The GLOBAL Economic Crisis Between World Wars [AP Euro Review—Unit 8 Topic 5]

Summary

After World War I, Europe experienced a period of recovery, largely thanks to the Dawes Plan and U.S. investments. However, several economic issues such as war debts, high tariffs, overproduction, and speculative practices led to the Great Depression by 1929. The crash of the U.S. stock market exacerbated the crisis, affecting European economies with massive unemployment. In response, nations explored different remedies like Keynesian economics, cooperative social action, and political alliances. Despite these efforts, Europe remained vulnerable, setting the stage for political instability and the rise of fascism.

Takeaways

• 😀 The end of World War I marked the beginning of economic struggles for Europe due to global issues such as war debt and hyperinflation in Germany.
• 😀 Germany's response to war reparations involved printing excessive amounts of money, which led to hyperinflation, with the value of their currency plummeting by 1923.
• 😀 The Dawes Plan of 1924 provided a solution by limiting Germany's reparations to what it could afford and injecting U.S. investment into the country, which temporarily stabilized Germany.
• 😀 The Kellogg-Briand Pact, signed during the interwar years, symbolized Europe's hope that war would no longer be used to resolve conflicts.
• 😀 Economic recovery in Europe was short-lived, as four major factors contributed to the collapse into the Great Depression: war debt, high tariffs, overproduction, and speculation.
• 😀 High tariffs were imposed by many nations, causing a decline in free trade and significant unemployment.
• 😀 Overproduction, especially in farming, led to market saturation and falling prices, which hurt the agricultural sector.
• 😀 Speculation in the U.S. stock market, funded by borrowed money, contributed to the 1929 stock market crash and the global economic collapse that followed.
• 😀 The Great Depression spread to Europe due to the U.S. reducing its investments in European recovery after the stock market crash.
• 😀 Unemployment soared in Europe by 1932, with some countries experiencing unemployment rates of up to 40%, severely affecting male workers in particular.
• 😀 Various responses to the Great Depression emerged, such as Keynesian economics, which advocated for government spending to boost demand and revive economies, and cooperative social action seen in Scandinavian countries with welfare states.

Q & A

What was the economic situation in Europe immediately after World War I?

After World War I, Europe experienced a period of recovery, although the economic stability was fragile. Germany faced significant challenges due to war reparations, leading to hyperinflation, while other European nations dealt with war debt and economic strain.

How did the Dawes Plan help Germany after World War I?

The Dawes Plan, established in 1924, restructured Germany's war reparations payments and introduced a substantial amount of U.S. investment to help stabilize the German economy. This helped avoid a collapse and led to some recovery.

What was the Kellogg-Briand Pact, and what did it symbolize?

The Kellogg-Briand Pact, signed in 1928, was an agreement among nations to renounce war as a tool of foreign policy. It symbolized the optimism of the time, as nations hoped for lasting peace following the devastation of World War I.

What were the primary causes of the Great Depression in Europe?

The Great Depression in Europe was caused by several factors: war debt, nationalistic tariff policies, overproduction in industries (especially agriculture), and speculation, which was largely driven by the U.S. stock market crash of 1929.

How did speculation in the U.S. contribute to the global spread of the Great Depression?

In the 1920s, U.S. investors borrowed money to buy stocks, and as stock prices continued to rise, they could pay back loans. When the U.S. stock market crashed in 1929, it not only devastated the U.S. economy but also caused a withdrawal of funds from European economies, triggering a global depression.

What was the unemployment rate like in Britain and Germany during the Great Depression?

By 1932, unemployment in Britain reached 25%, and in Germany, nearly 40% of the labor force was without work. These were devastating figures, demonstrating the severity of the economic collapse.

How did the Great Depression affect gender roles in the workforce?

During the Great Depression, men faced higher unemployment rates compared to women, who were more likely to find work in lower-paying jobs. This led to a temporary reversal of traditional domestic gender roles, which many men resented.

What economic theory did John Maynard Keynes propose to address the Great Depression?

John Maynard Keynes proposed that government spending could stimulate economic demand and lift economies out of depression. He argued that governments should increase spending, even if it led to large budget deficits, to combat economic downturns.

How did the United States respond to the Great Depression under President Franklin Roosevelt?

Under Franklin Roosevelt, the U.S. implemented Keynesian economics by spending large amounts of government money on public projects to create jobs and stimulate the economy. This approach was part of his New Deal programs.

What was the political response to the Great Depression in Scandinavian countries?

In Scandinavia, socialist parties gained power and created welfare states with high taxes to fund social safety nets for citizens. These countries also fostered cooperative enterprises, which balanced elements of socialism and capitalism to navigate the economic crisis.