AP European History

## Learning Outcomes

- Explain why many European democracies struggled to overcome the Great Depression
- Identify how **balanced budgets**, **deflation**, and the **gold standard** shaped policy choices
- Compare the responses of Britain, France, and Weimar Germany
- Understand how economic crisis weakened faith in parliamentary democracy
- Recall key dates, figures, and events including **1931**, **Heinrich Brüning**, and **Léon Blum**
- Use this topic in AP European History causation, comparison, and LEQ or DBQ arguments

## AP European History Syllabus

For the AP European History, you are expected to understand why interwar democracies struggled during the Great Depression, with a focus on the following syllabus points:

- Know that the deeper European crisis intensified after the **1931 banking collapse**, especially after the failure of **Credit-Anstalt** in Vienna
- Identify the main features of **orthodox economic policies**: balanced budgets, spending cuts, tight money, and defense of currencies under the gold standard
- Explain how the **gold standard** restricted governments’ ability to devalue currency or expand the money supply
- Understand why **protectionism** and tariffs worsened the downturn by shrinking international trade
- Compare Britain’s 1931 **National Government** and exit from the gold standard with France’s later and more divided response
- Explain how **Brüning’s** austerity and rule by **Article 48** in Germany deepened the crisis and weakened parliamentary democracy
- Understand the significance of **Keynesian economics** as an alternative to austerity, especially the idea of **deficit spending** and **public works**
- Distinguish between democratic failure to restore prosperity and outright democratic collapse, which happened most clearly in Weimar Germany

## Test Your Knowledge

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, look more closely at that area during your revision._

1. Why did adherence to the gold standard make recovery from the Great Depression harder?
2. How did Britain’s response to the Depression differ from that of Weimar Germany?
3. Why did Brüning’s policies damage support for democracy in Germany?
4. What reforms did the French Popular Front introduce in **1936**?
5. How would **John Maynard Keynes** have criticised balanced-budget policies during a depression?

## Introduction

The Great Depression was not only an economic disaster. In Europe during the interwar period, it became a political test of whether liberal and parliamentary governments could protect ordinary people during mass unemployment, bank failures, and collapsing trade. In many cases, democracies looked weak, divided, and slow. That mattered because when governments fail to provide relief, voters start looking for alternatives.

For AP European History, this topic sits in **Unit 8** and connects directly to the themes of **states and other institutions of power**, **poverty and prosperity**, and **national and European identity**. It is also a strong causation topic: economic collapse did not affect every democracy in the same way, but it often damaged confidence in democratic politics.

> **Key Term: Great Depression**
> The worldwide economic crisis of the early 1930s, marked by bank failures, collapsing trade, falling production, and mass unemployment.

### Why democratic governments struggled: orthodox economics made the crisis worse

The depression is often dated from the **1929** Wall Street crash, but in Europe the crisis became fully severe after the **1931** banking panic. The collapse of **Credit-Anstalt** in Vienna triggered fear across central and eastern Europe. Once depositors doubted banks, they rushed to withdraw savings. Banks then failed not always because they were fundamentally unsound, but because they lacked enough cash on hand to meet panicked withdrawals.

This created a chain reaction. Banks stopped lending. Businesses could not borrow. Consumers cut spending. Factories then had less reason to produce goods, so they dismissed workers. Unemployment then reduced spending even further. This is the classic downward spiral of depression.

Many democratic leaders responded with what historians call **orthodox economic policies**.

> **Key Term: orthodox economic policies**
> Traditional early-1930s policies such as balanced budgets, spending cuts, tight money, and defense of currency values rather than aggressive state stimulus.

These policies sounded responsible. Governments feared debt, inflation, and currency weakness. So they cut spending, reduced benefits, raised some taxes, and tried to keep their currency stable. The problem was that these measures reduced demand at exactly the wrong moment.

> **Key Term: deflationary policy**
> A policy that reduces demand, often through spending cuts, tax increases, wage reductions, or tight money, in order to protect budgets or currency stability.

Why did this hurt so much? In a depression, private demand is already weak. If the government also cuts spending, total demand falls further. Firms sell less, so they lay off more workers. That deepens the slump. This is why democracies often seemed unable to defeat the crisis: many leaders were using tools that worked against recovery.

The **gold standard** made matters worse.

