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

Political Parties in the Reichstag

May 1924

Dec. 1924

May1928

Sep.1930

July1932

Nov.1932

Mar.1933

Communist Party (KPD)

62 45 54 77 89 100 81

Social Democratic Party (SDP)

100 131 153 143 133 121 120

Catholic Centre Party (BVP)

81 88 78 87 97 90 93

Nationalist Party (DNVP)

95 103 73 41 37 52 52

Nazi Party (NSDAP)

32 14 12 107 230 196 288

Other Parties 102 112 121 122 22 35 23

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

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

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

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

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

15Britain15United States9 Japan5 France5 Italy

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)

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

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

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

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

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

Unemployment

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

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

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

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 highPresident Franklin D. Roosevelt, 1933-45