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The Search for Peace and Political Stability Treaty of Versailles left a shaky truce! Trying to create international order. War debts and disrupted trade. Economic crash ruins all hope./ Germany and the Western Powers Reparations Payments France Vital necessity Hold Germany down indefinitely Finally reach goal of security Great Britain Second best market Maynard Keynes Economic Consequence of the Peace-1919 Created sympathy for Germany in English speaking countries/ Germany and the Western Powers French Alliances Russia hostile and communist England and U.S. unwilling to commit Eastern Europe 1921-mutual defense pact with Poland Little Entente-against Hungary Czechoslovakia Romania Yugoslavia Germany and the Western Powers Reparations and the Great Inflation Germany made first payment in 1921 Unable to pay second payment Inflation, assassination, hostility and arrogance of Weimar Republic Proposed moratorium Prime Minister Raymond Poincare-call bluff or see peace settlement dissolve. France’s Response January 1923 France and Belgium moved out on the Rhineland Occupied the Ruhr Industrial city **Most serious international crisis of the 1920s France would force Germany to accept the Treaty of Versailles Germany’s Response Ordered people to stop working passively resist occupation French Response: Cut off Rhineland and Ruhr Only enough food to prevent starvation Sent in 40,000 colonial troops “Black shame”-African soldiers savages, will brutalize women Racial panic intensified relations German support to its people In order to pay the passive workers Germany printed money (mark). RESULT: runaway INFLATION Prices rose German money lost all value Civilian Response to Inflation Germans felt betrayed **Hated and blamed Western government, their own government, big business, the Jews, the workers, and the communists for their misfortune. Adolf Hitler and Nazi Party capitalized on the feeling of discontent. Gustav Stresemann pg 875 1878-1929 Assumed leadership of German government Compromise Called off passive resistance in the Ruhr and agreed to pay reparations** Question: What to do with reparations? Hope in Foreign Affairs 1924-Dawes Plan Put forth by Charles G Dawes-American Banker Accepted by France, Germany and Great Britain Reparations linked to level of economic prosperity. Receive loans from the US to promote recovery Germany takes out large loans from the United States Germany pays reparations to France and Great Britain France and Britain repay debts to the United States Political Settlements Locarno, Switzerland Germany and France accepted their common border Britain and Italy would enter a war if one attacked the other Germany settled boundary disputes with Poland and Czechoslovakia-NO permanent borders Cautious Optimism “spirit of Locarno” 1926- Germany joined League of Nations Kellogg-Briand Pact- 1928 “renounce (war) as an instrument of international policy”-settle disputes peacefully German Stabilization 1923 Liberal democracy Elections held regularly Growing in support of Germans Hitler’s entrance-beer hall=prison Mein Kampf (My Struggle) Hitler’s National Socialist Party Anti-Semites, ultra-nationalists, ex-servicemen Economy stabilized Still divided French Stabilization Communists and Socialists battle for support of the workers. Rebuilt war-torn Northern region Inflation 10% of pre-war value Social Harmony in Great Britain Unemployment after WWI and its effect on government policy Rise of the Labour Party-decline of old liberal ideals of competitive capitalism, limited government control, and individual responsibility Labour Party replaced the Liberal Party as opposition to Conservatives Moved toward socialism Granted Ireland full autonomy in 1922 Except for Ulster Great Depression Social and political consequences Mass unemployment Failing farms Social welfare programs Shattered political stability of the mid-1920s Encouraged growth of extremists Democratic government faltered Authoritarian fascist parties gained power Spark of Great Depression October of 1929-Crash of Stock Market in US American stock boom was built on borrowed money- “On Margin” People started to sell all at once=financial panic Impact of the Financial Panic Investors and speculators were wiped out Started to by fewer goods Prices fell, production began to slow down, unemployment began to rise SPIRALING DECLINE in AMERICA International Financial Crisis New York bankers began recalling the short-term loans Gold reserves began to flow rapidly out of Europe Hard for European business people to borrow money Public begins to withdraw savings from banks Austria 1931 largest bank crashes Crisis of Production 1929-1933 World output falls 38% Each country tried to manage alone Going off gold standard Raising protective tariffs limiting international trade Relentless slide to the bottom International economy lacked leadership Poor national economic policy in almost every country Governments cut their budgets when they should have raised them and run large deficits “counter-cyclical policy”-Keynes Mass Unemployment Financial crisis led to cuts in production Workers lost their jobs Little money to buy goods 1932- 1 in 3 were jobless in Germany 1932- 33% unemployed in US Governments pumped money into economy to break cycle of decline Social Problems due to Unemployment Poverty Unemployment benefits and public aid to prevent starvation Other effects: Postpone marriages Birthrates fell sharply Increase in suicides and mental illness “Social Powder Keg” Herbert Hoover’s Response 1929-1933 Banks fell and unemployment soared1931 Industrial production fell 50% between 1929-1932 Roosevelt’s Response 1933-1945 “New Deal for the forgotten men” Reform capitalism in order to preserve it Rejected socialism and government ownership of industry-1933 HOWEVER: advocated forceful government intervention in economy and instituted social programs RESULT---Europe followed suit New Deal Acts Agricultural Adjustment Act (1933)Attempted to raise prices and farm income by limiting production Farmers repaid Roosevelt with overwhelming support in the next election National Labor Relations Act (1935)Helped unions by declaring collective bargaining to be the law of the land New Deal Programs The National Recovery Administration (NRA)-Attempted to fix prices and wages Most ambitious attempt to control and plan the economy Did not work and declared unconstitutional in 1935 The Works Progress Administration (1933)Built public works projects such as building, bridges, and highways 1/5 of the entire US labor population Checked social revolution Legacy of the New Deal Though achieving some social reform, it failed to pull the United States out of the depression: it took the Second World War to accomplish that. Scandinavian Response to the Depression Responded successfully Social Democracy built on cooperative community action Large-scale deficits to finance public works and maintain production and therefore employment Had to tax heavily Private and cooperative enterprise thrived, also democracy Orthodox Economic Theory in Britain Ramsey MacDonald’s Labour government and then the conservative governments followed by balancing the budget and controlling spending. Economy recovered and total production was up 20% in 1937 compared to 1929 Explaining British Improvement National market New industries-demand increased Automobiles and electrical appliances Low interest rates=housing boom The French Malaise Economy declined steadily until 1935 Governments remained unstable 1933 alone 5 formed and failed The Popular Front-1936 Formed for the national elections of May 1936 Alliance of Communist, Socialists, and Radicals formed in response to the growing strength of fascists at home and abroad. The Popular Front Won the election Launched a program of social reform Spanish Civil War Support for unions, paid vacations, 40-hour work week Political extremism growing Coalition collapsed in 1937 “An anxious and divided France drifted aimlessly once again, preoccupied by Hitler and German rearmament”
