Futile Search for Stability17-1
Weak League of Nations◦US Senate refused to approve◦League members disagreed on using force
French Demands◦Strict enforcement of Treaty of Versailles Desired security and demanded reparations
◦132 billion German marks = $33 billion Germans can’t pay French occupy
RuhrValley
Uneasy Peace, Uncertain Security
German government◦Established in 1919
Serious weaknesses◦Germany lacked strong democratic tradition
◦Several major political parties Many minor ones
◦Blamed for defeat in WWI and humiliation of Treaty of Versailles Wartime leaders excused
The Weimar Republic
Enormous economic problems◦Didn’t increase wartime taxes Printed more $ $ lost value after war
◦Had to pay reparations Printed more $
1914 – 4.2 $11923 – 4.2 trillion marks $1
Inflation Causes Cri$i$
Cost of goods rose bread in 1918 – less than 1 mark 1922 – 160 marks 1923 – several billion marks
People questioned value of democratic gov’t
Dawes Plan - 1924◦$200 million loan from US banks◦Stabilize German currency Strengthen economy
◦Realistic schedule for reparations payments
◦Helped slow inflation1929 – German factories producing at pre-war levels
Attempts at Economic Stability
Treaty of Locarno - 1925◦France and Germany ban war forever
◦Germany agreed to respect borders of France and Belgium
◦1926 - Germany admitted to League of Nations
Efforts at a Lasting Peace
1928Pledge to renounce war as an instrument of national policy
Signed by 62 nationsTreaty had no way to be enforced
◦League of Nations had no armed forces
Kellogg-Briand Pact
By 1920s, American economic prosperity sustained world economy
If US economy weakened, whole world system might follow
1929 – US Economy Crashes
Financial collapse
1. Uneven distribution of wealth2. Overproduction3. Underconsumption
A Flawed US Economy
Stock◦Share of ownership in a company◦Pay money to company so it can operate
◦Receive interest on moneyMiddle-income people bought stocks on margin◦Paid a % of the price as a down payment
◦Borrowed from stock brokers◦Works if prices rise
Stock Market Crashes
September 1929◦Investors sell stocks◦Lowers prices of stock
October◦Prices slide too far down◦Panic sets in and everyone tries to sell stocks
October 29 – Stock Market Crashes
Stocks became worthless Industrial production, prices, and wages declined◦Unemployment rose
1932 – factory production cut in half
1933 – ¼ of American workers had no jobs
The Great Depression
Collapse of American economy impacted world◦Bankers demanded repayment of overseas
loans◦American investors withdrew $ from Europe
Market for European goods dropped◦Congress used tariffs to keep $ in US◦Countries that depended on exports to US
suffered◦World trade dropped by 65%
A Global Depression
Great Britain
Great BritainCurrency was overvalued
Exports were overpriced
Foreign trade decreased
National Government – coalition government made up of Labour Party and ConservativesPassed high protective tariffsIncreased taxesRegulated the currency to avoid inflation
Lowered interest rates
What did they do?
Results by 1935Industrial production
returned to 1929 levels10% Unemployment Preserved democracy
Unemployment came from decline in demand◦Not overproduction
Increase jobs through deficit spending◦Government goes into debt to create jobs
John Maynard Keynes
France
FranceMore agricultural, less dependent on foreign trade
1 million unemployed by 1935Political leaders stressed patriotism – warned against Marxist and socialist ideas
What did they do?Economic crisis led to political instability1936 - Popular Front – coalition government
made up of moderates, Socialists and Communists◦Passed reforms to help workers◦40 hr workweek, minimum wage***Still preserved democratic government***
1932 – Franklin Delano Roosevelt elected◦Confident manner appealed to millions
Recovery in the US
Large public works programs to provide jobs◦Gov’t agencies give $ to farms and businesses
◦$ for welfare programs Gov’t spending would create jobs and start a recovery
Reformed stock market and banking system
The New Deal – Sound familiar?
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