Great Depression

Background and causes

The war is overEurope is in ruins

Countries are nearly bankruptThere is a great deal of uncertainty

The US and Japan are doing wellNeither had been a wartime battlefieldTheir influence rose after WWI

Unstable DemocracyNew Democracies in Europe

Russia (provisional government)Germany (Weimar Republic)

Problems lead to instabilityNo democratic tradition in some countriesFrance and Italy had many political parties

Democracy in GermanyWeimar Republic

Created in 19191st democracy in Germany

Major problemMany Germans were angry with the Weimar for signing the Treaty of Versailles

Economic CrisisBackground

During the war, Germany printed more money to pay the costs of the war reparations.

InflationDefinition: when the value of a currency drops and prices go upSuddenly, German marks became worthless

Attempts at Economic StabilityDawes Plan

Began in 1924$200 million in loans from

the US to GermanyDesigned to stabilize the currency and strengthen the economyBy 1929, Germany had recovered

Efforts at a Lasting PeaceGermany in the League of Nations (1925)

France and Germany agree never to fight each other again

The ‘Roaring 20s’Good times

Easy money: corruption scandals, shady business tycoons, and gangstersBig Band music, dance clubsAthletes become major celebrities

‘A Return to Normalcy’The economy seemed strongWar was a distant memory

Flaws in the US EconomyDistribution of income

A wealthy elite kept most of the profitsOverproduction

Too much production = lower pricesLower prices = less profit

Unpaid debtsMany farmers could not sell their cropsAs a result, banks could not collect debts

The Rise of Totalitarianism

Desperate Times...Global Economic Depression

Rising unemployment & falling productionGrowing inflation destroyed savings

Failure of moderate governmentsMany democratic governments were unable to deal with the crisis• Russia (provisional government)• Germany (Weimar Republic)

…desperate measuresRadical solutions

Many stocks became worthlessSome of the world’s wealthiest people saw their fortunes disappear

Strong leadership9 million people lost their savingsMany farmers lost their land

The Depression BeginsUnemployment

Factory production dropped by 50%Less production meant fewer jobsBy 1933, 25% of Americans and Canadians had no job

The Vicious CycleLess money available = fewer purchasesFewer purchases = less money available

Tariffs Affect Global TradeTariffs

Definition: fees charged on goods produced in other countriesThe US tried to protect its own industries by making imports more expensive

Global Trade dropsOther countries increased their tariffsGlobal trade declined by 65%

A Global DepressionEurope

Austria’s largest bank failed

Latin AmericaMany countries could not sell their products

AsiaCrop failures led to famine