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.