Great Depression

Great Depression Background and causes

The war is over • Europe is in ruins • Countries are nearly bankrupt • There is a great deal of uncertainty • The US and Japan are doing well • Neither had been a wartime battlefield • Their influence rose after WWI

Unstable Democracy • New Democracies in Europe • Russia (provisional government) • Germany (Weimar Republic) • Problems lead to instability • No democratic tradition in some countries • France and Italy had many political parties

Democracy in Germany • Weimar Republic • Created in 1919 • 1st democracy in Germany • Major problem • Many Germans were angry with the Weimar for signing the Treaty of Versailles

Economic Crisis • Background • During the war, Germany printed more money to pay the costs of the war reparations. • Inflation • Definition: when the value of a currency drops and prices go up • Suddenly, German marks became worthless

Attempts at Economic Stability • Dawes Plan • Began in 1924 • $200 million in loans from the US to Germany • Designed to stabilize the currency and strengthen the economy • By 1929, Germany had recovered

Efforts at a Lasting Peace • Germany 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 gangsters • Big Band music, dance clubs • Athletes become major celebrities • ‘A Return to Normalcy’ • The economy seemed strong • War was a distant memory

Flaws in the US Economy • Distribution of income • A wealthy elite kept most of the profits • Overproduction • Too much production = lower prices • Lower prices = less profit • Unpaid debts • Many farmers could not sell their crops • As a result, banks could not collect debts

The Rise of Totalitarianism

Desperate Times... • Global Economic Depression • Rising unemployment & falling production • Growing inflation destroyed savings • Failure of moderate governments • Many democratic governments were unable to deal with the crisis • Russia (provisional government) • Germany (Weimar Republic)

…desperate measures • Radical solutions • Many stocks became worthless • Some of the world’s wealthiest people saw their fortunes disappear • Strong leadership • 9 million people lost their savings • Many farmers lost their land

The Depression Begins • Unemployment • Factory production dropped by 50% • Less production meant fewer jobs • By 1933, 25% of Americans and Canadians had no job • The Vicious Cycle • Less money available = fewer purchases • Fewer purchases = less money available

Tariffs Affect Global Trade • Tariffs • Definition: fees charged on goods produced in other countries • The US tried to protect its own industries by making imports more expensive • Global Trade drops • Other countries increased their tariffs • Global trade declined by 65%

A Global Depression • Europe • Austria’s largest bank failed • Latin America • Many countries could not sell their products • Asia • Crop failures led to famine

Great Depression