Global Depression Chapter 15:2 Notes. Europe after World War I Europe rebuilding war-torn nations and economies Many received loans from the United States,

Global Depression

Chapter 15:2 Notes

Europe after World War I Europe rebuilding war-torn nations

and economies Many received loans from the United

States, which had experienced a prosperous decade

However, U.S. prosperity in the 1920s was not as real as it seemed to be

The collapse of the U.S. economy in 1929 set off a Global Depression that affected many parts of the world!

Europe after World War I New governments formed in Germany,

Austria, Hungary, Russia, etc., were unstable

Frequent changes in government, which meant the leaders were often replaced

Countries remained weak Some people were willing to sacrifice

democracy for a strong, totalitarian government

REVIEW: What is a totalitarian

government??

Germany

Weimar Republic: Germany’s new democratic government, beginning in 1919 Plagued by weaknesses and lack of

leadership Germans blamed the Weimar Republic

for their humiliating defeat in WWI

Germany High inflation… Germans had simply

printed more money to pay for WWI Value of money decreased

Germany needed money to repay war reparations… so they printed more money even worse inflation

Cost of Bread in 1923:

200 billion marks or $131 billion

Cost of Bread in 1922:

160 marks or

$105.00

Cost of Bread in 1918:

>1 mark or 65 cents

Germany What did this mean for Germans?

Life savings were worthless They could no longer afford to buy

things they previously could buy People started to question their new

democratic government

Dawes Act: in 1924, the U.S. gave Germany $200 million in loans from banks to help stabilize

economy and begin paying war reparations… by 1929 the German economy was back on track

HERBERT HOOVER ELECTED PRESIDENT, 1928

"We in America today are nearer to the final triumph

over poverty than ever before in the history of any land. The poorhouse is vanishing from

among us.“ 1928

"I do not believe that the power and duty of the General

Government ought to be extended to the relief of individual suffering.

. . . The lesson should be constantly enforced that though

the people support the Government the Government

should not support the people." (1930)

•UNEQUAL DISTRIBUTION OF WEALTH

•HIGH TARIFFS AND WAR DEBTS

•OVERPRODUCTION IN INDUSTRY AND AGRICULTURE

•INCONSISTENT MONETARY POLICY

•STOCK MARKET CRASH AND FINANCIAL PANIC

Historians disagree as to the causes of the Great Depression. Most scholars would include:

UNEQUAL DISTRIBUTION

OF WEALTH

OVER PRODUCTION

HIGH TARIFFS AND WAR

DEBTS

CAUSES OFTHE GREAT

DEPRESSION

AGRICULTURE

INDUSTRY

MONETARY POLICY

STOCK MARKET CRASH AND

FINANCIAL PANIC

THE 1920’S WAS A PROSPEROUS TIME

BUT THE PROSPERITY WAS NOT SHARED

EQUALLY

MANY PEOPLE, LARGELY DUE TO NEWLY

INTRODUCED INSTALLMENT BUYING, COULD AFFORD TO

BUY CARS, RADIOS AND OTHER NEW PRODUCTS OF

THE 1920’S. FARMERS, HOWEVER, WERE IN A

DEPRESSION THROUGHOUT THE WHOLE DECADE.

RURAL POVERTY IN THE 1920’S

UNEQUAL DISTRIBUTION OF WEALTH

Although the nation's total realized income rose from $74.3 billion in 1923 to $89 billion in 1929 it was not distributed evenly.

In 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%. That same top 0.1% of Americans in 1929 controlled 34% of all savings

80% of Americans had no savings at all

The top 1% received a 75% increase in their disposable income while the other 99% saw an average 9% increase in their disposable income.

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10

20

30

40

50

60

70

80

1929

TOP .01%BOTTOM 42%TOP 1%BOTTOM 99%

THE CHART ABOVE SHOWS THAT IN 1929 THE TOP 1/10TH OF 1 % OF THE POPULATION EARNED AS MUCH MONEY AS THE BOTTOM 42% OF THE

POPULATION. THE SECOND TWO BARS SHOW THAT THE TOP 1% OF THE POPULATION SAW A 75% INCREASE IN THEIR INCOME WHILE THE OTHER 99%

SAW ONLY A 9% INCREASE IN THEIR INCOME IN THE 1920’S.

HIGH TARIFFS AND WAR DEBTS

AT THE END OF WORLD WAR ONE, EUROPEAN NATIONS OWED OVER $10 BILLION ($115 BILLION IN 2002 DOLLARS) TO

THEIR FORMER ALLY, THE UNITED STATES. THEIR ECONOMIES HAD BEEN DEVASTATED BY WAR AND THEY HAD NO WAY OF

PAYING THE MONEY BACK.

THE U.S. INSISTED THAT THEIR FORMER ALLIES PAY THE MONEY. THIS FORCED THE ALLIES TO DEMAND GERMANY PAY

THE REPARATIONS IMPOSED ON HER AS A RESULT OF THE TREATY OF VERSAILLES. ALL OF THIS LATER LED TO A

FINANCIAL CRISIS WHEN EUROPE COULD NOT PURCHASE GOODS FROM THE U.S. THIS DEBT CONTRIBUTED TO THE

GREAT DEPRESSION.

IN 1922 THE U.S. PASSED THE FORDNEY-MC CUMBER ACT WHICH INSTITUTED HIGH TARIFFS ON INDUSTRIAL PRODUCTS.

OTHER NATIONS SOON RETALIATED AND WORLD TRADE DECLINED HELPING BRING ON THE GREAT DEPRESSION.

. OVERPRODUCTION IN INDUSTRYFACTORIES WERE PRODUCING PRODUCTS BUT WAGES WERE NOT RISING FAST ENOUGH. TOO FEW WORKERS COULD AFFORD TO BUY THE FACTORY OUTPUT. THE SURPLUS PRODUCTS COULD NOT BE SOLD OVERSEAS

DUE TO HIGH TARIFFS AND LACK OF MONEY IN EUROPE.

