The Age of Anxiety



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The Age of Anxiety

  1. The Search for Peace and Political Stability

    1. Germany and the Western Powers

      1. Under the Allies’ naval blockade and threat to extend military occupation from the Rhineland had Germany’s new government signed the Treaty of Versailles in 1919

      2. The treaty had neither broken nor reduced Germany, which was still very strong

      3. By the end of 1919, France wanted to stress the harsh elements in the Treaty of Versailles and much of rich, industrialized France had been devastated

        1. Expected costs of reconstruction were staggering and like Great Britain, France had also borrowed large sums from the United States during the war

        2. Betrayed by the United States, many French leaders saw that large reparation payments could hold Germany down indefinitely and achieve its goal of security

        3. After the war a healthy, prosperous Germany appeared to be essential to the British economy as Germany had been Great Britain’s second-best market

        4. Many English people agreed with economist John Maynard Keynes (Economic Consequences of the Peace) who argued that reparations and harsh economic measures would indeed reduce Germany to the position of a second-rate power

        5. However such impoverishment would increase economic hardship in all countries

      4. The British were suspicious of France’s army (largest) and France’s foreign policy

        1. Since 1890, France had looked to Russia as an ally against Germany, but France soon turned to the newly formed states of eastern Europe of diplomatic support

        2. In 1921 France signed a mutual defense pact with Poland and associated itself closely with the so-called Little Entente, an alliance that joined Czechoslovakia, Rumania and Yugoslavia against defeated and bitter Hungary (League of Nations)

      5. The Allied reparations commission complete its work in April 1921 and announced

        1. Germany had to pay the enormous sum of 132 billion gold marks (33 billion) in annual installments of 2.5 billion bold marks; facing possible occupation of more of its territory, the young German republic made its first payment in 1921

        2. In 1922, wracked by rapid inflation and political assassinations and motivated by hostility, the Weimar Republic announced its inability to pay more and proposed a moratorium on reparations for three years (implication that money be reduced)

      6. The British were willing to accept his offer, but the French were not and led by their legalistic prime minister, Raymond Poincare, France decided they either had to call German’s bluff or see the entire peace settlement dissolve to France’s disadvantage

      7. Despite strong British protests, France and ally Belgium decided to pursue a firm policy and in 1923, French and Belgian armies began to occupy the Ruhr district, heartland of industrial Germany, creating a serious international crisis of the 1920s

    2. The Occupation of the Ruhr

      1. The strategy of Poincare and his French supporters was simple: since Germany was resisting to pay reparations in hard currency or gold, France and Belgium would collect reparations in kind—coal, steel, and machinery (used occupation)

      2. The German government ordered the people of the Ruhr to stop working and start passively resisting the French occupation; 10 percent of Germany need relief

        1. The French answer to passive resistance was to seal off not only the Ruhr but also the entire Rhineland from the rest of Germany, letting in only enough food; the French also revived plans for a separate state to be formed in the Rhineland

        2. French armies could not collect reparations from striking workers at gunpoint and even though French occupation was paralyzing Germany and its economy (80 percent of Germany’s steel and coal); occupation of the Ruhr turned rapid German inflation into runaway inflation and the German government began to print money to pay its bills (Germany money rapidly lost all value)

        3. Runaway inflation brought about a social revolution as middle-class virtues of thrift, caution, and self-reliance were mocked by catastrophic inflation and the German middle and lower middle classes burned with resentment

        4. Many hated and blamed Western governments and their own government

      3. In August 1923, Gustav Stresemann assumed leadership of the government and adopted a compromising attitude calling off the passive resistance in the Ruhr and in October agreed in principle to pay reparations for asked for a re-examination of Germany’s ability to pay; Poincare accepted (he became increasingly unpopular)

      4. In Germany and France, power was passing to the moderates and after five years of hostility and tension culmination in a kind of undeclared war in the Ruhr in 1923, Germany and France decided to give compromise and cooperation a try

    3. Hope in Foreign Affairs, 1924-1929

      1. The reparations commission appointed an international committee of financial experts headed by American banker Charles G. Dawes to re-examine reparations in Germany; the committee made a series of recommendations known as the Dawes Plan (1924)

        1. The plan having been accepted by France, Germany, and Britain stated that German reparations were to be reduced and placed on a sliding scale, like income tax, payments depending on the level of German economic prosperity

        2. The Dawes Plane also recommended large loans to Germany, which came U.S.; these loans were to help Stresemann’s government put its new currency on a firm basis and promote German recovery; Germany would get private loans from the U.S. and pay reparations to France and Britain, allowing them to repay the U.S.

