2 days before the armistice was signed, the Kaiser abdicated. Germany became a republic, called the Weimar Republic. The treaty of Versailles took land from Germany, reduced its armed forces and forced it to pay huge reparations. The government had to accept the treaty. There were strikes and several revolts, called putsches.
The Weimar Republic faced the economic problems caused by four years of warfare. They couldn’t pay the reparation payments in time. In 1923 they were so far behind, that France took over the Ruhr, and took the profits as part of the reparations. This made the economic situation worse. Confidence in the German currency collapsed, and inflation ran out of control.
In 1923 Gustav Stresemann became chancellor and foreign minister of the Weimar government. He stopped trying to rescue the mark, and introduced the Rentenmark, and new currency. He cut government spending and set up government building schemes all over Germany to provide work for the unemployment.
In 1929 the German economy started to recover. The inflation decreased and unemployment dropped. Germany was seen as a major power in Europe. But Germany was dependent on loans from the USA, and had a long road to go.
2.14 USA – BOOM!
After the First World War, things in the USA seemed to go well. Mass production meant many new, cheaper, consumer goods.
Americans began to use hire purchase schemes, a new way to buy things without saving enough money for it. They paid a small amount of money weekly or monthly to pay it off. The hire purchase price was higher than the cash price, because of the interest. But people still like to hire it, so they can buy things straight away. This was a part of the Boom spiral: People bought new goods, factories employed more workers to make goods, the workers had good wages to buy more goods etc.
But farmers and rural workers had a bad life compared to the workers in the city. This was because the USA sold food to European countries, whose agriculture was disturbed. After the First World War the production went back to full production, so there was less food bought from the USA.
The Klu Klux Klan was a racist organization which used intimidation, beatings or murders to get its way. It grew really fast after the First World War. It began to interfere in politics too, but it lost members after one of its leaders was convicted of rape and murder.
2.15 Bust! The New Deal
The boom in the USA came to an end in 1929. The Americans who could buy new consumer goods did that, but the demand for goods began to fall, and so did company profits. The Wall Street stock market was popular, because they made lot of profit, so you could earn much money with the stocks. But when the profit decreases in 1929, it caused the Wall Street Crash.
People lost confidence in the economy and thought it only could go worse. They lost interest in buying consumer goods and shares. They saved their money instead of spending it, which is bad for the economy. Because, as less was being sold, factories made fewer goods, and factories need fewer workers. So people lost their jobs, there was less buying, less products were made, and more workers sacked. The Boom spiral has turned in a Bust spiral, and America had entered the Depression. When people realized that banks had made loans that would not be repaid, they took their money out of the banks. Some banks were bankrupted.
There was no unemployment benefit in the USA, and people who lost their jobs were on the edge of starvation. People bought their houses on mortgages, and when they did not have money to pay the payments of the houses, the houses were taken away by the bank, to repay the loans. Some unemployed people build shanty towns, because they had no other place to live. These were called Hoovervilles (after president Hoover). He believed it was wrong for the government to interfere in business.
President Roosevelt promised a ‘New Deal’. He said that people had to get out the poverty, the economy needed help and the system had to be changed to stop another depression.
Roosevelt defeated Hoover easily. The government created many new jobs by spending a deal of government money. Roosevelt was able to restore Americans’ confidence in their own country. He was very successful.
2.16 The Depression in Europe
In the First War and after, the USA lend money to Allies, especially German. With that money reparations were bought, and the Allies bought American goods, and boosted the American economy. This was a dangerous circle, because when America plunged in Depression, it could not make other loans.
The economies of Europe also got in Depression. The Government cut down the wages to pay back the loans, so people had less money to spend, and demand dropped. The USA bought less from Europe, so the factories sold fewer exports. This caused bankrupt factories and employing fewer people, so unemployment rose. This caused that people had less money to spend, and goods reduced demand. Thousands of people were forced into poverty.
The Dutch government tried to create work for the unemployment. The crisis years for the Netherlands were form 1931-1937. Because the Netherlands were trading much, but Europe hadn’t something to trade. So there was mass unemployment. Wage cuts meant that the people who had jobs even had a hard life. People lived on the very basics because of the Poverty Fund, so people wanted to look for jobs. Even people who worked on their selves get basic wages.
Wealthy people set up organizations to help the unemployment. They helped many individual families. In 1937 the economy improved, but it took many years before it reached the same level as before the First World War.