Interwar Crises: Postwar Diplomacy and Economics

What problems were left after the peace conference at Versailles? What problems were the result of the war itself? What problems do you expect from the peace? List as many as you can. If you can see how to solve any of them, suggest solutions.

What is the attitude represented here?

Europe after the war: Problems Areas of Europe were devastated. European resources and treasuries were depleted. New democracies that emerged from the empires of the Central Powers were unstable. In time of crisis, weak government was especially problematic. Weimar government was blamed by German people for the result of the war since it signed the peace treaty. Suggested solutions:

Reparations: After being coerced to signing a large reparations bill, Germany found itself unable to pay as early as one year after the agreement was made in In response the French government sent troops to occupy the Ruhr, so that the French could collect reparations in kind by using the mines and factories in the region. The Germans responded to the occupation with passive resistance. They refused to work for the French. In order to relieve the economic burdens of the people the German government printed more money. This unworkable situation would lead the international community to look for a solution. Americans suggested a conference of experts to examine the reparations problem. Even France agreed to this. The conference would meet and come up with a solution in 1924.

Economic Situation: Germany had not increased taxes to pay for war. It had printed money. It continued to print money as needed to pay war debts. The result is hyperinflation in Germany. The solution was a plan put forth by an international committee – the Dawes Plan. It called for a $200 million loan from American banks to Germany and set a more reasonable reparations payment schedule. It went into effect in 1924 and Germany began to recover from the inflation. More American investment in Germany helped German factories recover to prewar levels of production by In effect, U.S. investors were loaning money to Germany to pay reparations to France and Britain who were paying back their war loans to the United States.

The Young Plan After it became apparent that Germany was not able to make its reparations payments, another plan was devised in 1929, which eased the burden somewhat by reducing payments and spreading them out over a longer period of time. The Young Plan—which set the total reparations at $26,350,000,000 to be paid over a period of 58 1/2 years—was adopted by the Allied Powers in 1930 to replace the Dawes Plan. Designed to substitute a definite settlement under which Germany would know the exact extent of German obligations and to reduce the payments appreciably, the Young Plan divided the annual payment, set at about $473 million, into two elements—an unconditional part (one third of the sum) and a postponable part (the remainder).

Efforts to keep the peace in the 1920s Important responsibility fell on the League of Nations. What were some of the problems with the League?

Did anyone think that the League would really work?

Additional treaties intended to prevent further conflict. Washington Naval Treaties ( ) – U.S., Britain, France & Japan agreed to respect each other’s Pacific possessions & guarantee China’s independence. There would be a ten year stoppage in the building of capital ships (more than 10,000 tons with guns larger than 8"). A ratio of USA:5, GB:5, Japan:3, France:1.75 and Italy:1.75 was to be maintained in the building of capital ships. Treaty of Rapallo (1922) – Signed by Germany and Soviet Union - They said they would not attack each other and trade links were opened. Both powers were no longed isolated Treaty of Locarno (1925) - France and Germany agreed never to go to war against each other again. Germany agreed to respect the borders of France and Belgium. “Spirit of Locarno”

Kellogg-Briand Pact: U.S. Secretary of State Frank Kellogg made this agreement with French Foreign Minister Aristide Briand. They pledged “to renounce war as an instrument of national policy.” Nearly every country in the world signed it. Do you see any potential problems with these treaties? How do you think people at the time felt?

The Great Depression Why was the American economy so important to the global economy? Problems in the U.S. economy despite postwar prosperity: uneven distribution of wealth, overproduction of goods – business and agriculture The role of the stock market: Optimism about American economy led many people, especially middle class, to invest in stocks by buying them on the margin, paying for a percentage of the price and borrowing the rest. This leads to disaster when stock prices fall. When some investors see stocks as overvalued and sell, it leads others to do the same. Prices fell quickly. The market collapsed. After the crash: Industrial production fell, unemployment rose, wages and prices fell. By 1932 factory production had been cut in half. By 1933, one fourth of Americans were unemployed.

Optimism in 1920s What signs did people have that the world was recovering from the War? International Relations: Economics:

Global Depression American investors pulled money out of Europe, calling in loans. A tariff on imported goods kept European goods out of the U.S. market. Other nations imposed tariffs and global trade dropped 65%. Germany and Austria were especially hard hit because of the American loans and investments. In 1931, Austria’s largest bank failed which set off a financial panic in central Europe. The Japanese economy suffered as crop failures led to famine and lower exports led to unemployment. Latin Americans were in a very vulnerable position since they were so dependent on trade in cash crops and foreign loans. Britain’s dependence on foreign trade caused problems.

Global responses to the Depression Britain passed high tariffs, increased taxes and lowered interest rates. This led to a slow recovery. France was more self-sufficient and did not suffer as much. Still unemployment was a problem. The government passed reforms to help the workers. Sweden’s socialist government sponsored huge public works projects to keep people working. Scandinavian countries increased government benefits for people and raised taxes on all to pay for them. The U.S. efforts to fight the depression fall under the umbrella of FDR’s New Deal program, which included public works, relief payments, and regulation of the economy. Recovery was slow and it was really World War II that ended the depression in the U.S.

What do you anticipate would be the world situation during the 1930s? Who is doing well? What type of governments do you think would be most successful during the 1930s?