Ismet Inonu was elected as the second President of the Republic following Ataturk's death. He was the President and the party chairman at the same time. He led Turkey during the most difficult years of both the world and Turkey.

He tried to overcome the difficulties stemming from the world economic crisis with a policy of statism during the period when he was the Prime Minister. He wanted to develop industry by means of the State Economic Enterprises (SEEs) and took important steps in this direction. Inonu's greatest success was in keeping Turkey out of the Second World War.

His policy in this regard was based on establishing various balances at the same time and insisting adamantly on neutrality. When the Soviet-German Agreement was signed on 23 August 1939, Inonu thought that this agreement could harm Turkey and signed agreements with France and Britain on 13 October 1939 and obtained economic aid. Later he signed a nonaggression pact with the Soviet Union on 25 March 1941.

In June 1941, a few days before Germany attacked the Soviet Union, Inonu signed a nonaggression pact with Germany. This policy of balances continued throughout the war. When the war was about to end, Turkey sided with the USA, Britain and the Soviet Union and declared war against Germany and Japan and signed the United Nations communiqu� dated 24 January 1945. Turkey, which was officially invited to the San Francisco Conference on 5 March 1945, was among the founding members of the United Nations.

Turkey did not enter the Second World War, but was negatively affected by the war. Throughout the war a large army was kept alert and ready, prices increased rapidly, many of the basic food items were rationed, many items could not be found or were sold on the black market.

Inonu who was a farsighted statesman and politician, not only sensed the winds of freedom and democracy which had started to blow throughout the Western World after the Second World War, but also could not remain as a bystander to the social reactions stemming from the problems of the war. In fact, he first mentioned the necessity of "liberalizing the regime" in 1945. Subsequently, he started talking about "the need for an opposition party". He met with democratic tolerance the birth of the Democrat Party from within the CHP, its flourishing in 1946 and its coming to power with the 1950 election.