The Great Depression

The American Stock Market Crashed in 1929

1. In the 1920s, the USA was the most prosperous country in the world

  • Wages were high and there was mass production of goods
  • During this boom, the USA lent billions of dollars to help European countries recover from the effects of WWI
  • American companies were performing well, so people borrowed money to buy shares in them.

2. But problems started to emerge. Many American companies overproduced - there was too much supply and not enough demand. There was also competition from countries like Japan.

3. In 1929, the American stock market crashed - people realised some companies were doing badly and rushed to sell their shares (parts of companies). By October 1929, the selling was frantic and share prices dropped - they lost value because no-one wanted to buy them during the panic.

4. Businesses collapsed and thousands of people were ruined - by the end of the month they were selling shares for whatever price they could get for them. This was the start of the Great Depression - a global economic downturn.

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The Depression caused big problems in the USA...

1. In 1929, the USA stopped lending money abroad and asked for its loans to be paid back.

2. By 1930, nearly 2000 banks had collapsed as people rushed to withdraw savings.

3. Three years later there were over 12 million people unemployed in the USA.

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...and also in Other Industrial Countries

1. Most industrial countries were affected - banks failed, industries struggled and trade ground to a halt. The least affected country was the USSR, which had a communist system.

2. Within 3 years there were over 2.5 million people unemployed in Britain, and more than 30 million unemployed in the industrial countries of the West.

3. Germany, which had relied on American loans, was particularly affected. German banks failed, exports suffered and unemployment rose to over 6 million by 1932.

The Depression became a global problem because so many economies were linked to the economy in the USA (and to one another).

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The Depression made the League's Work more Difficu

1. The Depression caused widespread poverty. In these circumstances, people were more likely to support extreme right-wing leaders, hoping they'd provide strong government. For example, Hitler was elected in Germany in 1933 - he wanted to defy the LoN and break the ToV.

2. Countries like Britain and France were also less willing to help the League by getting involved in resolving international conflicts. They wanted to concentrate on dealing with domestic problems like unemployment.

3. The economic downturn was also a factor in some political conflicts, e.g. the Manchurian Crisis.

The Nazis were also a nationalist party. Nationalism is the belief that your own country's interests should be prioritised above all others. It's often popular in times of economic crisis.

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