The GLOBAL ECONOMY Between the World Wars [AP World History Review—Unit 7 Topic 4]

Economic Turmoil Post World War I

The Aftermath of World War I

• Following World War I, the global economy faced significant challenges, leading to widespread economic disaster rather than prosperity.

• Germany was particularly affected due to the Treaty of Versailles, which imposed heavy reparations that they struggled to pay.

Hyperinflation in Germany

• To cope with debt and reparations, the German government resorted to printing more money, resulting in hyperinflation.

• By November 1923, the exchange rate had drastically changed; one dollar could be exchanged for 4.2 trillion marks.

• The cost of basic goods skyrocketed; a loaf of bread that cost 160 marks in 1922 soared to 200 billion marks by 1923.

Global Economic Impact

• Germany's inability to pay reparations affected Britain and France, who also struggled with their debts to the United States.

• The economic crisis extended globally, impacting colonial governments reliant on their parent countries' economies.

Recovery Efforts and Economic Policies

Stabilization through U.S. Loans

• By 1924, Germany stabilized its economy by borrowing from U.S. banks to meet reparation payments.

Soviet Union's Economic Challenges

• Russia exited WWI during the Russian Revolution but faced severe economic devastation; Lenin introduced the New Economic Policy (NEP) in 1923 allowing limited free market practices while maintaining state control over major industries.

Stalin's Industrialization Plans

• After Lenin's death in 1924, Joseph Stalin took power and aimed for rapid industrialization through aggressive five-year plans.

• Collectivization of agriculture was implemented under Stalin’s regime; small farms were merged into large collective farms owned by the state.

Consequences of Collectivization

Resistance and Repression

• Wealthy landowners (kulaks) resisted collectivization fiercely; many were arrested or executed as part of Stalin’s crackdown on dissent.

Famine in Ukraine

Economic Turmoil and Recovery: The Great Depression

The Prelude to the Great Depression

• The global economy faced significant challenges post-World War I, with the United States initially providing a stabilizing influence through its booming economy.

• However, the 1929 US Stock Market crash marked a turning point, plunging America into the Great Depression and impacting economies worldwide reliant on American investments.

Government Response to Economic Crisis

• Historically, the US government maintained a hands-off approach towards economic management until the severity of the Great Depression necessitated intervention.

• Franklin D. Roosevelt's election brought about rapid changes as he implemented numerous government-sponsored policies collectively known as the New Deal.

Key Features of the New Deal

• The New Deal focused on job creation through infrastructure projects, establishing a government-sponsored retirement program, and introducing medical insurance for elderly citizens and children.