Essential Question

• What caused the global depression?

• How did western democracies react to global depression?

Europe in 1919Europe in 1919

Post War Economics

• Britain & France owe huge war debts to the US

• Germany’s economy is crushed by reparation payments

Great Britain: 1926 General Strike

Great Britain: 1926 General Strike

Massive unemployment, low wages, severe worker unrest

Massive unemployment, low wages, severe worker unrest

France

• Economy recovers rapidly

• European economies return to peacetime manufacturing and trade

• People enjoy a raising standard of living

The United States Booms

• US emerges form the war as the world’s leading economic power

• US loans and investments help the global economy remain stable

Falling Demand and Overproduction in the US

• Overproduction: A condition in which the production of goods exceeds the demand for them

• As demand slows, factories cutback on production and people loose their jobs

Crash and Collapse

• The stock market:• the public invests in companies by purchasing

stocks; in return for this they expect a profit• b/c of booming 1920's economy, $ was plentiful,

so banks were quick to make loans to investors • investors only had to pay for 10% of the stock's

actual value at time of purchase– this was known as BUYING ON MARGIN, and

the balance was paid at a later date

• this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck

• all of this gave a false sense of security/confidence in the American market

• The Federal Reserve raised interest rates in 1928 and 1929

• Made people nervous about borrowing $

The Great Depression

• Fall 1929--nervousness about the economy cause many people to sell their stocks

• Stock prices crash

• People’s fortunes are wiped out

• 1931 Federal Reserve raised interest rates again--making matters worse

• Economic crisis in the US spreads to the rest of the world

The Great Depression [1929-1941]

The Great Depression [1929-1941]

Paris in 1930Paris in 1930

London in 1930London in 1930

Depression Spreads

• Problems spread around the world

• US stops making loans and demands repayment of existing loans

Reaction to Depression

• By 1931-- in Great Britain 1 in every 4 workers was unemployed

• France was hit hard. Political turmoil between leftist and socialist groups.

Reaction in the US

• Herbert Hoover believes the government should not intervene in private business

• 1932-Preseident Franklin D. Roosevelt creates the New Deal---a massive package of social and economic programs – Social Security – New Jobs – Public Works Projects

• The New Deal does not end the depression, but it eases suffering

• People loose faith in democratic gov’ts to solve problems

• Misery and hopelessness create a fertile ground for extremists who promised radical solutions

Decrease in World Trade: 1929-1932

Decrease in World Trade: 1929-1932

• In addition to problems at home the”three democracies” faced a difficult international situation

• Peace settlements caused friction

The Maginot Line

• France builds massive fortification along German border

• The line will not stop another German invasion (1940)

• France creates an alliance with the USSR• Strict enforcement of the Versailles treaty • British care less about the treaty---fear that

if Ger becomes too weak, Fr & USSR become too powerful

The Maginot Line

The Maginot Line

Locarno Pact: 1925Locarno Pact: 1925

Locarno Pact: 1925Locarno Pact: 1925

GustaveStresemann(Ger.)

GustaveStresemann(Ger.)Aristide

Briand(Fr.)

AristideBriand

(Fr.)

Austin Chamberlain (Br.)Austin Chamberlain (Br.)

Settled Germany’s disputed borders with France, Belgium, Czechoslovakia, Poland

Symbolize a new era of peace

Settled Germany’s disputed borders with France, Belgium, Czechoslovakia, Poland

Symbolize a new era of peace

Kellogg-Briand Pact: 1928Kellogg-Briand Pact: 1928

Sponsored by the US

15 nations committed to outlawing aggression and war for settling disputes.

Agree on disarmament

Problem no way of enforcement.

Sponsored by the US

15 nations committed to outlawing aggression and war for settling disputes.

Agree on disarmament

Problem no way of enforcement.

League of Nations

• 1926-Germany and USSR are admitted

• Kellogg-Briand pact outlaws war, but has no way of enforcing ban

• 1931-Japan invades Manchuria

• League can do nothing to stop it

• Ambitious leaders in Europe note the League’s weakness

League of Nations MembersLeague of Nations Members