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CHAPTER 28 Section 1: The Postwar Era Section 2: Postwar Prosperity Crumbles Section 3: Political Tensions After World War I Section 4: Fascist Dictatorships in Italy and Germany Section 5: Dictatorship in the Soviet Union The Great Depression and the Rise of Totalitarianism
SECTION 2 Bell Ringer 19.2: What economic weaknesses led to the Great Depression? Postwar Prosperity Crumbles
In 1920, there were only 225 tractors in all of the U.S.
European farmland had been destroyed in the War.
The use of machinery increased productivity, while decreasing the demand for manual laborers.
While productivity increased, the nation's demand for food remained relatively steady. As a result, food prices — and profits — dropped.
Machinery was costly. The small farmer was no longer able to cope because he lacked the capital to buy the equipment. At the same time, the decade's industrial boom lured numerous workers off the farm to the cities.
Small farms lost their viability, and many farmers were compelled to merge in order to compete. The lasting effect would be larger, but fewer farms.
Investor confidence fell … people rushed to banks demanding their money … banks demanded borrowers repay their loans …
MAJOR FINANCIAL CRUNCH
How is this similar to what happened in 2009?
SECTION 2 Postwar Prosperity Crumbles
SECTION 2 Postwar Prosperity Crumbles * Broader speculative bubbles. In the years prior to the Crash of 1929, the bubbles were limited primarily to stock speculation and restricted to a minority of the population. This time, the speculation has engulfed not only stocks but also millions of homes, commercial properties, local governments, corporations, and entire nations. * More household debt. U.S. households are in far greater debt today with much less savings. In the 1930s, mortgages were rarer and less onerous. For all practical purposes, second mortgages, home equity loans, creative financing, and credit cards didn't even exist. Today, they are everywhere in our society. * U.S. is now a debtor nation. In the 1930s, the U.S. had large surpluses of foreign reserves and was a creditor to the rest of the world. Now, it has minimal reserves and huge foreign debts.
GB tried to create jobs by granting low-interest loans to its industries; raised tariffs against foreign goods; formed a system of economic cooperation within its empire
By the end of 1930 unemployment had more than doubled from 1 million to 2.5 million (20% of the insured workforce), and exports had fallen in value by 50%.
France was less industrialized – eventually its trade would decline; unemployment rose – industry production drops sharply; caused political instability (three changes in gov’t in 1933!)
In Germany, it will help destroy the Weimar Republic government …
SECTION 2 Postwar Prosperity Crumbles
SECTION 2 Postwar Prosperity Crumbles Asia suffered from the Depression as well, especially the Japanese. In Japan, 1931, the crops failed and people starved to death. Families had to eat bark and roots from trees to survive. Exports fell by 50% due to high tariffs. City workers suffered and had no choice but to return to the rural areas.
SECTION 2 Postwar Prosperity Crumbles panic selling of stocks high stock prices buying stocks run on the banks stock market crash bank closures financial ruin for many worldwide bank failures defensive international trading practices global depression easy credit