Great Depression - W3

In what year did the Great Depression begin?

1929.

Why was the Great Depression more than an ordinary capitalist slump?

It was unusually deep, prolonged, global, and socially destructive.

What is the normal capitalist economic cycle?

Alternating periods of expansion or boom and contraction or slump.

Which assumption about market economies did the Depression undermine?

That downturns would automatically correct themselves without major state intervention.

How did WWI contribute to the Depression's background?

It disrupted the international economy, leaving structural weaknesses and an incomplete recovery.

What is laissez-faire economic policy?

Limited government intervention, with markets largely left to operate on their own.

Name three flows that connected economies before 1914.

International trade, capital movements, and labour migration.

What is a global division of labour?

Different regions specialising in different goods and economic activities within an interconnected world economy.

How did international migration change after WWI?

It declined.

How did cross-border capital flows change after WWI?

They became unstable and unreliable.

How did governments weaken postwar international trade?

They protected domestic economies through trade barriers and import restrictions.

Which country became a major industrial producer and creditor in the 1920s?

The United States.

What is a creditor nation?

A country that lends to other countries and is owed money by them.

What was the weakness in the shift from British to American economic predominance?

The US had enormous economic power but did not provide the stabilising international leadership Britain had previously supplied.

Why was 1920s prosperity described as uneven and fragile?

Production outpaced demand, farm prices fell, wage growth was insufficient, trade remained weak, and countries relied on foreign loans.

What is overproduction?

Producing more goods than buyers can absorb at prevailing prices.

How did wage growth lagging behind production weaken prosperity?

Purchasing power did not grow enough to sustain demand for the expanding output.

Did agricultural distress begin only after the 1929 crash?

No; falling farm prices and overproduction were already problems.

What happened to farm incomes when agricultural prices fell?

Farm incomes declined, weakening farmers' ability to repay debts and buy goods.

What foreign funding dependency made several economies vulnerable?

Reliance on American loans, especially short-term lending.

What was the Dust Bowl?

Severe droughts and dust storms in the US Great Plains during the 1930s.

How did agricultural expansion help create Dust Bowl conditions?

Farming expanded into dry, fragile areas, removing protective grass cover and exposing soil.

How did drought turn exposed farmland into an environmental disaster?

Dry, unprotected topsoil was blown away in severe dust storms.

Where did many displaced Dust Bowl families migrate?

California.

What happened in the Wall Street Crash of 1929?

Stock prices collapsed after a period of intense speculation, wiping out wealth.

Was the Wall Street Crash the only cause of the Depression?

No; it intensified pre-existing structural weaknesses in the economy.

What is a bank run?

Many depositors trying to withdraw their money at once, potentially causing a bank to fail.

How did bank failures worsen the Depression?

They destroyed savings, disrupted credit, and deepened financial instability.

How did the crash affect business investment and consumer confidence?

Both fell, weakening demand and production.

How did declining American international lending spread the crisis?

Foreign economies dependent on US credit lost financing and struggled to meet obligations.

What postwar payments did Germany owe the Allies?

Reparations.

What made German reparations payments dependent on American finance?

Germany relied heavily on American loans to support its economy and meet payments.

What did Britain and France use German reparations to help repay?

Their wartime debts to the United States.

When was the Dawes Plan introduced?

1924.

What was the Dawes Plan intended to do?

Restructure German reparations payments and help stabilise Germany's economy.

What vulnerability accompanied Dawes Plan stabilisation?

Increased dependence on American lending.

When was the Young Plan introduced?

1929.

What did the Young Plan change?

It further revised German reparations, reducing demands and changing payment arrangements.

What happened to the international debt-payment system when US lending collapsed?

Its financial foundation weakened, causing payment difficulties and defaults.

When was Germany's postwar hyperinflation crisis?

1922–1923, before the Great Depression.

Who was especially harmed by hyperinflation?

People dependent on fixed incomes or monetary savings.

How did hyperinflation affect political attitudes in Germany?

It damaged confidence in institutions and contributed to resentment and political radicalisation.

What does the 'real economy' mean, as distinct from finance?

The production and exchange of goods and services, including jobs and industrial output.

How did the Depression move from finance into the real economy?

Credit and demand contracted, production fell, businesses failed, and unemployment rose.

What is protectionism?

Protecting domestic producers through tariffs, import restrictions, and related policies.

How could interwar protectionism deepen the Depression?

It reduced international trade, hurting production and worsening the wider crisis.

Which US president introduced the New Deal?

Franklin D. Roosevelt, or FDR.

How did the New Deal depart from laissez-faire assumptions?

It expanded federal intervention in the economy and social welfare.

What were two central economic aims of the New Deal?

Economic recovery and reducing unemployment.

How did New Deal public works address unemployment?

Government-funded projects created jobs.

Name two other areas of New Deal intervention.

Social welfare and economic regulation; farm assistance, labour rights, and environmental conservation also mattered.

Did the New Deal produce a complete recovery on its own?

No; economic problems persisted, including another downturn in 1937–1938.

Name two human costs of the Depression for industrial workers.

Unemployment and loss of savings; insecurity and loss of dignity also mattered.

How did the Depression harm farmers?

Falling crop prices and debt led to poverty and loss of farms.

Why were colonial economies especially vulnerable?

They depended heavily on exports of primary commodities whose prices and demand collapsed.

How did falling colonial export earnings affect colonial governments?

Tax revenues fell, weakening government finances and worsening hardship.

Why did Soviet planning appear attractive during the Depression?

The USSR was industrialising while capitalist economies faced mass unemployment; its apparent lack of mass unemployment attracted attention.

Does Soviet economic appeal mean its policies had no human costs?

No; industrialisation coexisted with famine, coercion, and repression.

What government actions did many people increasingly demand?

Economic intervention and planning, social welfare, and protection against unemployment and foreign competition.

How did fascists present themselves during the crisis?

As an authoritarian alternative to liberal capitalism, communism, and parliamentary democracy.

What was the 'Stab-in-the-Back' myth?

The false claim that Germany's WWI defeat resulted from betrayal at home rather than military defeat.

How did the radical Right use the Stab-in-the-Back myth?

To discredit parliamentary democracy and scapegoat opponents, including through anti-communist and anti-Semitic propaganda.

What economic responses emerged in Latin America?

State intervention, economic nationalism, domestic industrial development, and political reform.

How did the Depression encourage anti-colonial politics?

Economic hardship weakened imperial legitimacy and fuelled nationalist activism and mobilisation.

[Sequence] Order these: Young Plan; German hyperinflation; Wall Street Crash; Dawes Plan.

German hyperinflation (1922–1923), Dawes Plan (1924), Young Plan (1929, before the October crash), Wall Street Crash (1929).

[Connection] Recall the agricultural decline chain.

Overproduction, falling prices, declining farm incomes, wider economic weakness.

[Connection] Recall the Dust Bowl chain.

Expansion into fragile land and removal of grass cover, drought, wind erosion and dust storms, farm losses and migration.

[Connection] Recall the international postwar debt circuit.

American loans to Germany, German reparations to Britain and France, Allied debt repayments to the US.

[Connection] Recall the protectionism feedback loop.

Economic crisis, protectionism, less international trade, deeper economic crisis.

[Distinction] Hyperinflation versus Depression: what is the key difference?

Hyperinflation involves rapidly rising prices and money losing value; the Depression involved collapsing demand, production, trade, and employment, often with falling prices.

[Connection] How did economic crisis become a crisis of liberalism?

Mass hardship undermined faith in self-correcting markets and existing governments, increasing demands for intervention and support for radical alternatives