2.  1918-19 German leaders established a republican govt with a new constitution and no Kaiser  Suffered from instability and frequent changes of power  Faced a difficult political and economic situation  Many Germans felt betrayed by the Versailles Treaty  Extreme political parties remained popular throughout the 1920s  Few outstanding leaders emerged  President Hindenburg (1925-34) didn’t fully support democracy

3. Political Parties in the Reichstag May 1924 Dec. 1924 May 1928 Sep. 1930 July 1932 Nov. 1932 Mar. 1933 Communist Party (KPD) 624554778910081 Social Democratic Party (SDP) 100131153143133121120 Catholic Centre Party (BVP) 81887887979093 Nationalist Party (DNVP) 9510373413752 Nazi Party (NSDAP) 321412107230196288 Other Parties102112121122223523

5.  1921: Commission set Germany’s reparations at 132 billion marks  France demanded strict enforcement  1922: Germany claimed to be unable to pay  1923: French army occupied the industrial Ruhr Valley to collect reparations in kind

6.  Germans were outraged  German govt promoted passive resistance  Workers went on strike  Govt paid their salaries  Govt had to print more money  Led to hyperinflation  Money became almost worthless  Led to rampant poverty

7.  Ruhr occupation was extremely costly for both France and Germany  November 1923: Chancellor Gustav Stresemann introduced a new stable currency and resumed reparations  1924s: international conference reduced Germany’s reparations and reconfigured how and when they would be paid  Dawes Plan: promised large US loans to Germany and other European countries  Helped produce a period of stability and prosperity 1924 to 1929

8.  Did not initially include major states like the US, Soviet Union and Germany  League Covenant required near consensus to take significant action  Unable to cope with severe political and economic crises of 1920s- 1930s

9.  Called to prevent another naval race  Established a fixed ratio for the number of ships of each Great Powers  Japan and Italy felt deeply insulted by these limits 15Britain 15United States 9Japan 5France 5Italy

10.  Britain, France and Germany agreed to guarantee the western borders of Germany  Germany agree with Poland and Czechoslovakia to seek border changes only through negotiation  Signified a new spirit of cooperation and optimism in international relations  1926: Germany was admitted to the League of Nations Briand (France), Chamberlain (Britain), Stresemann (Germany)

11.  Written by US Secretary of State Frank Kellogg and French Foreign Minister Aristide Briand  63 nations pledged to “renounce war as an instrument of national policy”  Specified no way to enforce this pledge

12.  Banks had been making risky loans and keeping little cash on hand  “Easy money” policy led to wild stock market speculation and over-investment in industrial production  Rising wealth inequality caused a lack of consumer demand  US stock market crash in 1929  Nervous investors began to panic that stocks were overvalued and began to sell them  Millions of others followed suit and stock prices plummeted

13.  Investors and businessmen were unable to pay back loans  Citizens knew it and rushed to their banks to withdraw their deposits (“bank runs”)  Banks quickly ran out of money and declared bankruptcy (“bank failures”)  Millions saw their savings disappear  Loans became almost impossible to get  Business had to lay off millions of workers to cut expenses  President Hoover raised taxes and tariffs, which only made matters worse A bank run in New York, 1930

14.  US loans to German stopped abruptly  Germany now unable to pay reparations  Cancelled in 1932  Britain and France unable to repay loans to the US  Many countries imposed high tariffs to protect domestic industry  fall in international trade  Falling prices (deflation) caused many people to delay spending  A major drought in the US (Dust Bowl) caused extreme poverty among farmers in the Great Plains

15.  By 1932 world trade fell by 60%  Industrial production fell by 50%  Unemployment by 1932  25% in Britain  25% in the US  40% in Germany  Many outbreaks of industrial violence  Millions made homeless  Many have savings wiped out  Malnutrition and hunger become widespread  Many lose faith in capitalism and democracy and turn to radical politics

16. Unemployment

17.  Less industrialized so it didn’t suffer as severely  Recession eventually caused major political instability from 1932-36  1936: Popular Front coalition of Communists, Socialists and Radicals won the election  collective bargaining  40 hour work week  2 weeks of paid vacation  minimum wage  Policies satisfied workers but failed to address unemployment and led to inflation Leon Blum, Popular Front PM

18.  British industry had been severely hurt by WW1  High unemployment and low wages throughout the 1920s  1926 General Strike shut down almost the entire economy  1927: govt banned strikes and union political activity  Labour Party emerged in the 1920s as the defender of the working class and gradually replaced the Liberal Party  Labour Party lost power in 1931 to the Conservative Party Ramsay MacDonald, Labour Party PM

19.  During a recession traditional economic theory recommended balanced budgets, austerity measures, and protective tariffs  Suggested that economies will balance themselves  British economic John Maynard Keynes argued that the govt should stimulate demand by providing jobs and spending money  This will cause a short term deficit but will lead to a quick recovery

20.  US had enjoyed rapid economic growth and major improvements in living standards in the 1920s  Led to unrealistic optimism & too much debt  Great Depression caused severe unemployment and poverty  1932: Franklin D. Roosevelt elected President and initiated the New Deal  Huge spending on public works  Gave jobs to 3 million people  Established unemployment insurance and Social Security system  Unemployment remained high President Franklin D. Roosevelt, 1933-45