A Worldwide Depression After World War I, an economic depression in the United States spreads throughout the world and lasts for a decade. 1920s & 1930s
Historians disagree as to the causes of the Great Depression. Most scholars would include: MONETARY POLICY HIGH TARIFFS AND WAR DEBTS CAUSES OF THE GREAT DEPRESSION STOCK MARKET CRASH AND FINANCIAL PANIC UNEQUAL DISTRIBUTION OF WEALTH OVER PRODUCTION INDUSTRY AGRICULTURE 2
HIGH TARIFFS AND WAR DEBTS At the end of World War I, European nations owed over $10 billion ($115 billion in 2002 dollars) to their former ally, the United States. Their economies had been devastated by war and they had no way of paying the money back. The U.S. insisted their former allies pay the money. This forced the allies to demand Germany pay the reparations imposed on her as a result of the Treaty of Versailles. All of this later led to a financial crisis when Europe could not purchase goods from the U.S. This debt contributed to the Great Depression. 3
Unstable New Democracies Fall of kingdoms, empires creates new democracies in Europe People have little experience with representative government Some form coalition governments temporary, multi-party alliances Frequent changes in government create instability Postwar Europe
The Weimar Republic Democracy in Germany Weimar Republic Germany s democratic government formed in 1919 Government has serious weaknesses Inflation Causes Crisis in Germany Value of German currency falls dramatically Attempts at Economic Stability American bank loans help to revive German economy Efforts at a Lasting Peace Germany and France sign treaty pledging no more war Many nations sign a similar agreement, the Kellogg-Briand pact (Treaty) - No way to enforce!!!
Depression in Germany German resentment and humiliation - losing territory making war payments
The Great Depression: Post WWI Economic Problems - Germany made the first of the reparation payments in 1921 and claimed the next year that they could not afford to pay anymore.
France s Response France was going to use the German payments to rebuild their own economy. They sent troops into the Ruhr Valley to seize valuable mines and factories that belonged to Germany as payment.
Germany s Response The workers at these factories and mines went on strike to protest France s takeover. To help pay these workers wages, Germany began printing more money This backfired on the Germans causing inflation. Inflation is when money starts to lose its value and businesses raise their prices. The result is that it takes more money to buy things. Soon, German people had to have wheelbarrows full of money just to buy a loaf of bread. This German woman is using German paper money to keep her stove going. It was so worthless, the best use was for firewood!
Dawes Plan plan created in 1924 by the United States and other Western European nations to help Germany recover from its economic problems The plan would: 1. reduce the amount of money owed by Germany 2. set affordable payments 3. loaned Germany 200 million dollars This worked for a short time but the Dawes Plan set the world economy up for disaster. Charles Dawes: creator of the Dawes Plan and Vice-President of the United States under Calvin Coolidge
Financial Collapse A Flawed U.S. Economy Weaknesses in American economy cause serious problems Economy Boomed in the 1920s But. Wealth is distributed unevenly Most people are too poor to buy goods produced - start buying on credit, but can t buy anymore. Factory owners cut back on production, lay off workers Farmers produce more food than people can eat Many farmers cannot repay loans and lose their land Banks started to recall loans, people could not pay
Financial Collapse The Stock Market Crashes Stock prices soar Many people buy stocks on credit Investors begin selling stocks, which lowers prices On October 29, 1929, stock market collapses as prices fall very low Economic Downturn Great Depression long business & economic slump of 1930s Marked by bank failures, loss of savings, unemployment A Global Depression American economic problems create problems in other countries World trade falls sharply Nations raise tariffs wanted sales by local businesses Effects Throughout the World Germany and Austria suffer greatly, as do Asia and Latin America
The Great Depression spreads to Europe American investors pulled their money out of European banks. The European economy collapsed as well. Half of Germany s population was unemployed.
The World Confronts the Crisis Britain Takes Steps to Improve Its Economy British voters elect coalition (multiparty) government, avoids political extremes Government brings about slow, steady economic recovery Cut unemployment Preserves democracy by avoiding political extremes France Responds to Economic Crisis France has more self-sufficient economy Moderates and Socialists combined to form governments Preserves democracy in spite of economic troubles Unemployment remained high Socialist Governments Find Solutions (Sweden, Norway & Denmark) Public works programs help Scandinavian countries recover Taxed people w/ jobs to pay for people w/o jobs