The Global Depression Chapter 15, Section 2

Europe After the War Major European countries nearly bankrupt Only U.S. and Japan in better financial shape Neither had been a wartime battlefield War drained the continent’s resources

New Democracies Are Unstable Europe’s last absolute rulers overthrown First time European’s use democracy Little experience in representative government Dozens of political groups 40 changes in governments 1919-1938 Voters sacrifice democracy

Weimar Republic Weak 1919, democratic government Germany lacked strong democratic tradition Several major political parties German’s blamed Weimar Government for defeat and humiliation

Inflation Causes Crisis in Germany Did not increase wartime taxes Printed money to pay war debt Money lost value Severe inflation set in Loaf of bread < 1 Mk 1918, in 1923 200 billion Mk

Attempts at Economic Stability Dawes Plan, $200 million to Germany Stabilized German currency Strengthened economy Realistic schedule for reparations payments 1929, German factories producing at prewar level

Efforts at a Lasting Peace Gustav Stresemann tried to improve relations w/France France/Germany treaty promising never to make war again Germany admitted to League of Nations Kellogg-Briand pact, 1928- almost all countries signed Renounce war as a national policy League had no armed forces U.S. refusal weakened League

The Great Depression A Flawed U.S. Economy Uneven distribution of wealth Richest 5% received 33% of all person 60% earned less than $2,000 most families unable to buy produced goods stores cut back orders Overproduction in business factories reduce production laid off workers fear sets in, less buying, more lost jobs

The Stock Market Crashes Middle income people buy stock on “margin” Paid small percentage of the stocks price as a down payment Borrowed the rest from a stockbroker October 24, panic selling October 29, 16 million stocks sold, market collapses

The Stock Market Crashes Billions of dollars “paper wealth” vanish 1932, factory production cut in half Businesses fail and more banks close 1933, 25% of all Americans with no jobs

The Global Depression Bankers demand repayment of overseas loans Withdraw money from Europe Congress places high tariffs on imports Other nations impose their own high tariff World trade drops 65% Germany and Austria hard hit 1931, Austria’s largest bank fails

The World Responds to the Crisis Britain Takes Steps to Improve Its Economy Multi-party coalition “National Government” High protective tariffs, increased taxes, regulated the currency Lowered interest rates, encourages industrial growth 1937, unemployment cut in half Preserved democracy

France Responds to Economic Crisis Had a self-sufficient economy Somewhat cushioned against the Depression But, 1 million French unemployed 5 coalition governments fail Reforms for workers Pay increases, holidays w/pay, 40-hour work week

Socialist Governments Find Solutions Denmark, Sweden Norway Built recovery programs on existing cooperative communities Public works projects Improved social benefits

Recovery in the United States 1932, FDR elected president The “New Deal” Large public works projects Provided jobs Government agencies to help businesses and farms Regulations to reform stock market and banking system Preserved faith in democratic system