A worldwide depression 31.2 Notes A worldwide depression

Postwar Europe Late 1920s European nations were rebuilding economies, helped by loans from US US and Japan only nations to come out of war in better financial shape than before American economy seemed strong but serious weaknesses would bring about most severe economic depression ever

Unstable New Democracies The war’s end saw many new democracies-last European absolute rulers were overthrown. Citizens of new democracies had little experience with representative government-large number of political parties made effective government difficult It was hard for one party to win enough support-a coalition government, or temporary alliance of several parties, was formed when no single party won a majority The coalitions didn’t last long because parties couldn’t agree, frequent changes in government Voters were then willing to sacrifice democratic gov’t for strong, authoritarian leadership

The Weimar Republic 1919 Germany’s new democratic gov’t was set up, known as the Weimar Republic Several weaknesses from start 1: Germany lacked strong democratic tradition 2: too many political parties 3: Germans blamed Weimar Rep for country’s defeat and humiliation

Inflation Causes Crisis in Germany Germany didn’t increase wartime taxes, but instead printed money After war this money lost value, printed more money, then inflation The mark, Germany’s currency, fell sharply These economic woes led many Germans to question value of new democratic gov’t

Attempts at Economic Stability American banker Charles Dawes created the Dawes Plan to provide $200 million loan to stabilize German currency, strengthen economy, more realistic reparations payments Put in to effect in 1924, by 1929 German factories were back to pre WWI levels

Financial Collapse Late 1920s weaknesses of US economy began to show: overproduction by business and agriculture uneven distribution of wealth Americans were buying less Store owners cut back orders from factories, which in turn reduced production and laid off workers, creating a downward spiral Farmers couldn’t pay off bank loans, forced some banks to close, etc.

The Stock Market Crashes 1929 NYC’s Wall Street was financial capital of the world- optimism about economy led to soaring price of stocks Middle class ppl began buying stocks on margin-paid a small percentage of a stock’s price as a down payment, borrowed the rest from a stockbroker Sept 1929: in a panic that stock prices were unnaturally high, ppl began selling stocks Black Tuesday: Oct 29th, 1929: 16 million stocks were sold, market collapsed

The Great Depression This business slump came to be called the Great Depression=severe worldwide economic depression from 1929-1939 By 1932 factory production had been cut in half, 1000s of businesses failed, 9 million ppl lost savings 1933: ¼ of all American workers had no jobs

A Global Depression American bankers demanded repayment of overseas loans, withdrew money from Europe Congress placed high tariffs on imported goods which backfired bc other nations enacted tariffs too, so world trade dropped by 65% Germany and Austria hit hardest bc of dependence on US loans, investments

The World Confronts the Crisis Great Britain, France, and the Scandinavian Countries all able to keep democracies strong Passed high protective tariffs, increased taxes, regulated currency=slow but steady recovery Also sponsored massive public works projects that kept ppl employed and producing, raised pensions for elderly, increased unemployment insurance, subsidies for housing, welfare benefits

Recovery in the US 1932 first presidential elections after GB, FDR elected, began New Deal: program of gov’t reform Large public works projects, new gov’t agencies gave financial help, public money spent on welfare, relief programs, regulations were created to help reform banking system, stock market New Deal eventually fixed American economy, FDR’s leadership preserved democracy