      2. The German republic experienced a spectacular economic recovery and Germany easily paid about 1.3 billion dollars in reparations in 1927 and 1928

      3. In 1929 the Young Plan, named after the American businessman representing the U.S., further reduced German reparations and formalized the link between German reparations and French-British debts to the United States (worldwide recovery)

      4. In 1925 the leaders of Europe signed a number of agreements at Locarno, Switzerland

      5. Stresemann had suggested a treaty with France’s Aristide Briand (returned to office in 1924) and by this treaty, Germany and France pledged to accept their common border, and both Britain and Italy agreed to fight either country it if invaded the other

        1. Stresemann also agreed to settle boundary disputes with Poland and Czechoslovakia by peaceful means and France promised those countries military aid if they were attacked by Germany

        2. Stresemann and Briand shared Nobel Peace Prize in 1926; the spirit of Locarno gave Europeans a sense of growing security and stability in international affairs

      6. In 1926 Germany joined the League of Nations, where Stresemann continued his “peace offensive” and in 1928 fifteen countries signed the Kellogg-Briand Pact, which “condemned and renounced war as an instrument of national policy”

      7. The pact grew out of a suggestion by Briand that France and the United States renounce the possibility of war between their two countries; Secretary of State Frank Kellogg had proposed a multinational pact; optimism rested on hope that United States would accept its responsibilities as a world power and contribute to stability

    4. Hope in Democratic Government

      1. In Germany in 1923 communists momentarily entered provincial governments and in November a nobody named Adolf Hitler proclaimed a “national socialist revolution” but Hitler’s plot to seize control of the government was poorly organized and easily crushed, and Hitler was sentenced to prison (wrote My Struggle in prison)

      2. Throughout the 1920s, Hitler’s National Socialist party attracted support only from few anti-Semites, ultranationalists, and disgruntled ex-servicemen; democracy seemed to take root in Weimar Germany, new currency, and economy boomed

      3. The moderate businessmen who tended to dominate the various German coalition governments were convinced that economic prosperity demanded good relations with the Western powers and supported parliamentary government at home

      4. Although elections were held regularly, there were political divisions in the country

        1. Many nationalists and monarchists populated the right and the army; Germany’s Communists were active on the right and the Communist, directed from Moscow, reserved their greatest hatred for the Social Democrats (betrayed revolution)

        2. The working class were divided politically, but most supported the nonrevolutionary but socialist Social Democrats (similar to France’s situation)

        3. In France, Communists and Socialists battled for the support of the workers and after 1924 the democratically elected government rested in the hands of coalitions of moderates, and business interests were well represented

        4. The expenses, however, led to a large deficit and substantial inflation; Poincare was recalled to office, while Briand remained minister for foreign affairs

        5. The Poincare government proceeded to slash spending and raise taxes, restoring confidence in economy; franc was “saved” and good times prevailed until 1930

      5. Despite political shortcomings, France attracted artists and writers from all over the world in the 1920s (much of intellectual and artistic ferment flourished in Paris); France appealed to foreigners and the French as a harmonious combination of small businesses and family farms, of bold innovation and solid traditions

      6. Britain faced challenges after 1920; wartime trend toward greater social equality continued helping maintain social harmony but the great problem was unemployment

        1. In June 1921, 23 percent of the labor force were out of work and throughout the 1920s unemployment hovered at around 12 percent; the state provided unemployment benefits of equal size to all those without jobs and supplemented those payments with subsidized housing, medical aid, and old-age pensions

        2. Relative social harmony was accompanied by the rise of the Labour party as the determined champion of the working classes and of greater social equality

        3. Committed to the kind of moderate, “revisionist” socialism, the Labour party replaced the Liberal party as the main opposition to the Conservatives

        4. The prominence of the Labour party reflected the decline of old liberal ideals of competitive capitalism, limited government control, and individual responsibility

      7. In 1924 and 1929, the Labour party under Ramsay MacDonald governed the country with the support of the smaller Liberal party yet Labour moved toward socialism gradually and democratically, as the working classes won new benefits

      8. The Conservatives under Stanley Baldwin showed the same compromising spirit on social issues and social unrest in Britain was limited in the 1920s and 1930s; In 1922 Britain granted southern, Catholic Ireland full autonomy after bitter guerrilla war, thereby removing an other source of prewar friction (cautious optimism in late 1920s)

  2. The Great Depression 1929-1939

    1. The Economic Crisis

      1. Though economic activity was declining in many countries by 1929, the crash of the stock market in the United States in October of that year started the Great Depression

