LECTURE 4

Socio-economic consequences of the WWI

and economic development of the USA and
Germany

Dr. Kseniia Lopukh

Outline of the lecture

USA after the WWI

Roaring 1920s
Great Depression
Economic consequences of the WW1 for Germany
Germany’s economic development and the rise of Hitler
Trade during the Interwar Period
The legacies of the war for the US economy

the cost of the war in terms of resources

the change in the role of the United States in
international capital markets
the long-run changes in ideas about the role of the
government in the economy
 The cost of the war: people

The United States mobilized about 4.8 million men in WWI. About 2.086
million went overseas, and about 1.39 million saw combat.
About 204,000 Americans suffered non-mortal wounds, and
about 117,000 died. Of those who died, it is estimated that about 50,000
died in battle, and about 67,000 died from disease. The most important
disease was pneumonia, which accounted for about 40,000 deaths.
Compared to the total US population in 1920 of 106,466,000 or the total
labor force of 42,434,000, these numbers may look relatively small: deaths
were only 0.11% of the population and only 0.28% of the workforce.
The cost of the war: money
The role of the United States in international capital markets

USA: the international investment position, 1914–1929

(selected years, billions of dollars)
 The ideological changes: role of government
The impact of World War I appears to have been relatively limited

little increased postwar spending

the institutional legacies were limited. Most of the wartime
regulatory control agencies were terminated as soon as the war
ended
the most important domestic institutional legacy of the war was
prohibition - prohibition of alcohol

policy of ‘a return to normalcy’ (Warren G. Harding in 1920,

Republican, 29th president of the USA)
Roaring 1920-1929 in the USA

Adjusting to peacetime
Changes in American Society
The Jazz Age
The Economy of the 1920’s
 Roaring 1920-1929 in the USA

Adjusting to peacetime Changes in American The Jazz Age The Economy of the 1920’s
Society
Treaty of Versailles failed No booze New dances Stock market boom
Poor economy (striking The power of women Flagpole sitting Heavy purchasing
workers, 1919) Mass culture Dance marathons Rural poverty
Fears of communism, Social Conflict Sports heroes Unemployment
socialism, unrest and Celebrities Industrial Growth
revolution Golden Age of Hollywood
Key Takeaways
The 1920s was a period of vigorous economic growth in the United States.
That decade marked the beginning of the modern era as we know it.

Rapid rise in prosperity induced sweeping changes in technology, society,

and economy.

1920s prosperity also gave rise to new ideas and ways of thought. Voting
and independence were new rights and concepts accorded to women.
Financial innovations allowed exuberant investment in the stock market,
which supported rapid growth for many companies and the labor sector.
Real GDP per capita, 1919-1930
Farm population and Employment
 Industrial Growth Industrial Growth

More new products to buy

Washing machines People buy on credit
Vacuum cleaners High taxes (tariffs) on imports
Tax cuts for the wealthy
Radios
Toasters Economy stimulated but is there a
Cars problem?
Reckless spending
Increasing High supply = low price

economy The Stock Market

1920’s – Bull Market

financial innovations
buying shares by people
Causes of Great Depression, 1929-1933

https://slideplayer.com/slide/9684961/
Great Depression, 1929-1933
Impact and Effects of the Great Depression on Americans

During an economic depression unemployment rises, there is an

increased number of bankruptcies, and an increased number of poor
citizens.
During the Depression a large number of banks and businesses failed.
One – fourth of workers were without jobs.
A large number of people were hungry and homeless.
Farmers’ income fell to low levels.
Many people moved to Hoovervilles, which were shacks made by
homeless people, because they were forced to leave their homes due to
economic reasons.
Roosevelt’s New Deal
President Franklin D. Roosevelt succeeded Herbert Hoover in 1932 as
president.
Hoover was blamed for being unable to solve the problems of the Great
Depression.
He was president when the Great Depression began.
Roosevelt created programs that were aimed at economic relief, recovery,
and reform. They will be known as the New Deal.
The New Deal programs were passed by Congress during the “Hundred
Days”. Other parts of the New Deal will be passed in the years to come.
New Deal Programs
The New Deal affected banking, the stock market, industry, agriculture,
public works, relief for the poor, and conservation of resources.

It reformed banking problems, farming overproduction, and stock market

risks.

The New Deal gave the federal government more control over the nation’s
economy as well as the idea that the government must take responsibility
for helping those in need.

Franklin Roosevelt spoke over the radio to explain his New Deal programs
to the American public. These will be called “Fireside Chats”.
Specific New Deal Programs

Agricultural Adjustment Act – (AAA) – Paid farmers not to grow crops.

Civilian Conservation Corps – (CCC) – Provided jobs for young men.
Tennessee Valley Authority – (TVA) – Built dams to provide cheap electric
power to seven southern states and built schools and health centers.
Public Works Administration – (PWA) – Built ports, schools, and aircraft
carriers.
Federal Deposit Insurance Corporation – (FDIC) Insured savings accounts
in banks approved by the government Social Security Act – (SSA)
Works Progress Administration – (WPA) Employed men and women to
build hospitals, schools, parks, and airports.

etc.
The End of the Great Depression

The Great Depression will last from 1929 to 1941.

On December 7th, 1941 the Japanese will bomb the U.S. naval base at
Pearl Harbor and force the U.S. into World War II.
Factories begun producing war material thus employing workers.
Farmers produced food and crops needed for the war effort.
Millions of men and women would find themselves in the armed forces.

By entering the war, the U.S. economy will get the boost it had been
looking for.
 Postwar Germany

Key points

After World War One, Germany was severely punished by the terms of the
Treaty of Versailles.

The newly formed Weimar Republic faced much opposition from both
right- and left-wing groups.

From 1918 to 1933, reparations payments, hyperinflation and the Great

Depression caused much economic hardship for the German people.
How did the Treaty of Versailles punish Germany?

The punishments from the Treaty of Versailles can be remembered with

the acronym ‘BRAT’: Blame, Reparations, Armed forces and Territory.
Hyperinflation in 1923
Gustav Stresemann's
recovery
From 1923, Germany started to show signs
of recovery.

By 1928 industrial production levels were

higher than those of 1913
Between 1925 and 1929 exports rose by
40 per cent
Hourly wages rose every year from 1924
to 1929 and by 10 per cent in 1928 alone
IG Farben, a German chemical
manufacturing company, became the
largest industrial company in Europe
Generous pension, health and
unemployment insurance schemes were
introduced from 1927
Signs of continued weakness
of Weimar Republic
Hitler’s Rise to Power
Agricultural production did not recover to
its pre-war levels
Death of President: in 1934, Hitler was
It spent more on imports than it earned
appointed Chancellor, President Paul
from exports, so Germany was losing
von Hindenburg died, he combines the
money every year
two roles and becomes “fuhrer”.
Unemployment did not fall below 1.3
Treaty: reparations WAY too harsh, want
million and in 1929 increased to 1.9
back colonies, etc. and Hitler promises to
million
do something about this.
German industry became dependent
Speaking Skills: uses propaganda well,
upon loans from the USA
defends himself on the radio, publishes a
The government ended up spending
book.
more than it received in taxes and so
Economic: country is in a depression, US
continued to run deficits from 1925
takes back loans.
onwards
Weimar Failures: can’t deal with
depression (think Hoover…), causes
inflation by printing more money