Terms/concepts you need to know:

• Economic terms/concepts– free market (capitalism)

vs. command economy– capitalism vs. socialism– (shares of) stock– corporation– speculation– stock market (ex. New

York Stock Exchange, NYSE)

– Banks– interest– inflation and deflation– recession and depression– tariff

• Political terms/concepts– republic– parliament– Treaty of Versailles– coalition government

CHAPTER 31 SECTION 2

• The world from 1919-1939– Political problems– Economic problems

CHAPTER 31 SECTION 2

• I. Political problems– A. The new European democracies (Ex.

Austria, Poland, Hungary, Czechoslovakia, Germany, etc.) formed after the war are weak• 1. Citizens have little experience with

representative government• 2. Large number of political parties (leads to

formation of coalition governments [what are these?])

• 3. Frequent changes in government [why would this be a problem?]

• 4. Slow recovery from cost and devastation of WWI

CHAPTER 31 SECTION 2• I. Political problems

(cont.)– B. The Weimar Republic

(Germany) [why is it called the Weimar Republic?]• 1. Problems:

– Many different political parties

– Blamed for defeat in WWI and signing Treaty of Versailles

– Economic weaknesses: inflation from printing money, high taxes, huge debts, reparations to Allies

– Growing power of communists

How is the Weimar Republic structured?

CHAPTER 31 SECTION 2

• I. Political problems (cont.)– B. The Weimar

Republic (Germany)• 2. Attempts at

recovery– Dawes Plan:

provided loans from US to Germany to halt inflation and stabilize economy

– By 1929, Germany had increased production and decreased unemployment

Charles Dawes

CHAPTER 31 SECTION 2

• II. Economic problems: the Great Depression– A. Causes of the Great Depression

• 1. Farmers over-produced during WWIfood prices drop, farmers lose land and must borrow money

• 2. Despite high profits for businesses in 1920s, wages for workers do not increaseworkers use credit to purchase goods [why would this be a problem?]

• 3. To promote growth, the govt. (through the Federal Reserve) and banks keep interest rates low [what would be the effect of low interest rates?]

• 4. Speculation, optimism, and demand cause stock values to increasepeople buy stocks on margin

CHAPTER 31 SECTION 2

• II. Economic problems: the Great Depression (cont.)– B. The Stock Market crash

(Oct. 24-29, 1929)• 1. Investors grow nervous

about stock pricesbegin selling off stock

• 2. Oct. 29, 1929 (“Black Tuesday”): stock prices plunge as people panic and sell stocks (16.4 million)

• 3. Banks, companies, and individuals wiped outleft with huge debts that can’t be paid

• 4. Signals the beginning of the Great Depression: long period of high unemployment and low production

CHAPTER 31 SECTION 2• II. Economic problems: the

Great Depression (cont.)– C. Effects of Great

Depression (in US):• 1. Bank failures• 2. Business failure and high

unemployment: Low wages, high debt, loss of money in stock marketdecreased demand for goods and less productionworkers laid offless purchasing of goodsmore workers laid off

– Gross National Product (GNP): drops from $104 to $59 billion from 1929-1933

– Unemployment: 25% by 1933 (1 out of 4 Americans out of work)

• 3. Govt. raises tariffs (Smoot-Hawley Tariff, 1930) to protect industries, but it backfires [why would this not work?]

CHAPTER 31 SECTION 2• II. Economic problems: the

Great Depression (cont.)– D. Effects of Great Depression

(in world): Collapse of American economy devastates the rest of the world• 1. US banks stop new foreign

loans and demand repayment of existing loans– Germany suffers most from loss

of US investment• 2. Raising of tariffs causes

worldwide trade to grind to a halt– Nations dependent on exports

(ex. Japan, Brazil, Argentina) suffer

• 3. Unemployment soars in Europe– By 1932, 30% of Germans are out

of work

CHAPTER 31 SECTION 2

• II. Economic problems: the Great Depression (cont.)– E. Responses to the Great Depression

• 1. Britain, France, and the United States– People elect socialist leaders who form coalition govts.

(ex. Popular Front in France and National Govt. in Britain) and liberal Democrats take power in US (Franklin D. Roosevelt elected in 1932)

– Expansion of govt. power and involvement in economy– Govts. engage in defecit spending on public works and

social welfare programs (ex. New Deal in US) [why would govts. Do this?]

– Recovery slow and unevenweakens faith in democratic govt.

• 2. Germany, Italy, and Japan– New political parties emerge that combine intense

nationalism, socialist ideas, and strong dictatorial rule (ex. Fascists in Italy and Nazis in Germany)