1. WorldWide Depression

2. Western Capitalism – a flawed system
It gave rise to individualistic materialism
A concept at odds with older values
Community and spirituality
Created great social inequalities
It is unstable
Cycles of expansion and recession
It generated anxiety for all social classes

3. 1930’s – Flaws of Capitalism exposed
World economic system seemed to unravel Rich lost paper fortunes almost overnight Banks closed People lost all their savings People worldwide stopped investing World trade dropped by 62% Businesses closed or contracted High unemployment – Germany 30% Beggars, soup kitchens, breadlines, shantytowns

4. worldwide depression began in the USA
1920s – USA economy is booming
1929 – US farms and factories producing too much
Uneven distribution of wealth
Many cannot afford to buy all these products
Europeans cannot afford to buy American products
Germany and Austria paying reparations
Britain & France expanding their own production
USA – Too much speculation in stock market
October 29, 1929 – US Stock Market crashes

5. A globalized economy Economic linkages globalize the Great Depression
Places that export one or two products hit hard
Rubber from Southeast Asia
West African cocoa
Agricultural products from Latin America
Raw materials from Latin America
Depression triggers political unrest in Latin America
Military takeovers
Military dictatorships last for decades

6. Questioning Capitalism
Leaders in capitalist countries question long held economic assumptions
Once thought markets self-corrected
Followed laws of supply and demand
Capitalists looked to other ideologies
Communist Soviet Union seemed OK
State-controlled economy growing
Very little unemployment

7. Democratic Socialism Some Europeans adopt “democratic socialism”
Through peaceful means and electoral politics.
Britain, France, and Scandinavia
Democratic socialism
Greater regulation of the economy
A more equal distribution of wealth

8. The United States in 1933 25% of the people were unemployed
25% of the people were underemployed

9. Psychological effect on Americans
Americans felt a sense of shame Americans doubted their exceptionalism Some doubted capitalism Some turned to fascism and communism

10. US President Franklin D. Roosevelt
The New Deal (1933–1945) An experimental combination of reforms ❶ Relieve suffering ❷ Restart the economic ❸ Prevent future depressions He sought to preserve capitalism Ending its abuses Regulating its excesses Softening its impact

11. John Maynard Keynes Roosevelt’s programs reflect “Keynesian economics”
John Maynard Keynes – British economist –
Governments should soften the impact
. . . of recessions and depressions
People cannot spend enough money
Government acts as “the spender of last resort.”
Governments run up deficits when times are hard
and pay them down when the economy improves
Keynes’s ideas became western orthodoxy

12. The New Deal, 1933-1945 Alters relationships within the United States
Government, business, citizens
Short run: creates jobs on public works
Long term reforms
Help the poor, the unemployed, the elderly
Support labor unions
Support farmers by paying them subsidies
Regulate and supervise the economy