FARM OVERPRODUCTION

DUE TO SURPLUSES AND OVERPRODUCTION FARM INCOMES DROPPED THROUGHOUT THE 1920’S. THE

PRICE OF FARM LAND FELL FROM $69 PER ACRE IN 1920 T0 $31 IN 1930. AGRICULTURE WAS IN A DEPRESSION THAT BEGAN IN 1920 LASTING UNTIL THE OUTBREAK OF

WORLD WAR II IN 1939.

IN 1929 THE AVERAGE ANNUAL INCOME FOR AN AMERICAN FAMILY WAS $750, BUT FOR FARM FAMILIES

IT WAS ONLY $273. THE PROBLEMS IN THE AGRICULTURAL SECTOR HAD A LARGE IMPACT SINCE

30% OF AMERICANS STILL LIVED ON FARMS.

ONE OF HOOVER’S FIRST ACTS WAS DEALING WITH THE FARM CRISIS

Candidate Hoover: "The most urgent

economic problem . . . is agriculture. It

must be solved.

The net income of American farmers plummeted from $7 billion in 1929 to only $2.5 billion in 1932. Few farmers had electricity or running

water and many lived in primitive and isolated conditions. Farm tenancy rose sharply again in the early 1930s with new waves of foreclosures

because of farmers' inability to pay their taxes and mortgages. By 1933, banks were foreclosing on some 20,000 farm mortgages monthly, and

thousands of small, undercapitalized country banks failed, while thousands were barely surviving. As the Great Depression worsened,

farmers experienced abandoned homesteads, collapsing prices, longer working hours, buildings and equipment in disrepair, a lack of cash or

credit, and a rising wave of political discontent.

FARM INCOME IN BILLIONS OF

DOLLARS

MANY FARMERS LOST THEIR FARMS. BELOW IS ONE OF THOUSANDS OF FARM FORECLOSURE SALES.

STOCK MARKET CRASH AND FINANCIAL PANIC

WALL STREET ON THE DAY OF THE CRASH, OCTOBER 29th

1929

Stock Market Crash, continued The trading floor of the New York Stock Exchange

just after the crash of 1929. On Black Tuesday, October twenty-ninth, the market collapsed. In a single day, sixteen million shares were traded--a record--and thirty billion dollars vanished into thin air. Westinghouse lost two thirds of its September value. DuPont dropped seventy points. The "Era of Get Rich Quick" was over. Jack Dempsey, America's first millionaire athlete, lost $3 million. Cynical New York hotel clerks asked incoming guests, "You want a room for sleeping or jumping?"

REASONS FOR THE STOCK MARKET CRASH

STOCKS WERE OVERPRICED DUE TO SPECULATION

MASSIVE FRAUD AND ILLEGAL ACTIVITY

MARGIN BUYING

FEDERAL RESERVE POLICY

The Great Depression

Factory production declined

Businesses failed causing banks to close

9 million people lost money in

savings accounts when banks closed

Business failures caused unemployment

People could not pay mortgages and lost

homes and land

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FOOD HOUSING CLOTHING AUTO MEDICAL

1929

1933

EFFECT OF DEPRESSION ON CONSUMER SPENDING FROM 1929 T0

1933 IN BILLIONS OF DOLLARS

WITHIN EIGHT MONTHS OF TAKING OFFICE HOOVER HAD TO DEAL WITH THE GREATEST

ECONOMIC DECLINE IN U.S. HISTORY. HE WAS NOT PREPARED TO DEAL WITH THE SUFFERING THE GREAT DEPRESSION BROUGHT TO AMERICANS. FOR FOUR YEARS THE FEDERAL GOVERNMENT,

UNDER THE LEADERSHIP OF HOOVER, MADE ONLY MINIMAL ATTEMPTS TO END THE ECONOMIC

CRISIS.

“ECONOMIC DEPRESSION CANNOT BE CURED BY

LEGISLATIVE ACTION OR EXECUTIVE

PRONOUNCEMENT. ECONOMIC WOUNDS MUST BE HEALED BY THE ACTION

OF THE CELLS OF THE ECONOMIC BODY - THE

PRODUCERS AND CONSUMERS THEMSELVES”

HERBERT HOOVER

“Hoovervilles”, homeless camps

THE ELECTION OF 1932

ELECTORAL VOTES FOR EACH CANDIDATE

POPULAR VOTE

ALMOST 57% OF THE ELECTORATE VOTED

FRANKLIN DELANO

ROOSEVELT BECAME THE 32ND

PRESIDENT OF THE UNITED STATES

“HAPPY DAYS ARE HERE AGAIN”

FDR’S CAMPAIGN

SONG: LYRICS ON NEXT PAGE

The U.S. Responds to the Depression… In 1932, Franklin

Delano Roosevelt became president

New Deal: Roosevelt’s plan for reform Public works

programs to help the unemployed

Public money spent on welfare and relief programs

A Global Depression Americans demanded repayment of

overseas loans U.S. put high tariffs on imported

goods so that Americans would buy American-made goods Hurt nations who sold goods to the U.S. Foreign nations imposed their own

tariffs on imports, which meant Americans could no longer sell to those nations

A Global Depression Germany and Austria were

especially hurt by the Depression because they depended on American loans

In 1931, Austria’s largest bank failed, which hurt the economies of many central European nations

While some democratic countries like the United States, Great Britain and France were able to

recover, others lost faith in their democracy because of the Great Depression and turned towards a new

kind of government known as fascism…

We’ll learn more about fascism in 15:3 and 15:4…

Hitler

Mussolini