> **Key Term: gold standard**
> A monetary system in which currency is tied to gold, limiting a government's ability to devalue, expand the money supply, or use inflation to encourage recovery.

If a government stayed on the gold standard, it could not easily let its currency fall in value or increase the money supply. Yet those steps might have made exports cheaper and credit easier. Instead, governments often defended their currencies through tight money and financial caution. In normal times, leaders saw that as stability. In depression conditions, it became a trap.

Protectionism also damaged recovery.

> **Key Term: protectionism**
> The use of tariffs and trade barriers to protect domestic producers from foreign competition.

Tariffs were politically tempting. If industry is suffering, it seems logical to block foreign goods. But when many countries all do this, international trade shrinks. That is exactly what happened after **1930**. Exports fell, and countries dependent on trade found fewer markets for their goods. Protectionism was not the only cause of failure, but it worsened an already severe contraction.

> **Test Tip:** In an LEQ or SAQ, do not say “democracies failed because of the Depression” and stop there. Explain the chain: banking crisis → falling credit and demand → orthodox policies → deeper unemployment → weaker faith in parliament.

### Britain and France: democracy survived, but recovery was uneven and limited

Britain is a good example of both failure and adaptation. In the 1920s, Britain already faced stagnation in older industries such as coal, shipbuilding, and steel. So when the Depression struck, the economy was vulnerable. In **1931**, political and financial crisis led to the formation of a **National Government**, first associated with **Ramsay MacDonald**.

Initially, Britain followed austerity logic: spending cuts, reduced benefits, and financial caution. That looked like the same mistaken pattern seen elsewhere. However, Britain also made an important change in **September 1931** when it left the gold standard.

This mattered because leaving the gold standard gave Britain more freedom. The pound could fall in value, making British exports more competitive. Monetary policy became more flexible. Recovery was still incomplete and unemployment stayed high in some regions, but Britain adjusted earlier than many other democracies.

So did Britain “fail”? In one sense, yes: it did not quickly end unemployment or produce a dramatic social solution. In another sense, no: constitutional government survived, and policy became more adaptable than in states that clung longer to orthodoxy.

France followed a different path. The Depression hit later and parliamentary politics were highly unstable. Frequent cabinet changes made sustained policy difficult. French leaders were often cautious and financially conservative, which slowed decisive action. France also stayed tied to financial orthodoxy longer than Britain, which limited recovery.

By **1936**, fear of the far right helped produce the **Popular Front**, a coalition of Communists, Socialists, and Radicals led by **Léon Blum**. This government is important because it shows that democracy could still answer crisis through reform rather than dictatorship.

The Popular Front introduced major labour reforms through the **Matignon Agreements** and related legislation:

- collective bargaining rights
- a **40-hour workweek**
- paid vacations

These reforms improved workers’ lives and defended democracy politically. But they did not solve all economic problems. Business opposition, political division, and **capital flight** weakened the government.

> **Key Term: capital flight**
> The movement of money out of a country because investors fear taxation, inflation, instability, or government policy.

France also faced pressure on the **franc**, which was eventually devalued in **1936**. Even then, recovery remained limited. By **1938**, the Popular Front had largely broken down.

The key comparison is this: Britain and France both remained democratic, but neither found a complete solution quickly. Britain adapted sooner because it left the gold standard earlier. France preserved democracy but struggled under cabinet instability, business resistance, and slower policy change.

> **Test Tip:** A strong comparison answer will not lump Britain and France together. Britain shows adaptation within democracy; France shows reform within democracy but also major limits. Germany shows democratic breakdown.

### Weimar Germany: economic failure became political collapse

Weimar Germany is the clearest case in which democracy failed to defeat the Depression and was itself destroyed in the process. Germany was especially exposed because much of its mid-1920s recovery depended on American loans. When U.S. credit dried up after **1929**, that support vanished.

The collapse of the coalition government in **March 1930** over unemployment insurance was a major turning point. President **Paul von Hindenburg** then appointed **Heinrich Brüning** as chancellor. Brüning’s response followed the pattern of orthodoxy: austerity, deflation, and budget balance.

This response was disastrous socially and politically. It deepened unemployment and hardship, but that alone does not explain democratic collapse. The constitutional issue matters just as much. Because Brüning could not secure parliamentary majorities, he governed largely through **Article 48**.

