CHAPTER 28 Section 2:Postwar Prosperity Crumbles >What were the causes of the worldwide Great Depression that began in 1929? >What were the effects of the Great Depression? >What was the New Deal, and how was it a dramatic change for the gov’t of the U.S.? The Great Depression and the Rise of Totalitarianism

SECTION 2 Bell Ringer 19.2: What economic weaknesses led to the Great Depression? Postwar Prosperity Crumbles

SECTION 2 Postwar Prosperity Crumbles Economic Troubles Many nations never recovered from the economic effects of WWI. As the Roaring Twenties continued, the global economy became increasingly vulnerable.

SECTION 2 Postwar Prosperity Crumbles Farmers

SECTION 2 Postwar Prosperity Crumbles Protectionism Beginnings of a global economy Economic nationalism (protectionism) –Protect your own country’s industries by limiting trade with others –Tariffs on imported goods so consumers would buy domestic (American) But if Europeans couldn’t sell goods in the U.S. then they couldn’t pay off their debts... American bankers and businesses loaned money to Europeans to buy goods. This just put the Europeans FURTHER into debt.

SECTION 2 Postwar Prosperity Crumbles Speculation and Panic Market speculations (risky investments) Stock prices soar... Investors believed stock prices would continue to rise. Many bought stocks on margin – borrowing the money to buy stocks. If prices went up … great. But if prices went down? Or the broker called in your margin? And you didn’t have the money?

SECTION 2 Postwar Prosperity Crumbles Black Tuesday 29 October 1929 Investors panicked – fearing a drop in artificially high prices, investors rushed to sell their stocks. Sudden sell-off drove prices tumbling down.

SECTION 2 Postwar Prosperity Crumbles Black Tuesday Investor confidence fell … people rushed to banks demanding their money … banks demanded borrowers repay their loans … MAJOR FINANCIAL CRUNCH How is this similar to what happened in 2009?

SECTION 2 Postwar Prosperity Crumbles Broader speculative bubbles More household debt U.S. is now a debtor nation

SECTION 2 Postwar Prosperity Crumbles Why does Germany suffer greater unemployment than GB?

SECTION 2 Postwar Prosperity Crumbles How did the Great Depression affect Europe? Great Britain France Germany

SECTION 2 Postwar Prosperity Crumbles Asia suffered from the Depression as well, especially the Japanese.

SECTION 2 Postwar Prosperity Crumbles American Response Americans did not have the social programs that Europeans had to fall back on. Franklin D. Roosevelt created a program of relief and reform called the New Deal. –Granted money to each state for clothing, food & shelter –To created jobs, gov’t began a program of public works

SECTION 2 Postwar Prosperity Crumbles American Response (cont.) Reformed the economic system – placed banks and stock exchanges under stricter regulations. Social Security Act of 1935 – provided unemployment and old-age benefits Established a 40-hour work week and minimum wages Guaranteed workers the right to form unions

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SECTION 2 Postwar Prosperity Crumbles QUIZ TIME! Close your books!