1918-19 German leaders established a republican govt with a new constitution and no KaiserSuffered from instability and frequent changes of powerFaced a difficult political and economic situationMany Germans felt betrayed by the Versailles TreatyExtreme political parties remained popular throughout the 1920sFew outstanding leaders emerged President Hindenburg (1925-34) didnt fully support democracy

Political Parties in the ReichstagMay 1924Dec. 1924May 1928Sep. 1930July 1932Nov. 1932Mar. 1933Communist Party (KPD)624554778910081Social Democratic Party (SDP)100131153143133121120Catholic Centre Party (BVP)81887887979093Nationalist Party (DNVP)951037341375252Nazi Party (NSDAP)321412107230196288Other Parties 102112121122223523

1921: Commission set Germanys reparations at 132 billion marksFrance demanded strict enforcement 1922: Germany claimed to be unable to pay1923: French army occupied the industrial Ruhr Valley to collect reparations in kind

Germans were outragedGerman govt promoted passive resistanceWorkers went on strikeGovt paid their salariesGovt had to print more moneyLed to hyperinflationMoney became almost worthlessLed to rampant poverty

Ruhr occupation was extremely costly for both France and GermanyNovember 1923: Chancellor Gustav Stresemann introduced a new stable currency and resumed reparations1924s: international conference reduced Germanys reparations and reconfigured how and when they would be paidDawes Plan: promised large US loans to Germany and other European countriesHelped produce a period of stability and prosperity 1924 to 1929

Did not initially include major states like the US, Soviet Union and GermanyLeague Covenant required near consensus to take significant actionUnable to cope with severe political and economic crises of 1920s-1930s

Called to prevent another naval raceEstablished a fixed ratio for the number of ships of each Great PowersJapan and Italy felt deeply insulted by these limits15Britain15United States9Japan5France5Italy

Britain, France and Germany agreed to guarantee the western borders of GermanyGermany agree with Poland and Czechoslovakia to seek border changes only through negotiationSignified a new spirit of cooperation and optimism in international relations1926: Germany was admitted to the League of NationsBriand (France), Chamberlain (Britain), Stresemann (Germany)

Written by US Secretary of State Frank Kellogg and French Foreign Minister Aristide Briand63 nations pledged to renounce war as an instrument of national policySpecified no way to enforce this pledge

Banks had been making risky loans and keeping little cash on handEasy money policy led to wild stock market speculation and over-investment in industrial productionRising wealth inequality caused a lack of consumer demandUS stock market crash in 1929Nervous investors began to panic that stocks were overvalued and began to sell themMillions of others followed suit and stock prices plummeted

Investors and businessmen were unable to pay back loansCitizens 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 disappearLoans became almost impossible to getBusiness had to lay off millions of workers to cut expensesPresident Hoover raised taxes and tariffs, which only made matters worseA bank run in New York, 1930

US loans to German stopped abruptlyGermany now unable to pay reparationsCancelled in 1932Britain and France unable to repay loans to the USMany countries imposed high tariffs to protect domestic industry fall in international tradeFalling prices (deflation) caused many people to delay spendingA major drought in the US (Dust Bowl) caused extreme poverty among farmers in the Great Plains

By 1932 world trade fell by 60%Industrial production fell by 50%Unemployment by 193225% in Britain25% in the US40% in GermanyMany outbreaks of industrial violenceMillions made homelessMany have savings wiped outMalnutrition and hunger become widespreadMany lose faith in capitalism and democracy and turn to radical politics

Unemployment

Less industrialized so it didnt suffer as severelyRecession eventually caused major political instability from 1932-361936: Popular Front coalition of Communists, Socialists and Radicals won the electioncollective bargaining40 hour work week2 weeks of paid vacationminimum wagePolicies satisfied workers but failed to address unemployment and led to inflationLeon Blum, Popular Front PM

British industry had been severely hurt by WW1High unemployment and low wages throughout the 1920s1926 General Strike shut down almost the entire economy1927: govt banned strikes and union political activityLabour Party emerged in the 1920s as the defender of the working class and gradually replaced the Liberal PartyLabour Party lost power in 1931 to the Conservative PartyRamsay MacDonald, Labour Party PM

During a recession traditional economic theory recommended balanced budgets, austerity measures, and protective tariffsSuggested that economies will balance themselvesBritish 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

US had enjoyed rapid economic growth and major improvements in living standards in the 1920sLed to unrealistic optimism & too much debtGreat Depression caused severe unemployment and poverty1932: Franklin D. Roosevelt elected President and initiated the New DealHuge spending on public worksGave jobs to 3 million peopleEstablished unemployment insurance and Social Security systemUnemployment remained highPresident Franklin D. Roosevelt, 1933-45

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