Western Democracies After WWI Postwar Issues, Recovery, and Depression

A Dangerous Imbalance Three western democracies seem rather powerful, economically and militarily after the war, while the much of the rest of the world is distraught. This creates a very dangerous imbalance in the economic world. Central Powers like Germany and Austria-Hungary are forced to pay huge amounts to Great Britain, the U.S. and France

Economic Gap The industries of Britain and the U.S. were largely untouched in the war, while Germany and Austria’s were all but destroyed. This created a situation where the economies of the western democracies would thrive, while the Central Powers would fail miserably after already being war torn.

The Problems of Overproduction Overproduction: condition in which production of goods exceeds the demand for them The war had increased demand for raw materials from Latin America and Asia After the war, the demand for raw materials fell due to the war ending and the destruction of industrial factories.

Agricultural Surplus Improved technology led to higher farming outputs than ever before. Farmers produced so much that the supply was higher than the demand. This led to a surplus and caused prices of agricultural products to drop drastically. This would lead to many hardships for the farmers and suppliers of raw materials

The Scale Tips While things were decreasing for the farmer, the world of the industrial worker was improving in the west. Workers won higher wages However, this led to an increased price in manufactured goods.

Crash and Collapse Few people paid attention to the growing risk. In the United States, stock prices began to soar and people viewed the stock exchange as a guaranteed moneymaker. Margin Buying: buying stocks with money borrowed from the banks. Margin buying became more popular, but as the economy began to decline the banks began to call back their loans. This causes banks and businesses to go bankrupt. People begin to sell their stocks at an enormous rate. This is the cause of the Stock Market Crash