A Global Depression Europe after the War Every major European country nearly bankrupt United States & Japan in better shape then before the war Europes domination in world affairs had declined New Democracies are Unstable Last absolute rulers are overthrown New democracies had little experience with representative government Dozens of political parties form Impossible for one party to win enough support to govern effectively Coalition government: temporary alliance of several parties Seldom lasted long Made it hard for strong leadership to form or move toward long term goals Major problem during times of crisis Problems in Germany Weimer Republic: Germanys new democratic gov. Serious weakness Lacked strong democratic tradition Several major political parties and many minor ones German people blamed Republic of countrys defeat & post-war humiliationthey signed the Treaty of Versailles Germany faced serious economic problems Did not increase wartime taxes to pay for war, instead printed more money Had to pay reparations to Allies, so they printed more money Severe inflation set in Needed more and more money to buy basic goods The Dawes Plan Provided a $200 million loan from American banks to stabilize German currency & strengthen its economy Set a more realistic schedule for Germanys reparations payments It helped slow inflation & Germany began to recover Roaring 20s An age of dramatic social and political change More Americans lived in cities than on farms Consumer society American consumers soon began buying mass- produced goods Fords Model T automobile Electric appliances: vacuum cleaner, refrigerator, toaster Movies Radios The New Woman Flappers Allowed to vote: 19 th amendment Women in the workforce Jazz age Prohibition: 18 th amendment Led to bootleggers, speakeasies, organized crime figures The Great Depression Weakness in U.S. economy caused serious problems Uneven distribution of wealth Overproduction by business and agriculture Lessening demand for consumer goods The Stock Market Crashes Wall Street was the financial capital of the world The booming U.S. economy showed in soaring stock prices Middle income people began buying stocks on margin Worked well as long as prices rose, if they fell investors had no money to pay of loan Stock Market Crash on Oct in New York started a chain reaction that sent the world into the Great Depression Prices unnaturally high, people started selling off stocks Lowering of stock prices caused a panic and people wanted to sell U.S. investors withdrew even more funds from Germany and other European markets People who lost all their money in the stock market stopped spending Banks and investors started to recall loans which people could not pay A global depression Investors withdrew their money from Europe Congress placed high tariffs on imported goods trying to force Americans to buy American goods Countries who depended on exporting goods to the U.S. suffered World trade dropped Unemployment rates soared The depression challenged democratic political systems in Europe & the U.S. Britain formed a coalition National Government that preserves democracy In France, the depression contributes to political instability, but they were better off then other countries because they were heavily agricultural then relying on foreign trade In Scandinavia, socialist governments build successful recovery programs based on cooperative community action Roosevelt in the United States creates reform programs U.S. government President Herbert Hoover had the distinction of stepping into the White House then less than seven months, the worst depression in America began The Depression was not Hoovers fault, but as the country slipped deeper and deeper into the depression he would receive great blame Hoover believed that gov. aid would stifle initiative and create dependency where individual effort was needed. He failed to grasp the scope of the depression 1932 Electoral College Votes Franklin D. Roosevelt elected President promising a new deal for the American people He acted swiftly to try and stabilize the economy and provide jobs and relief to those suffering by implementing a massive gov. spending program He pursued a policy of active government intervention in the economy known as the New Deal, which included Ending prohibition Urged Americans to put their savings back into the banks Increased public works Works Progress Admin. To provide jobs to the unemployed Welfare System Social Security Insurance and federal agricultural subsidies Did not end Depression U.S. does not fully recover until WWII Recovery in the United States Although the New Deal improved economic conditions, full recovery did not occur until 1942 after the United States entered WWII. At that time, production of war materials led to almost full employment for Americans