Europe in the Interwar Period

1. Europe in the Interwar Period

2. Weimar Republic • 1918-19 German leaders established a republican govt with a new constitution and no Kaiser • Suffered from instability and frequent changes of power • Faced a difficult political and economic situation • Many Germans felt betrayed by the Versailles Treaty • Extreme political parties remained popular throughout the 1920s • Few outstanding leaders emerged • President Hindenburg (1925-34) didn’t fully support democracy

3. Weimar Political Instability

4. Weimar Political Instability

5. Reparations • 1921: Commission set Germany’s reparations at 132 billion marks • France demanded strict enforcement • 1922: Germany claimed to be unable to pay • 1923: French army occupied the industrial Ruhr Valley to collect reparations in kind

6. Ruhr Crisis • Germans were outraged • German govt promoted passive resistance • Workers went on strike • Govt paid their salaries • Govt had to print more money • Led to hyperinflation • Money became almost worthless • Led to rampant poverty

7. Dawes Plan • Ruhr occupation was extremely costly for both France and Germany • November 1923: Chancellor Gustav Stresemann introduced a new stable currency and resumed reparations • 1924s: international conference reduced Germany’s reparations and reconfigured how and when they would be paid • Dawes Plan: promised large US loans to Germany and other European countries • Helped produce a period of stability and prosperity 1924 to 1929

8. Problems with the League of Nations • Did not initially include major states like the US, Soviet Union and Germany • League Covenant required near consensus to take significant action • Unable to cope with severe political and economic crises of 1920s-1930s

9. Washington Naval Conference (1922) • Called to prevent another naval race • Established a fixed ratio for the number of ships of each Great Powers • Japan and Italy felt deeply insulted by these limits 15 Britain 15 United States 9 Japan 5 France 5 Italy

10. Treaty of Locarno (1925) • Britain, France and Germany agreed to guarantee the western borders of Germany • Germany agree with Poland and Czechoslovakia to seek border changes only through negotiation • Signified a new spirit of cooperation and optimism in international relations • 1926: Germany was admitted to the League of Nations Briand (France), Chamberlain (Britain), Stresemann (Germany)

11. Kellogg-Briand Pact (1928) • Written by US Secretary of State Frank Kellogg and French Foreign Minister Aristide Briand • 63 nations pledged to “renounce war as an instrument of national policy” • Specified no way to enforce this pledge

12. Causes of the Stock Market Crash • Banks had been making risky loans and keeping little cash on hand • “Easy money” policy led to wild stock market speculation and over-investment in industrial production • Rising wealth inequality caused a lack of consumer demand • US stock market crash in 1929 • Nervous investors began to panic that stocks were overvalued and began to sell them • Millions of others followed suit and stock prices plummeted

13. From Crash to Great Depression • Investors and businessmen were unable to pay back loans • Citizens knew it and rushed to their banks to withdraw their deposits (“bank runs”) • Banks quickly ran out of money and declared bankruptcy (“bank failures”) • Millions saw their savings disappear • Loans became almost impossible to get • Business had to lay off millions of workers to cut expenses • President Hoover raised taxes and tariffs, which only made matters worse A bank run in New York, 1930

14. Depression spreads to Europe • US loans to German stopped abruptly • Germany now unable to pay reparations • Cancelled in 1932 • Britain and France unable to repay loans to the US • Many countries imposed high tariffs to protect domestic industry  fall in international trade • Falling prices (deflation) caused many people to delay spending • A major drought in the US (Dust Bowl) caused extreme poverty among farmers in the Great Plains

15. Consequences of the Great Depression • By 1932 world trade fell by 60% • Industrial production fell by 50% • Unemployment by 1932 • 25% in Britain • 25% in the US • 40% in Germany • Many outbreaks of industrial violence • Millions made homeless • Many have savings wiped out • Malnutrition and hunger become widespread • Many lose faith in capitalism and democracy and turn to radical politics

16. Unemployment

17. France • Less industrialized so it didn’t suffer as severely • Recession eventually caused major political instability from 1932-36 • 1936: Popular Front coalition of Communists, Socialists and Radicals won the election • collective bargaining • 40 hour work week • 2 weeks of paid vacation • minimum wage • Policies satisfied workers but failed to address unemployment and led to inflation Leon Blum, Popular Front PM

18. Britain • British industry had been severely hurt by WW1 • High unemployment and low wages throughout the 1920s • 1926 General Strike shut down almost the entire economy • 1927: govt banned strikes and union political activity • Labour Party emerged in the 1920s as the defender of the working class and gradually replaced the Liberal Party • Labour Party lost power in 1931 to the Conservative Party Ramsay MacDonald, Labour Party PM

19. John Maynard Keynes • During a recession traditional economic theory recommended balanced budgets, austerity measures, and protective tariffs • Suggested that economies will balance themselves • British economic John Maynard Keynes argued that the govt should stimulate demand by providing jobs and spending money • This will cause a short term deficit but will lead to a quick recovery

20. United States • US had enjoyed rapid economic growth and major improvements in living standards in the 1920s • Led to unrealistic optimism & too much debt • Great Depression caused severe unemployment and poverty • 1932: Franklin D. Roosevelt elected President and initiated the New Deal • Huge spending on public works • Gave jobs to 3 million people • Established unemployment insurance and Social Security system • Unemployment remained high President Franklin D. Roosevelt, 1933-45