        1. The American stock market boom had seen stock prices double between early 1928 and September 1929, was built on borrowed money

        2. Many investors and speculators had bought stocks by paying only a small fraction of the total purchase price and borrowing the remainder from stock brokers

        3. Such buying “on margin” was dangerous as when prices started falling, the margin buyers either had to put up more money to sell shares to pay off brokers

        4. As thousands of people started selling all at once, the result was a financial panic

      2. The general economic consequences were swift and severe; battered investors and citizens started buying fewer goods and production began to slow down and unemployment began to rise (the American economy was caught in spiraling decline)

      3. The financial panic in the United States triggered a worldwide financial crisis and that crisis resulted in a drastic decline in production in country after country

        1. Throughout the 1920s, American bankers and investors had lent large amounts of capital not only to Germany but also to many other countries and once panic broke, New York bankers began recalling them (gold reserves to United States)

        2. It became very hard for European business people to borrow money and the panicky public began to withdraw its savings from the banks; these banking problems eventually led to the crash of the largest bank in Austria in 1931

        3. The recall of private loans by American bankers accelerated the collapse in world prices, as business people around the world dumped industrial goods and agricultural commodities in a frantic attempt to get cash to pay what they owed

      4. The financial crisis led to a general crisis of production: between 1929 and 1933, world output of goods fell by an estimated 38 percent (every country turned to itself)

      5. In 1931, Britain went off the gold standard, refusing to convert bank notes into gold, and reduced the value of its money; Britain’s goal was to make its good cheaper and more salable in the world market but because more than twenty nations including the U.S. in 1934 also went off the gold standard, no country gained a real advantage

      6. Country after country followed the example of the United States when it raised protective tariffs to their highest levels ever in 1930 trying to seal off national markets

      7. Two factors probably best explain the relentless slide from 1929 to early 1933

        1. The international economy lacked a leadership able to maintain stability when the crisis came; the unites States cut back its international lending and erected tariffs

        2. Poor national economic policy in almost every country existed; government generally cut their budgets and reduced spending when they should have run large deficits in attempt to stimulate economies (Since World War II, such a “counter-cyclical policy” advocated by Keynes became a good weapon against depression)

    2. Mass Unemployment

      1. The need for large-scale government spending was tied to mass unemployment; as the financial crisis led to cuts in production, workers lost their jobs and purchased less

      2. In Britain between 1930 and 1935, an average of 18 percent of the workers were unemployed while in 1932, unemployment soared to about 33 percent of the entire labor force in the United States (fourteen million people were out of work)

      3. Only by pumping new money into the economy could the government increase demand and break the vicious cycle of decline; along with economic effects, mass unemployment posed a great social problem that mere numbers cannot express

        1. Millions of people lost their spirit and dignity in an apparently hopeless search for work; homes and ways of life were disrupted in millions of personal tragedies

        2. People postponed marriages they could not afford, and birthrates fell sharply; there was an increase in suicide and mental illness; poverty became a reality

      4. Mass unemployment was a terrible time bomb preparing to explode

    3. The New Deal in the United States

      1. Of all the major industrial countries, only Germany was harder hit by the Great Depression, or reacted more radically to its, than the United States

      2. The Great Depression and the response to it marked a major turning point in history

        1. President Herbert Hoover and his administration initially reacted to the stock market crash and economic decline with dogged optimism and limited action

        2. When the full force of the financial crisis struck Europe in summer of 1931 and boomeranged back to the United States, people’s worst fears became reality

        3. Banks failed, unemployment soared and industrial production fell 50 percent

        4. Franklin Delano Roosevelt (crippled by polio) won a landslide electoral victory with grand but vague promises of a “New Deal for the forgotten man”

      3. Roosevelt’s basic goal was to reform capitalism in order to preserve; Roosevelt rejected socialism and government ownership of industry in 1933 and to right the situation, he chose forceful government intervention in the economy

      4. Roosevelt and his advisers were greatly influenced by American experience in World War I as the American economy had been thoroughly planned and regulated; government adopted similar policies to restore prosperity and reduce social inequality

      5. Government intervention and experimentation were combined in the New Deal

        1. The most ambitious attempt to control and plan the economy was the National Recovery Administration (NRA) that was established by Congress

        2. The key idea was to reduce competition and fix prices and wages for everyone

        3. This goal required government, business, and labor to hammer out detailed regulations for each industry (sponsored public work projects assure recovery)

        4. By the time the NRA was declared unconstitutional in 1935, Roosevelt and the New Deal were already moving away from planning and controlling the economy

