Europe and the Great Depression of the 1930s

I.               The Great Depression

A.     Causes

1.     Several long-term problems negatively affected the U.S. economy

a.     Companies overproduced consumer goods.

b.     Consumers did not have enough money or credit to purchase goods.

c.      Farmers overproduced agricultural products, driving down prices and incomes.

2.     The American stock market crash caused enormous financial losses and triggered a global financial crisis.

3.     Worried American bankers recalled loans to European banks. Austria’s largest bank failed, starting a financial panic in central Europe.

4.     The financial crisis led to sharp declines in global trade and manufacturing.

5.     The United States raised protective tariffs, forcing other nations to retaliate.

6.     Governments cut budgets and reduced spending, helping to accelerate the downward economic spiral.

B.     Impact on Europe

1.     Replaced the optimistic spirit of the late 1920’s with a growing sense of doubt and fear

2.     Created uncertainty and insecurity for millions of unemployed workers

3.     Prompted increased government economic intervention

4.     Created opportunities for demagogues and dictators to exploit people’s fears.