A Global Depression

Europe after the War Every major European country nearly bankrupt United States & Japan in better shape then before the war Europe’s domination in world affairs had declined

New Democracies are Unstable Last absolute rulers are overthrown New democracies had little experience with representative government Dozens of political parties form Impossible for one party to win enough support to govern effectively Coalition government: temporary alliance of several parties Seldom lasted long Made it hard for strong leadership to form or move toward long term goals Major problem during times of crisis

Problems in Germany Weimer Republic: Germany’s new democratic gov. Serious weakness Lacked strong democratic tradition Several major political parties and many minor ones German people blamed Republic of country’s defeat & post-war humiliation…they signed the Treaty of Versailles

Germany faced serious economic problems Did not increase wartime taxes to pay for war, instead printed more money Had to pay reparations to Allies, so they printed more money Severe inflation set in Needed more and more money to buy basic goods 1918 – a loaf of bread cost less than a mark By 1922 it cost more than 160 marks 1923 – some 200 billion marks By novemeber 1923, the American dollar was worth over 4 trillion German marks

The Dawes Plan Provided a $200 million loan from American banks to stabilize German currency & strengthen its economy Set a more realistic schedule for Germany’s reparations payments It helped slow inflation & Germany began to recover

Roaring 20s An age of dramatic social and political change More Americans lived in cities than on farms Consumer society American consumers soon began buying mass-produced goods Ford’s Model T automobile Electric appliances: vacuum cleaner, refrigerator, toaster Movies Radios The “New Woman” Flappers Allowed to vote: 19th amendment Women in the workforce Jazz age Prohibition: 18th amendment Led to bootleggers, speakeasies, organized crime figures

The Great Depression Weakness in U.S. economy caused serious problems Uneven distribution of wealth Overproduction by business and agriculture Lessening demand for consumer goods new wealth was not evenly distributed. The richest 5percent of the population received 33 percent of all personal income in 1929. Yet 60 percent of all American families earned less than $2,000 a year. Unable to sell all their goods, store owners eventually cut back their orders from factories. Factories in turn reduced production and laid off workers. A downward economic spiral began…Surplus or products drove prices down most families were too poor to buy the goods being produced.

The Stock Market Crashes Wall Street was the financial capital of the world The booming U.S. economy showed in soaring stock prices Middle income people began buying stocks on margin Worked well as long as prices rose, if they fell investors had no money to pay of loan This meant that they paid a small percentage of a stock’s price as a down payment and borrowed the rest from a stockbroker

Stock Market Crash on Oct Stock Market Crash on Oct. 29 1929 in New York started a chain reaction that sent the world into the Great Depression Prices unnaturally high, people started selling off stocks Lowering of stock prices caused a panic and people wanted to sell U.S. investors withdrew even more funds from Germany and other European markets People who lost all their money in the stock market stopped spending Banks and investors started to recall loans which people could not pay

A global depression Investors withdrew their money from Europe Congress placed high tariffs on imported goods trying to force Americans to buy American goods Countries who depended on exporting goods to the U.S. suffered World trade dropped Unemployment rates soared

The depression challenged democratic political systems in Europe & the U.S. Britain formed a coalition National Government that preserves democracy In France, the depression contributes to political instability, but they were better off then other countries because they were heavily agricultural then relying on foreign trade In Scandinavia, socialist governments build successful recovery programs based on cooperative community action Roosevelt in the United States creates reform programs

U.S. government President Herbert Hoover had the distinction of stepping into the White House then less than seven months, the worst depression in America began The Depression was not Hoover’s fault, but as the country slipped deeper and deeper into the depression he would receive great blame Hoover believed that gov. aid would stifle initiative and create dependency where individual effort was needed. He failed to grasp the scope of the depression

1932 Electoral College Votes

Recovery in the United States Franklin D. Roosevelt elected President promising “a new deal for the American people” He acted swiftly to try and stabilize the economy and provide jobs and relief to those suffering by implementing a massive gov. spending program He pursued a policy of active government intervention in the economy known as the New Deal, which included Ending prohibition Urged Americans to put their savings back into the banks Increased public works Works Progress Admin. To provide jobs to the unemployed Welfare System Social Security Insurance and federal agricultural subsidies Did not end Depression U.S. does not fully recover until WWII Recovery in the United States

Although the New Deal improved economic conditions, full recovery did not occur until 1942 after the United States entered WWII. At that time, production of war materials led to almost full employment for Americans