with the New Deal
New Deal
The New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...
in the United States). The scale of these government interventions was however too small to really change the situation.
While government intervention on the economy was very limited, the Dutch government did lower its spending (including income support to the poor and unemployed) and raised taxes to keep its budget
Government budget
A government budget is a legal document that is often passed by the legislature, and approved by the chief executive-or president. For example, only certain types of revenue may be imposed and collected...
balanced. The effect of this was that while poverty increased, government support to the poor decreased. Such a government policy is heavily criticised by the Keynesian school of economics, which at that time was still in its infancy. Keynesian economics stresses that governments should play an active role in promoting public and private consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
during an economic depression, so a balanced government budget should only be aimed at on the long run.
The Dutch government was also very reluctant to intervene in its trade policy. While most industrialised countries strongly increased their trade restriction
Trade restriction
A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, harmful or...
s from the early stages of the Great Depression onwards, the Dutch government still hoped for international cooperation to solve the economic crisis. Only after the failed 1933 World Economic Conference, when it became clear that countries had to solve their economic problems by themselves, did the Netherlands increase its trade barriers to a more significant level. But as described earlier the Netherlands was still unwilling to drop the Gold Standard, and instead joined an agreement between the last European countries to maintain the Gold standard. This subjected the Dutch economy to fierce foreign competition, forcing Dutch firms to strongly cut their costs in order to survive this situation. In the process wages and employment were cut, and the depression deepened. While the economic situation gradually improved in most industrialised countries around 1933-1934, the Great Depression was still getting worse in the Netherlands.
End of the Great Depression? (1936–1940)
As in most affected countries the end of the Great Depression in the Netherlands was a gradual process. But in the Netherlands this process didn’t start before 1936, when the country abandoned the Gold StandardGold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
.
Fall of the Gold Standard
By 1933 only a few European states still remained with the Gold Standard, while among others the United Kingdom and the United States had abandoned it. By cooperating in international negotiation as a ‘gold bloc’ and lowering trade restrictionTrade restriction
A trade restriction is an artificial restriction on the trade of goods between two countries. It is the result of protectionism. However, the term is not uncontroversial since what one part may see as a trade restriction another may see as a way to protect consumers from inferior, harmful or...
s among themselves these states tried to survive harsh foreign competition without accepting currency devaluation. Internal trade didn’t solve their problems however, and by 1935 only France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
and the Netherlands remained in this gold bloc. When France finally decided to accept devaluation
Devaluation
Devaluation is a reduction in the value of a currency with respect to those goods, services or other monetary units with which that currency can be exchanged....
in 1936 the Netherlands had no choice but to follow. While the Netherlands had been so reluctant to drop the Gold Standard, it quickly brought an economic boost after years of decline. In 1936 the Dutch stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
started climbing again, trade slowly recovered and unemployment stopped growing. Finally the country could now profit from the ongoing economic recovery that had been taking place for many of its trading partners.
Preamble to World War II
In 1937 the short period of economic recovery in the Netherlands stagnated again when the United States suffered its Recession of 1937Recession of 1937
The Recession of 1937–1938 was a temporary reversal of the pre-war 1933 to 1941 economic recovery from the Great Depression in the United States.-Background:...
. Another reason for stagnation were the rising political tensions caused by Germany’s increasingly aggressive behaviour, causing uncertainty and the withdrawal of capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
from European economies. At the same time the effects of the depression became less visible as European states started to rearm themselves in the preamble of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. The Netherlands started its rearmament relatively late and imported much of its weaponry, but by 1938 the artificial economic recovery caused by pre-war preparations also had its effects on the Netherlands. By 1939 large numbers of formerly unemployed people had been drafted
Conscription
Conscription is the compulsory enlistment of people in some sort of national service, most often military service. Conscription dates back to antiquity and continues in some countries to the present day under various names...
into the army, while rising defence spendings (the budget tripled between 1936 and 1939) artificially revived several sectors of the economy. Just before World War II an event took place which could have been very influential, had it happened earlier. The old conservative statesman Colijn lost the government to the De Geer-cabinet
Dirk Jan de Geer
Jonkheer Dirk Jan de Geer was a Dutch nobleman, lawyer, conservative statesman and prime minister of the Netherlands . He was disgraced for advocating a peace settlement between the Kingdom and Nazi Germany in 1940.Born in Groningen, he was a descendant of the de Geer family painted by Rembrandt...
, which included for the first time in history two members of the socialist party (SDAP). The new cabinet proposed an ambitious strategy to invest large sums of money in public works to finally end the depression. But before this new policy could fully be implemented the Netherlands was dragged into World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. On May 10, 1940 Germany invaded the Netherlands, and the Dutch economy transformed into a war economy
War economy
War economy is the term used to describe the contingencies undertaken by the modern state to mobilise its economy for war production. Philippe Le Billon describes a war economy as a "system of producing, mobilising and allocating resources to sustain the violence".Many states increase the degree of...
.