A Global Depression

Chapter 15, Section 2

Europe After the War

• Europe was ravage by WWI• Every major European country was

bankrupt • Only the U.S.A. and Japan came out

in better financial shape then they went in– They both expanded trade during WWI

• Europe is no longer the dominate figure in world affairs

New Democracies Are Unstable

• From 1914-1918 the absolute rulers of Europe are overthrown

• Hohenzollerns – Germany, Hapsburgs – Austria-Hungary, Romanovs – Russia, Ottomans – Turkey

• Russia forms the first new government– Known as? They went quick to the communist

• Many political groups = problems for a new democracy

• Coalition Government – Alliance among many groups (extremely difficult to work)

Weimar Republic is Weak

• New German government (after the war)

• It was doomed from the start:– Germany had no history of being a

republic– To many political parties in Germany at

the time– Because the Weimar took over at the

end of WWI, people blamed them for the war and outcome

– They signed the Treaty of Versailles

Inflation Causes Crisis in Germany

• The economy in Germany collapses• The Germans did not increase taxes during the

war (Britain and France did) they just printed more money

• Think about classic market economies– Want for something = more $ – Too much of something = the item cost less

• Plus Germany had to pay the war debt– A loaf of bread in Germany:

• 1918 – less then a mark• 1922 – 160 marks• 1923 – 200 billion marks

Attempts at Economic Stability

• Germany did recover from the 1923 inflation due to an international committee.

• Headed by Charles Dawes (an American banker)

• The Dawes Plan provided a $200 million dollar loan to Germany and gave it a realistic timeline to buy back the war debt

• It did work and by 1929 Germany was back on its feet

Efforts at a Lasting Peace

• Germany and France tried to improve relations

• Italy, Belgium and Britain came to Switzerland as well

• They all signed a treaty that said France and Germany would never make war again (with each other)

• Germany accepted the boarders it had and enter the League of Nations

Efforts at a Lasting Peace

• In 1928 hopes grew from the “spirit of Locarno” (city in Swiss where Ger. Fra. treaty)

• The Kellogg-Briand peace pact was signed by almost every country in the world

• You cannot use war as a political tool– Explain

• Well that’s all good but who is going to enforce it?

Great Depression

• America had propped Europe up with massive investments if U.S.A. economy collapsed then the worlds economy would as well

• And this all happened in 1929• The house of cards tumbled to the

ground

A Flawed U.S. Economy

• The U.S. was prosperous but had three big weakness:– Uneven distribution of wealth– Overproduction– Less demand

• Production way up, Common person in U.S. poor, people don’t need all these products, factories scale back production, people are fired

A Flawed U.S. Economy

• Agricultural production was way up around the world

• Soon prices dropped and profits are nonexistent

• When factories and farmers could not pay back the loans they took from the banks this caused them to go under and close

The Stock Market Crashes

• If you do not have money to save you should not be buying stocks

• The U.S. economy was way up so people felt they should buy stocks (the prices were going up)

• Buying on the margin – Someone buys a stock for a % of the cost and borrowed the rest from a stockbroker

The Stock Market Crashes

• People believed that stock prices had gotten to high so they started selling off their stock

• Prices of stock start to fall and everyone with stock starts to sell, this creates the panic of October 24, 1929

• Everyone sold their stock and the financial center for the world The New York Stock Exchange collapsed

Stock Market Crash• Billions of dollars in “paper wealth” was gone

in a matter of days• The crash, unemployment soaring,

outstanding debts cannot be paid, wages down, production down

• The Great Depression is born• Many businesses went under, banks included• My people lost their savings when the banks

could not pay them• A quarter of all Americans had no jobs

A Global Depression

• America demands to be paid• High tariffs all around• World trade drops by 65%• Germany and Austria get it the worst• No country was left undamaged by

the Depression

The World Responds to the Crisis

• Britain takes steps to improve its economy– Heavily on trade economy– A new government was elected– Their actions worked and slowly turned the

economy around

• France responds to economic crisis– France did not take a big of a blow– 1 million workers lost their jobs– Leads to political instability– Moderates, Socialist and Communist form a

coalition to help workers rights

The World Responds to the Crisis

• Socialist governments find solutions– Demark, Sweden, and Norway all have

socialist governments that find the way– They create recovery programs–Massive public works

• Recovery in the United States– Franklin D Roosevelt creates the New Deal– Large public works to employ workers,

bailouts for farmers and businesses, lots of welfare

Trouble on the Horizon

• With all the economic and societal change it leaves the door open for people with an “idea of direction” to take over