World History Chapter 15 Section 2 A Global Depression

A Global Depression By the late 20’s, European nations were rebuilding war-torn economies. They were aided by loans from the more prosperous U.S. In the U.S., Americans seemed confident that the country, unhurt by WWI, would continue on the road to even greater economic prosperity. One sign of this was the booming stock market. Yet the American economy had serious weaknesses that were soon to bring about the most severe economic downturn the world had yet known.

Europe After the War A. WWI left nearly every European country bankrupt-Only the U.S. & Japan came out in better financial shape Neither US nor Japan had fought on their own territory. Both countries had expanded their trade during the war. Europe’s domination in world affairs declined because of the huge slaughter of the war. The long brutal fight had drained the Europe’s resources.

B. New Democracies Are Unstable By 1918, most countries had rid themselves of absolute rulers. Most had democracies. Many countries had little experience with democracy & had many political parties. Nearly impossible for countries to elect someone, which created a coalition gov’t (or temporary alliance). Frequent changes made it impossible to develop strong leadership. Some citizens decided eventually that democracy was too slow and preferred a totalitarian gov’t that would get things done.

C. Weimar Republic is Weak Germany’s new democratic gov’t set up in 1919 Not a strong support for a democratic gov’t Germany lacked a strong democratic tradition Postwar Germany had several major political parties & many minor ones including extremists—the Communists and Nazis Suffering from the inflation and then the Great Depression, millions of Germans blamed the Weimar government for the country’s defeat & postwar humiliation from the Versailles Peace Treaty

D. Inflation Causes Crisis in Germany 1. To pay WWI reparations, Germans printed money. 2. In 1918, a loaf of bread cost 1 mark, by 1922 160 marks, and by 1923 200 billion marks! 3. Made Germans question their democratic gov’t.

E. Attempts at German Economic Stability 1. Dawes Plan-$200 million loan from U.S. banks to stabilize the German currency and strengthen it’s economy 2. Soon Germany began to recover

F. Efforts at Lasting Peace 1. After their economy started recovering, German officials met with Belgium, Italy, & England and promised to not go to war with them again Recognized existing borders of France and Belgium Germany was accepted into the League of Nations.

2. In 1928, the Kellogg-Briand Peace Pact was signed by nearly every country in the world (including the Soviet Union) pledging to “renounce war as an instrument of national policy.” 3. No way to enforce the pact!

II. The Great Depression U.S. Economy has serious problems 3 weaknesses Uneven distribution of wealth Overproduction by business & agriculture Lessening demand for consumer goods

B. Overpriced Stock Market Crashes/Depression begins 1. Some middle class families began buying stock on margin (borrowing money to buy stock); only worked if stock prices rose 2. Sept. 1929, stockbrokers started selling overpriced stocks to make profits 3. Tuesday, October 24, 1929-Stocks had been declining for weeks and those on margin were losing money. People panicked and rushed to sell their stocks at the same time. Prices fell-- “Black Tuesday;” start of the Great Depression

4. By 1932 factory production had slowed down to half of 1929 levels 4. By 1932 factory production had slowed down to half of 1929 levels. Thousands of businesses failed. 5. About 9 million Americans lost their savings accounts as banks failed 6. By 1933, ¼ of all working Americans had no jobs

C. A Global Depression 1. U.S. Depression affected most of the world. 2. U.S. demanded repayment of loans, especially to Germany and Allies and put high tariffs on foreign goods. Other countries retaliated with tariffs of their own 3. World trade dropped by 65% 4. In Asia, crop failures led to widespread starvation; as many as 3 million workers lost their jobs. 5. Latin America also felt the effects; no more demand for commodities (such as sugar, beef, copper & tin)

III. The World Responds to the Crisis Britain Takes Steps to Improve Its Economy Elected a multi-party coalition called the National Government Passed high tariffs, increased taxes, & regulated currency Slow but steady recovery No political extremes

B. France Responds to Economic Crisis 1. Was more self-sufficient (so cushioned against reliance on trade) 2. Five coalition gov’ts were formed and failed 3. 1936, moderates, Socialists, and Communists formed a coalition (called the Popular Front) 4. P.F. increased pay, holidays with pay, and enforced a 40 hour week 5. France preserved a democratic gov’t.

C. Scandinavian Governments Find Solutions 1. Scandinavian countries of Sweden, Denmark, and Norway sponsored massive public works projects, raised pensions for elderly, and increased other welfare benefits 2. To pay for these projects, gov’ts increasingly taxed all citizens, building their recovery programs on existing traditions of cooperative community action (democratic socialism) 3. Democracy remained intact

D. Recovery in the U.S. 1. Franklin D. Roosevelt was elected in 1932 with a plan to fix the U.S. economy called the New Deal 2. Started new public works programs, welfare and relief programs, regulated banks and stock market. Unemployment stayed high, however. 3. Democracy stayed intact