WorldWide Depression 1929-1939

Western Capitalism – a flawed system It gave rise to individualistic materialism A concept at odds with older values Community and spirituality Created great social inequalities It is unstable Cycles of expansion and recession It generated anxiety for all social classes

1930’s – Flaws of Capitalism exposed World economic system seemed to unravel Rich lost paper fortunes almost overnight Banks closed People lost all their savings People worldwide stopped investing World trade dropped by 62% Businesses closed or contracted High unemployment – Germany 30% Beggars, soup kitchens, breadlines, shantytowns

worldwide depression began in the USA 1920s – USA economy is booming 1929 – US farms and factories producing too much Uneven distribution of wealth Many cannot afford to buy all these products Europeans cannot afford to buy American products Germany and Austria paying reparations Britain & France expanding their own production USA – Too much speculation in stock market October 29, 1929 – US Stock Market crashes

A globalized economy Economic linkages globalize the Great Depression Places that export one or two products hit hard Rubber from Southeast Asia West African cocoa Agricultural products from Latin America Raw materials from Latin America Depression triggers political unrest in Latin America Military takeovers Military dictatorships last for decades

Questioning Capitalism Leaders in capitalist countries question long held economic assumptions Once thought markets self-corrected Followed laws of supply and demand Capitalists looked to other ideologies Communist Soviet Union seemed OK State-controlled economy growing Very little unemployment

Democratic Socialism Some Europeans adopt “democratic socialism” Through peaceful means and electoral politics. Britain, France, and Scandinavia Democratic socialism Greater regulation of the economy A more equal distribution of wealth

The United States in 1933 25% of the people were unemployed 25% of the people were underemployed

Psychological effect on Americans Americans felt a sense of shame Americans doubted their exceptionalism Some doubted capitalism Some turned to fascism and communism

US President Franklin D. Roosevelt The New Deal (1933–1945) An experimental combination of reforms ❶ Relieve suffering ❷ Restart the economic ❸ Prevent future depressions He sought to preserve capitalism Ending its abuses Regulating its excesses Softening its impact

John Maynard Keynes Roosevelt’s programs reflect “Keynesian economics” John Maynard Keynes – British economist – 1883-1946 Governments should soften the impact . . . of recessions and depressions People cannot spend enough money Government acts as “the spender of last resort.” Governments run up deficits when times are hard and pay them down when the economy improves Keynes’s ideas became western orthodoxy

The New Deal, 1933-1945 Alters relationships within the United States Government, business, citizens Short run: creates jobs on public works Long term reforms Help the poor, the unemployed, the elderly Support labor unions Support farmers by paying them subsidies Regulate and supervise the economy