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A Worldwide Depression 15.2 Mrs. Stoffl

Setting the Stage Late 1920s European countries were rebuilding after the war U.S. + Japan only countries that came out better than before WWI

Postwar Europe WWI left most European countries bankrupt Human + economic suffering

Unstable New Democracies Democracies popped up in European countries after WWI BUT Ppl had little experience w/ representative gov’ts Kings/emperors ruled most of Europe for centuries France + Italy had parliaments before WWI but too many political parties ∴ impossible for one party to gain the support to rule effectively This could form a coalition government: Temporary alliance of parties when no single party has a majority would rarely last long b/c disagreement

Unstable New Democracies Frequent changes in gov’t = instability Needed strong, steady leadership to rebuild Some countries were willing to sacrifice coalition gov’t for authoritarian leaders in times of crisis

The Weimar Republic Set up in 1919, the Weimar Republic was Germany’s experiment w/ democracy Had weaknesses from the start Lacked strong democratic tradition Many political parties w/ diverse views Millions of ppl blamed the Weimar Republic gov’t (not wartime leaders) for defeat + humiliation of Treaty of Versailles

Inflation Causes Crisis in Germany Germany didn’t increase taxes during the war like Br + Fr did They simply printed more money to pay for the war Lost its value quickly after the war b/c decrease in demand for products Also faced heavy reparations ∴ printed more $ Value of German mark fell even more = severe inflation Loaf of bread: 1918 cost less than a mark 1922 cost 160 marks 1923 cost $200 BILLION MARKS?!?!?!?!? = Ppl questioned the strength of the Weimar Rep

Attempts at Economic Stability Dawes Plan put in place by American banker Charles Dawes to help Germany recover in 1924 $200 million loan to Germany 1929 Germany factories back to pre-war production rates

Efforts at a Lasting Peace “Spirit of Locarno” – 1925 Germany’s foreign minister Gustav Stresemann + France’s foreign minister Aristide Briand meet to improve relations Met in Locarno, Switzerland w/ ministers from Br, Italy + Belgium Signed a treaty that Fr + Gr would never again make war against each other Germany agreed to respect borders of Fr + Belgium Treaty was sent to the League of Nations for approval

Kellogg-Briand Pact 1928 – Frank Kellogg, U.S. Sec of State + France’s Aristide Briand wrote the Kellogg-Briand Pact: “to renounce war as an instrument of national policy” Almost every country in the world signed BUT League of Nations had no way to enforce this agreement

Financial Collapse In the 1920s the American economy supported the world’s economy… And there were several weaknesses

A Flawed U.S. Economy Uneven distribution of wealth + ppl buying less in late 20s Richest 5% were earning 1/3 of all personal income in % of American families made less than $2,000/yr ∴ they couldn’t afford to buy goods Overproduction by business B/c ppl unable to buy they had to reduce output + reduce # of employees = downward economic spiral Overproduction by agriculture Farmers producing much more due to scientific improvements New competition from farmers abroad = More food than ppl could consume = farmers defaulted on bank loans

The Stock Market Crashes Buying on Credit - Early 1920s consumerism Ppl putting small amount of money down then paying goods off slowly Low interest rates Buying on Margin Borrowed $ from stock broker to buy a stock w/ a small amount as a down payment Worked as long as the stock prices were rising

Sept, 1929 – prices hit an all time high then dropped Dropped again on Oct. 24, some shareholders dumped their stocks → this day is called Black Thursday. Then, 7 months into Hoover’s presidency the NYC Stock market crashed Oct. 29, 1929 – Black Tuesday 16.4 million shares sold at very low prices, millions couldn’t even find buyers By November, investors lost $30 billion October 29, 1929: Stock Market Crashed!

The Great Depression Begins The Banks Collapse: ● After the crash, many people panicked and withdrew $ from banks ● Many ppl couldn’t get their $ b/c the banks had invested their savings + the Fed cut supply

● Between 1929 and 1933 ● GNP fell from $104 billion to $59 billion ● 90,000 businesses went bankrupt ● Unemployment went from 3% to 25% Business Failures

A Global Depression American economic collapse shocked the world U.S. placed high tariffs (Hawley-Smoot Tariff) on foreign goods to raise $ but European countries retaliated w/ the same World trade dropped by 65% Unemployment soared  ¼ in U.S. unemployed

Effects Throughout the World Many countries depended on U.S. for loans especially Germany + Austria

Britain Takes Steps to Improve its Economy British voters elected a multiparty coalition: National Government to solve the emergency Passed high protective tariffs Raised taxes Regulated the currency Lowered interest rates to encourage industrial growth = slow but steady recovery By 1937  unemployment cut in half, production levels back to pre-Depression levels Able to preserve democracy + avoid extremists

France Responds to Economic Crisis Economically France was more self-sufficient + less dependent on foreign trade BUT Depression caused huge political instability 5 coalition gov’ts rose and fell in 1933 alone Nervous about the rise of socialism Fr formed the Popular Front: moderate, socialist, + communist coalition Passed reforms to help workers but unemployment still high BUT Fr did preserve democracy as well

Socialist Governments Find Solutions Democracies in Denmark, Sweden + Norway used socialism to built recovery programs Massive public works projects Welfare + housing subsidies increased Large taxes on citizens

Economies of Great Depression

Recovery in the U.S. Franklin D. Roosevelt’s New Deal Widespread relief programs run by the federal government to help put people back to work.