1. 31:2 A Worldwide Depression

2. Postwar Europe Unstable New Democracies: – 1914-1918: last of absolute rulers overthrown – New Russian democracy devolves into Communist dictatorship – Newly democratic nations struggle with representative government – Some nations have many political parties

3. – Difficult for one party to gain enough political support to govern effectively – Coalition government: government controlled by temporary alliance of several political parties – Frequent changes make it difficult to develop leadership and reach long-term goals – Voters willing to sacrifice democracy for strong, authoritarian leadership

4. The Weimar Republic Weimar Republic: republic established in Germany following WWI; lasts 1919-1933 Weaknesses: (1) Germany lacks strong democratic tradition, (2) several major political parties, many minor ones, (3) millions of Germans blame Weimar government instead of military leaders for defeat and postwar humiliation caused by Versailles Treaty

5. Inflation Causes Crisis in Germany: – Unlike Britain & France, Germany greatly increased taxed during WWI – Germany prints more money to pay for war expenses; money loses its value – Germany prints more money to pay reparations to Allies – 1923: value of the German “mark” declines; massive inflation ensues

6. Attempts at Economic Stability: – Germany recovers with help from international committee led by American banker Charles Dawes – 1924: Dawes Plan provides $200 million loan from American banks to stabilize German economy – Plan also sets more realistic schedule for reparations payments – 1929: German factories back to prewar production

7. Efforts at a Lasting Peace: – 1925: Germany’s foreign minister Gustav Stresemann and France’s foreign minister Aristide Briand meet to try to improve relations in Locarno, Switzerland – Ministers sign treaty; agree to never make war against each other again – Germany also agrees to respect existing borders of France and Belgium – Germany admitted into League of Nations

8. – 1928: U.S. Secretary of State Frank Kellogg and France’s Briand arrange Kellogg-Briand peace pact – Almost every nation in the world, including the U.S.S.R., pledge to “renounce war as an instrument of national policy” – League of Nations has no armed forces; impossible to enforce treaty’s provisions – Refusal of U.S. to join League of Nations weakens it

9. Financial Collapse A Flawed U.S. Economy: – Uneven distribution of wealth; most Americans can’t afford to buy goods being produced – Store owners forced to cut back production, lay off workers – Technological advances increases agricultural yields; supply rises, prices drop

10. The Stock Market Crashes: – Many people buying stocks on margin: pay small percentage of stock’s price, borrow rest from stockbroker – September, 1929: some investors believe prices are unnaturally high; begin to sell stock – Others sell, panic ensues; mass selling of stocks causes downward slide of prices – Market collapses

11. The Great Depression Great Depression: severe economic slump that followed the collapse of the U.S. Stock Market in 1929 – Production cut in half – Up to 25% unemployment – Thousands of business close, banks fail – Savings lost, farmers lose land

12. A Global Depression: – American bankers demand repayment from overseas loans; Americans withdraw money from European interests – American demand for European goods drops – U.S. uses high tariffs to protect American interests – Other nations uses high tariffs; world trade drops 65%

13. Effects Throughout the World: – Germany, Austria hit hard due to war debts and dependence on American loans – Asia: farmers and urban workers suffer; value of exports falls by 50% – Latin America: demand for sugar, beef, copper, etc. drops; prices collapse

14. The World Confronts the Crisis Britain Takes Steps to Improve Its Economy: – Elects multiparty coalition (National Government) – Pass high tariffs, increase taxes, regulate currency, lower interest rates – Slow, steady recovery – 1937: unemployment cut in half; production returns to pre-depression levels – Avoids political extremes

15. France Responds to Economic Crisis: – Self-sufficient; largely agricultural, les dependent on foreign trade – 1935: 1 million unemployed – Political instability forces coalition in 1936 (Popular Front); pass worker reforms – Price increase offset wage gains – France also preserves democracy

16. Socialist Governments Find Solutions: – Socialist governments in Scandinavia combat economic crisis – Sweden: massive public works projects keep people employed, producing – Nations raise pensions for elderly, increase unemployment insurance, housing subsidies, welfare benefits – Governments raise taxes to pay for programs – Democracy remains intact

17. Recovery in the United States: – 1932: Franklin D. Roosevelt elected president – New Deal: economic reform program designed to solve the problems created by the Great Depression – Large public works projects provide jobs, financial help to businesses and farms, welfare & relief programs – Regulations to stock market and banking system