> **Key Term: Article 48**
> A clause in the Weimar Constitution allowing the president to rule by emergency decree in times of crisis.

Article 48 was supposed to be exceptional. Under Brüning, it became normal. That taught Germans that major decisions could be made without parliament. So even before Hitler became chancellor, democratic practice was already being hollowed out.

Brüning then called elections in **September 1930**, expecting support for his policies. Instead, the Nazis surged from a fringe movement to a major force. In the textbook account, they rose from **12 seats** to **102 seats**. Later they became the largest party in the Reichstag, winning **196 seats** in **November 1932**.

Why did voters move toward extremism? Several causes worked together:

- unemployment and despair
- resentment over Versailles
- hatred of Communism
- political violence
- loss of confidence in parliamentary government

The Nazis exploited all of these. They offered scapegoats, discipline, and national rebirth. They also looked dynamic next to moderate parties that seemed helpless. Brüning’s policies therefore did more than fail economically: they discredited republican institutions.

This is the core AP Euro argument. Economic crisis alone did not automatically produce Hitler. What turned crisis into dictatorship was the interaction between social misery and constitutional breakdown. Emergency decrees, anti-parliamentary elites, and electoral fragmentation made authoritarian solutions seem acceptable.

By **January 1933**, Hindenburg appointed **Hitler** chancellor. Soon after, the Reichstag fire and the Enabling Act destroyed the last restraints on Nazi rule.

### Keynes and the alternative democracies mostly did not use

The main intellectual alternative to orthodox policy came from **John Maynard Keynes**.

> **Key Term: Keynesian economics**
> The view that in a severe downturn governments should increase demand through deficit spending and public works instead of focusing first on balanced budgets.

Keynes argued that when private demand collapses, the government must step in. If people are unemployed and businesses are not investing, the state can spend money directly, especially on **public works**, to restore income and demand.

> **Key Term: deficit spending**
> Government spending that exceeds government revenue, used to stimulate the economy during a downturn.

Here is the basic reasoning:

1. Government hires workers or funds projects.
2. Workers receive wages.
3. Those wages are spent on goods and services.
4. Businesses then have more customers.
5. Production and employment begin to recover.

This is why Keynes criticised immediate budget balance during a depression. Balanced budgets may appear prudent, but if they shrink demand further, they prolong suffering.

Most democracies in the early 1930s did not fully apply this approach. That matters for exam answers. Do not imply that Europe quickly became Keynesian. The significance of Keynes lies partly in contrast: he offered a clear alternative while many governments still followed austerity.

A useful contrast case is **Sweden**, where Social Democrats after **1932** used more interventionist policies, including relief and public works, while keeping democracy intact. This helps prove that dictatorship was not the only possible result of crisis.

For AP Euro, the best judgement is balanced. Democracies often failed to defeat the Depression because they responded slowly, remained tied to orthodox economics, and were constrained by parliamentary division and the gold standard. But outcomes varied. Britain adapted and survived. France reformed but remained fragile. Germany’s democratic failure became dictatorship.

## Key Point Checklist

_This article has covered the following key knowledge points:_

- The Great Depression in Europe became especially severe after the **1931** banking crisis
- The collapse of **Credit-Anstalt** helped spread financial panic across central Europe
- Many democracies used **orthodox economic policies** such as balanced budgets, tight money, and spending cuts
- **Deflationary policies** often deepened unemployment because they reduced demand further
- The **gold standard** limited governments’ ability to devalue currency or expand the money supply
- **Protectionism** and tariffs worsened the slump by shrinking international trade
- Britain formed a **National Government** in **1931** and left the gold standard in **September 1931**
- France’s **Popular Front** under **Léon Blum** introduced labour reforms in **1936**, including the 40-hour week and paid vacations
- Weimar Germany under **Heinrich Brüning** used austerity and governed through **Article 48**
- Brüning’s policies deepened hardship and weakened confidence in parliamentary democracy
- Nazi growth depended on both economic misery and political breakdown
- **John Maynard Keynes** argued for **deficit spending** and **public works** as a better response to depression

## Key Terms and Concepts

- Great Depression
- orthodox economic policies
- deflationary policy
- gold standard
- protectionism
- capital flight
- Article 48
- Keynesian economics
- deficit spending


Global Economic Crisis - Democracies failed to defeat depression