WH+13.2+A+Worldwide+Depression+Lecture

13.2 A WORLD WIDE DEPRESSION

Economic Context

  • $132 billion papermarks debt faced by Germany post-WWI.

  • Postwar Europe saw shifts in economic power:

    • U.S. began to dominate economically as European countries, weakened by war, were unable to fulfill debts.

    • Economic exports from the U.S. grew at a pace that Europe could not match due to their instability.

    • New democracies emerged in Europe after WWI as absolute monarchs were overthrown.

Weimar Republic

  • Establishment of the Weimar Republic:

    • Formed in 1919 after the abdication of Kaiser Wilhelm II, marking Germany's shift toward democracy.

    • Named after the city where the national assembly convened.

    • Characteristics of the Weimar Republic:

      • Doomed due to lack of experience with democracy and inability to perform basic governmental functions (e.g., trash collection).

      • Political instability with no party capable of winning a majority.

Reparations and Economic Challenges

  • Germany faced significant challenges due to war reparations and had to borrow heavily from the United States.

  • Friedrich Ebert, the first president of the Weimar Republic, faced backlash referred to as the "November Criminal" after signing the Treaty of Versailles.

Hyperinflation and Economic Consequences

Hyperinflation in Germany

  • Definition: Hyperinflation occurs when prices increase by more than 50% in a month.

  • Drivers of Hyperinflation:

    • Caused by overprinting of money to pay for reparations and government spending instead of tightening the money supply.

    • The result was a devalued currency and prices skyrocketing; there were reports of people using papermarks for kindling or wallpaper due to worthlessness.

Economic Crisis

  • Post-WWI, Germany could not meet reparations and continued to print money, worsening currency value.

  • International assistance through the Dawes Plan in an effort to stabilize the economy:

    • $200 million loan from the U.S.

    • Established a more realistic schedule for reparations payments.

The Great Depression

Causes in the U.S.

  • Various economic weaknesses contributed to the onset of the Great Depression:

    • Uneven distribution of wealth.

    • Overproduction in factories and agriculture leading to reduced demand and layoffs.

    • Stock market crash in October 1929 - a significant drop in stock prices due to panic selling.

Consequences of the Depression

  • By 1932:

    • Factory production halved, unemployment reached 25%.

    • Closure of thousands of businesses and banks, with depositors losing money due to poor investments.

    • The Dust Bowl worsened conditions for farmers, compounding economic strain.

Recovery Under Franklin D. Roosevelt

  • Franklin D. Roosevelt (FDR) took office in 1933 and introduced the New Deal:

    • Promoted government intervention in the economy through public works projects, modifying tax policies, and welfare programs.

    • Aimed to provide jobs and relief to millions of unemployed Americans.

    • Implemented Keynesian economic theory promoting active government involvement to circumvent the recession.

New Deal Programs

Overview

  • A summary of key New Deal programs and their significance:

    • Agricultural Adjustment Act (AAA): Helped reduce crop supply to stabilize prices.

    • Civilian Conservation Corps (CCC): Provided jobs in conservation projects.

    • Federal Emergency Relief Administration (FERA): Distributed relief funds to the unemployed.

    • Glass-Steagall Act: Established the FDIC to protect bank deposits.

    • National Industrial Recovery Act (NIRA): Promoted fair competition and minimum wages.

    • Social Security Act: Provided pensions and insurance for vulnerable populations.

    • Throughout, the New Deal aimed to restore confidence in the economy and assist Americans through direct support and job creation.

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