Lesson 1:

Instability After World War I

Page 562 in the textbook

Uneasy Peace

• Peace settlement ending WWI left nations unhappy

• President Woodrow Wilson placed many hopes for the future in the League of Nations

• This organization was not very effective in maintaining the peace

League of Nations

• United States failed to join the league• Most Americans wanted to avoid involvement

in European affairs.• The US senate refused to approve the Treaty

of Versailles• League of Nations weakened without United

States

Reparations

• French demanded strict enforcement of Treaty of Versailles

• Began with issue of reparations from Germany• April 21 1921 – Allied Reparations Commission

determined that Germany owed 33 billion US dollars for reparations, payable in annual installments.

Ruhr Valley

• German republic made first payment in 1921, and one year later, facing financial crisis, announced it could pay no more.

• Enraged, France sent troops to occupy Ruhr Valley, Germany’s chief industrial and mining center.

• France wanted to collect reparations by using mines and factories.

Inflation in Germany• German government had policy of passive

resistance to French occupation• German workers went on strike• German government paid their salaries by

printing more paper money• Only added to the inflation (rise in prices) that

had already begun in Germany after the war. • German mark became worthless.• 1914: 4.2 marks = 1 US dollar• 1923: 4.2 trillion marks – 1 US dollar

Woman uses German marks to light her stove during the Great

Depression

Dawes Plan• France and Germany sought way to end disaster• Aug 1924: international commission adopted new plan

of reparation.• Dawes Plan: named after American banker who

chaired the commission• First reduced reparations• Then coordinated Germany’s annual payment with its

ability to pay• Granted initial $200 million loan for German recovery• Loan opened door to heavy American investment in

Europe. • Brief period of European prosperity followed.

Bellringer: Connection to Today

• Depression vs. Recession

When the United States experienced a recession in 2008, people worried unemployment would reach Great Depression levels. But in studying unemployment numbers, economists discovered that, while the economic downturn was the worst since World War II, it was nowhere near as bad as the great Depression. In 1933, unemployment had reached 29.4 percent. In December 2010, 9.4 percent of the US population was unemployed.

Question: What do you think are the causes of a recession or depression in an economy?

The Great Depression• The brief period of prosperity that began in

Europe in 1924 ended in a economic collapse• Two factors caused the Great Depression:• ECONOMIC and FINANCIAL

1. Economic.• downturns of economies if individual nations

in the second half of the 1920’s• Prices for farm products fell due to

overproduction• Increase in use of oil and hydroelectricity led

to slump in coal industry.• Poor distribution of wealth• Reliance on credit

2. Financial• Much of European prosperity in 1920’s was

built on US bank loans to Germany• US stock market boomed in 1920’s• Stocks rise to unrealistic levels• By 1928, American investors pulled money out

of Germany to invest it in stocks• By Oct 1929, the US stock market crashed,

stock prices plunged.

Great Depression

• Economic depression not new to Europe• Extent of downturn in 1929 had never been

seen before• 1932, worst year of depression, nearly 1 in

every 4 British workers was unemployed• 5.5 million Germans (30% of labor force) had

no jobs• Unemployed and homeless filled the streets

The Dust Bowl

The Dust Bowl

• The Dust Bowl, or the Dirty Thirties, was a period of severe dust storms causing major ecological and agricultural damage to American and Canadian prairie lands in the 1930s, particularly in 1934 and 1936.

• Caused by severe drought combined with farming methods that did not include crop rotation, fallow fields, cover crops, soil terracing and wind-breaking trees to prevent wind erosion.

Bellringer

• How do you think the economic conditions of post war Europe lead to the rise of dictatorships and totalitarian states in the 1930’s?

Responses to the Depression

• Germany• Weak government plagued by economic crisis• Runaway inflation 1922 and 1923• Families watched their life savings disappear• Period of relative prosperity from 1924-1929• 1930: unemployment grew to 3 million people

by March and 4.38 million by December• Fear and rise of extremist parties to come

France• Also suffered from postwar economic problems• Had more balanced economy, did not feel

effects of depression until 1932• 1936: coalition of Communists, Socialists, and

Radicals formed the Popular Front government• Started program some call the French New Deal• Gave workers right to collective bargaining, 40

hour work week, minimum wage• Collective bargaining: right of unions to

negotiate with employers over wages and hours.

Great Britain

• Experienced limited prosperity from 1925-1929• Effects of Great Depression hit in 1929. • The Labor Party failed to solve problems, fell from

power in 1931• New Conservative government: balanced budgets and

protective tariffs. • British economist John Maynard Keynes:

unemployment came from decline in demand, not overproduction

• Encouraged deficit spending, or going into debt if necessary.

The United States

• Besides Germany, no Western nation was more affected by the Depression than the U.S.

• By 1932, industrial production fell by almost 50 percent from its 1929 level.

• 12 million unemployed by 1933• Democrat Franklin D. Roosevelt won the presidential

election in 1932 by a landslide• Believed capitalism must be reformed• Policy of government intervention in economy known

as the New Deal

The New Deal

• Included increased program of public works• Works Progress Administration (WPA) established in 1935• Employed 3 million people at its peak• Built bridges, roads, post offices, airports• Roosevelt instituted new social legislation• US welfare system• 1935 Social Security Act: old age pensions, unemployment

insurance• Did not solve unemployment problem• 1938: USA still had 10 million unemployed.