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==The Great Depression==

==The Great Depression==

The network of political alliances that led to World War I were replaced by a set of financial relations after World War I.  The Great War was very, very expensive and there were many debts to pay off after the war.  But in order for Britain and France to pay their debts to the United States, Germany had to pay reparations to Britain and France.  In order for Germany to be able to reparations, it had to receive loans from American banks and also benefit from a strong global market.  Meanwhile, colonies were already beginning to struggle due to a decreased demand in raw materials by industrialized nations, which had learned to make more with less.  Any economic downturn in a major country could have set off a financial chain reaction that would be hurtful to all.  In 1928 American lenders did begin pulling money out of Europe to invest in the more successful American stock market, and that was an early warning sign of potential trouble.

The network of political alliances that led to World War I was replaced by a set of financial relations after World War I.  The Great War was very, very expensive and there were many debts to pay off after the war.  But in order for Britain and France to pay their debts to the United States, Germany had to pay reparations to Britain and France.  In order for Germany to be able to reparations, it had to receive loans from American banks and also benefit from a strong global market.  Meanwhile, colonies were already beginning to struggle due to a decreased demand in raw materials by industrialized nations, which had learned to make more with less.  Any economic downturn in a major country could set off a financial chain reaction that would be hurtful to all.  In 1928 American lenders did begin pulling money out of Europe to invest in the more successful American stock market, and that was an early warning sign of potential trouble.

   

   

The American economy had been booming during the “Roaring Twenties” (1920s).  Everything looked good.  In 1920, the politically conservative President Warren Harding was elected president.  He favored limited government so that free enterprise could thrive, and his economic policies benefited the nation and the world for a decade.

The American economy had been booming during the “Roaring Twenties” (1920s).  Everything looked good.  In 1920, the politically conservative President Warren Harding was elected president.  He favored limited government so that free enterprise could thrive, and his economic policies benefited the nation and the world for a decade.

But President Harding died from an illness in 1923.  He was succeeded by his Vice President Calvin Coolidge, who was conservative but not as much as Harding.  When Coolidge declined to run for reelection in 1928, Republican Herbert Hoover took office.  In his first year in office, on “Black Thursday” Oct. 24, 1929, the stock market in New York crashed.  Stock prices plummeted and many lost everything.  This was the beginning the Great Depression in the United States, which then pulled down the economies in European nations also.

But President Harding died from an illness in 1923.  He was succeeded by his Vice President Calvin Coolidge, who was conservative but not as much as Harding.  When Coolidge declined to run for reelection in 1928, Republican Herbert Hoover took office.  In his first year in office, on “Black Thursday” Oct. 24, 1929, the stock market in New York crashed.  Stock prices plummeted and many lost everything.  This was the beginning of the Great Depression in the United States, which then pulled down the economies of European nations also.

Economists debate the possible causes of the Great Depression to this day.  There is no consensus in favor of one single cause.  There is no apparent reason why a drop in stock market value alone would cause a massive depression.  Only those owning the stocks that fell in value were immediately hurt.  But many had bought stock “on margin,” which means on a mere promise to pay.  When their stocks fell in value, those buyers could not pay their obligations on stock they had already purchased.  That means the losses were felt far beyond the stock owners, and were felt by many others in the economy, including banks.  Laws changed afterward to guard against this ripple effect.  The stock market crash hurt public confidence, and people stopped buying things.  It became a vicious cycle.

Economists debate the possible causes of the Great Depression to this day.  There is no consensus in favor of one single cause.  There is no apparent reason why a drop in stock market value alone would cause a massive depression.  Only those owning the stocks that fell in value were immediately hurt.  But many had bought stock “on margin,” which means on a mere promise to pay.  When their stocks fell in value, those buyers could not pay their obligations on stock they had already purchased.  That means the losses were felt far beyond the stock owners, including many others in the economy, such as banks.  Laws changed afterward to guard against this ripple effect.  The stock market crash hurt public confidence, and people stopped buying things.  It became a vicious cycle.

Perhaps it was an overreaction by government that really caused the Great Depression.  Economists criticize the Hawley-Smoot Tariff of 1930, which imposed high trade barriers on imports to protect American manufacturers, as a huge mistake.  Foreigners retaliated by refusing to buy American products, and factories, banks and stores closed in increasing numbers.  Unemployment that was only 5 million in 1930 skyrocketed to 13 million in 1932.  The Great Depression had hit.

But perhaps it was an overreaction by government that really caused the Great Depression.  Economists criticize the Hawley-Smoot Tariff of 1930, which imposed high trade barriers on imports to protect American manufacturers, as a huge mistake.  Foreigners retaliated by refusing to buy American products, and factories, banks and stores closed in increasing numbers.  Unemployment that was only 5 million in 1930 skyrocketed to 13 million in 1932.  The Great Depression had hit.

The effects of the Great Depression were clearer than its cause.  Weaker American banks meant weaker European banks.  Leaders were voted out of office worldwide.  In the United States, voters replaced Republican Herbert Hoover with Democrat Franklin Delano Roosevelt, who instituted the “New Deal” by which government assisted farms and business and created public projects to generate jobs.  The program was unsuccessful in pulling the country out of the depression, and probably delayed economic recovery.

The effects of the Great Depression were clearer than its cause.  Weaker American banks meant weaker European banks.  Leaders were voted out of office worldwide.  In the United States, voters replaced Republican Herbert Hoover with Democrat Franklin Delano Roosevelt, who instituted the “New Deal” by which government assisted farms and business and created public projects to generate jobs.  The program was unsuccessful in pulling the United States out of the depression, and probably delayed economic recovery.

Island countries like Great Britain and Japan were hit hardest because they depended most on trade rather than farming.  Voters replaced the liberal Labour Party in Britain with conservatives in 1931, but tariffs and taxes increased anyway.  In Japan, its silk export industry collapsed and it struggled to pay for fuel.  It turned to a stronger military to acquire what it needed.

Island countries like Great Britain and Japan were hit hardest because they depended most on trade rather than farming.  Voters replaced the liberal Labour Party in Britain with conservatives in 1931, but tariffs and taxes increased anyway.  In Japan, its silk export industry collapsed and it struggled to pay for fuel.  It turned to a stronger military to acquire what it needed.

For Scandinavia and Latin America, the depression meant more government control.  The governments in the socialistic Scandinavian countries increased their aid to citizens and protected retirement funds.  In Latin America, government increased planning and asserted more independence from the U.S. and Europe.

For Scandinavia and Latin America, the depression meant more government control.  The governments in the socialist Scandinavian countries increased their aid to citizens and protected retirement funds.  In Latin America, government increased planning and asserted more independence from the U.S. and Europe.

France was not hurt as badly due to its strong farming economy.  But a coalition of communists, socialists and moderates formed the Popular Front to enact laws to help workers, including pay increases and a maximum 40-hour work week.  Inflation took away any gains for workers by decreasing the real value of their earnings, and unemployment remained high.

France was not hurt as badly, due to its strong farming economy.  But a coalition of communists, socialists and moderates formed the Popular Front to enact laws to help workers, including pay increases and a maximum 40-hour work week.  Inflation took away any gains for workers by decreasing the real value of their earnings, and unemployment remained high.

== References ==

== References ==