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A Global Depression
Europe after the War
• Every major European country nearly
bankrupt
• United States & Japan in better shape then
before the war
• Europe’s domination in world affairs had
declined
New Democracies are Unstable
• Last absolute rulers are overthrown
• New democracies had little experience with
representative government
• Dozens of political parties form
– Impossible for one party to win enough support to govern
effectively
• Coalition government: temporary alliance of several
parties
– Seldom lasted long
– Made it hard for strong leadership to form or move toward
long term goals
– Major problem during times of crisis
Problems in Germany
• Weimer Republic: Germany’s new democratic
gov.
• Serious weakness
– Lacked strong democratic tradition
– Several major political parties and many minor
ones
– German people blamed Republic of country’s
defeat & post-war humiliation…they signed the
Treaty of Versailles
• Germany faced
serious economic
problems
– Did not increase
wartime taxes to pay
for war, instead printed
more money
– Had to pay reparations
to Allies, so they
printed more money
– Severe inflation set in
– Needed more and
more money to buy
basic goods
• The Dawes Plan
– Provided a $200 million loan from American banks
to stabilize German currency & strengthen its
economy
– Set a more realistic schedule for Germany’s
reparations payments
– It helped slow inflation & Germany began to
recover
Roaring 20s
• An age of dramatic social and
political change
• More Americans lived in cities
than on farms
• Consumer society
– American consumers soon
began buying massproduced goods
• Ford’s Model T
automobile
• Electric appliances:
vacuum cleaner,
refrigerator, toaster
• Movies
• Radios
The “New Woman”
Flappers
Allowed to vote: 19th
amendment
Women in the workforce
Jazz age
Prohibition: 18th amendment
Led to bootleggers,
speakeasies, organized crime
figures
The Great Depression
• Weakness in U.S. economy caused serious
problems
– Uneven distribution of wealth
– Overproduction by business and agriculture
– Lessening demand for consumer goods
The Stock Market Crashes
• Wall Street was the financial capital of the
world
• The booming U.S. economy showed in soaring
stock prices
• Middle income people began buying stocks on
margin
• Worked well as long as prices rose, if they fell
investors had no money to pay of loan
• Stock Market Crash on Oct. 29 1929 in New York
started a chain reaction that sent the world into
the Great Depression
• Prices unnaturally high, people started selling off
stocks
• Lowering of stock prices caused a panic and
people wanted to sell
• U.S. investors withdrew even more funds from
Germany and other European markets
• People who lost all their money in the stock
market stopped spending
• Banks and investors started to recall loans which
people could not pay
A global depression
• Investors withdrew their money from Europe
• Congress placed high tariffs on imported
goods trying to force Americans to buy
American goods
• Countries who depended on exporting goods
to the U.S. suffered
• World trade dropped
• Unemployment rates soared
• The depression challenged democratic
political systems in Europe & the U.S.
• Britain formed a coalition National
Government that preserves democracy
• In France, the depression contributes to
political instability, but they were better off
then other countries because they were
heavily agricultural then relying on foreign
trade
• In Scandinavia, socialist governments build
successful recovery programs based on
cooperative community action
• Roosevelt in the United States creates reform
programs
U.S. government
• President Herbert Hoover had the
distinction of stepping into the
White House then less than seven
months, the worst depression in
America began
• The Depression was not Hoover’s
fault, but as the country slipped
deeper and deeper into the
depression he would receive great
blame
• Hoover believed that gov. aid
would stifle initiative and create
dependency where individual
effort was needed. He failed to
grasp the scope of the depression
1932 Electoral
College Votes
Recovery in
the United
States
• Franklin D. Roosevelt elected President
promising “a new deal for the American
people”
• He acted swiftly to try and stabilize the
economy and provide jobs and relief to those
suffering by implementing a massive gov.
spending program
• He pursued a policy of active government
intervention in the economy known as the New
Deal, which included
– Ending prohibition
– Urged Americans to put their savings back
into the banks
– Increased public works
• Works Progress Admin. To provide jobs
to the unemployed
– Welfare System
– Social Security
– Insurance and federal agricultural subsidies
• Did not end Depression
• U.S. does not fully recover until WWII
• Although the New Deal improved economic
conditions, full recovery did not occur until
1942 after the United States entered WWII.
• At that time, production of war materials led
to almost full employment for Americans