      6. Roosevelt and his advisers attack the key problem of mass unemployment; new agencies were created to undertake a vast range of public works projects

        1. The Works Progress Administration (set up in 1935) employed at its peak in late 1938, the government agency employed more than three million individuals

        2. The WPA was enormously popular in a nation long schooled in self-reliance; the hope of a job with the government helped check the threat of social revolution

        3. The U.S. government in 1935 established a national social security system, with old-age pensions and unemployment benefits to protect many workers

        4. The National Labor Relations Act of 1935 gave unions organizers the green light by declaring collective bargaining to be the policy of the United States

        5. Following some strikes (sit-down strike at GM) the union membership more than doubled between 1935 and 1940 and government rulings helped ordinary people

      7. The New Deal was only partly successful as a response to the Great Depression; the economic situation then worsened seriously in the recession of 1937 and 1938, production fell sharply, and unemployment was still ten million in September 1939

      8. The New Deal never did pull the United States out of the depression; many argue the New Deal did not put enough money into the economy through deficit financing and like his predecessors, Roosevelt was attached to the ideal of the balanced budget

    4. The Scandinavian Response to the Depression

      1. Of all the Western democracies, the Scandinavian countries under Socialist leadership responded most successfully to the challenge of the Great Depression

      2. Having grown in the late nineteenth century, the Socialists became the largest political party in Sweden and then in Norway after the First World War

      3. In the 1920s they passed important social reform legislation for both peasants and workers, gained practical administrative experience, and developed unique socialism

      4. Flexible and nonrevolutionary, Scandinavian socialism grew out of a strong tradition of cooperative community action (labor leaders and capitalists worked together)

      5. When the economic crisis struck in 1929, Socialists in Scandinavia built on pattern of cooperative social action and Sweden in particular pioneered in the use of large-scale deficits to finance public works and maintained production and employment

      6. Scandinavian governments also increased social welfare benefits, from old-age pensions and unemployment insurance to subsidized housing + maternity allowances

      7. All this spending required a large bureaucracy and high taxes, first on the rich and then practically everyone (private, cooperative enterprise, and democracy thrived)

    5. Recovery and Reform in Britain and France

      1. In Britain MacDonald’s Labour government and then, after 1931, the Conservative-dominated coalition government followed orthodox economic theory; budget was balanced, but unemployed workers received barely enough welfare to live

      2. For Britain, the years after 1932 were actually somewhat better than the 1920s had been, quite the opposite situation in the United States and France

      3. The performance reflected the gradual reorientation of the British economy

        1. After going off the gold standard in 1931 and establishing protective tariffs in 1932, Britain concentrated increasingly on the national market

        2. New industries, such as automobiles and electrical appliances, grew in response

        3. Low interest rates encouraged a housing boom and by the end of the decade, there were highly visible differences between the old industrial areas of the north and the new, growing areas of the south (encouraged Britain to look inward)

      4. Because France was relatively less industrialized and more isolated from the world economy, the Great Depression came late, but once it hit France, it stayed and stayed

        1. Economic stagnation both reflected and heightened an ongoing political crisis there were no stability in government and coalition cabinets formed and fell

        2. The French lost the underlying unity that had made government instability bearable before 1914; fascist-type organization agitated against parliamentary democracy and looked to Mussolini’s Italy and Hitler’s Germany for inspiration

        3. In February 1934 French fascists and semi-fascists rioted and threatened to overturn the republic; at the same time, the Communist party and workers opposed to the existing system were looking to Stalin’s Russia for guidance

      5. Frightened by the growing strength of the fascists at home and abroad, the Communists, the Socialists, and the Radicals formed an alliance—the Popular Front—for the national elections of May 1936 (victory reflected trend of polarization)

      6. Communists and Socialists increased their numbers while the moderate Radicals slipped and the conservatives lost ground to the semi-fascists

      7. Blum’s Popular Front government made the first and only attempt to deal with the social and economic problems of the 1930s in France; the Popular Front encouraged the union movement and launched a far-reaching program social reform, complete with paid vacations and a forty-hour workweek (inflation and cries of revolution)

      8. Wealthy people sneaked their money out of the country, labor unrest grew, and France entered a sever financial crisis; Blum forced to announce “breathing spell”

      9. The fires of political dissension were also fanned by civil war in Spain and communists demanded that France support the Spanish republicans, while many French conservatives would gladly have joined Hitler and Mussolini in aiding the attack of Spanish fascists (Blum was forced to resign in June 1937, the Popular Front quickly collapse and France was within sight of civil war)


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