WWI and the Great Depression p. 547 - 558 War Erupts in Europe пЃ® пЃ® пЃ® пЃ® Because of nationalism вЂ“ a feeling of intense loyalty to oneвЂ™s country or group вЂ“ Britain and Germany raced to build the largest navy. To protect themselves, European nations began to form alliances. In June 1914, a Serbian terrorist assassinated Archduke Franz Ferdinand, heir to the throne of the AustroHungarian Empire. Austria-Hungary declared war on Serbia. War Erupts in Europe пЃ® пЃ® пЃ® пЃ® Russia decided to help Serbia, which caused Austria-HungaryвЂ™s ally Germany to declare war on Russia as well as on RussiaвЂ™s ally France. Germany then invaded Belgium, so Britain, which had promised to protect Belgium, declared war on Germany. On one side were the Allied Powers вЂ“ Great Britain, France, and Russia. Later Japan and Italy joined. On the other side were the Central Powers вЂ“ Germany, Austria-Hungary, and the Ottoman (Turkish) Empire America Enters the War пЃ® пЃ® пЃ® пЃ® When World War I began, President Wilson declared the United States to be neutral. As the war went on, Americans began to side with the Allies. To stop American assistance to the Allies through trade, Germany began using submarines, known as U-boats, to sink cargo ships headed to Britain. In 1917, Germany ordered its U-boats to attack American ships without warning. Americans Join the Allies пЃ® пЃ® пЃ® пЃ® As America prepared to enter the war, Russia withdrew. In November 1917, the Bolsheviks вЂ“ a group of Communists led by Vladimir Lenin вЂ“ overthrew RussiaвЂ™s government. In March 1918, they signed a treaty ending the war with Germany. Germany then launched a massive offensive in France. Americans Join the Allies пЃ® пЃ® Their goal was to smash the British and the French armies before the Americans could fully mass their strength. As a result, by the time the Americans were assigned their first divisional area north of Paris at Cantigny, the German army was about 50 miles from Paris. American Troops in Battle пЃ® пЃ® пЃ® The American army crushed the Germans at the battle of MeuseArgonne. With their troops in retreat, German military leaders realized they had little chance of winning the war. On October 4, 1918, the German government appealed for an armistice вЂ“ an agreement to end fighting. Searching for Peace пЃ® пЃ® пЃ® пЃ® The Treaty of Versailles ended the war and set up the League of Nations вЂ“ an international organization to preserve the peace. The treaty required Germany to make reparations for the damage it had caused. It created new nations including Czechoslovakia, Yugoslavia, and Poland. The U.S. Senate rejected the treaty and never joined the League of Nations. пЃ® пЃ® пЃ® пЃ® пЃ® The Great Depression The bubble of American prosperity burst when the New York stock market collapsed in October 1929. Thousands of investors lost all their savings. In the booming economy of the 1920s, many people invested money in the stock market and began to borrow money to buy stocks. In October 1929, stock prices fell dramatically. Investors panicked and began selling their stocks. Many could not pay back their loans, which weakened the banks. Millions of people lost their savings and their jobs. The Economy Crumbles пЃ® пЃ® пЃ® пЃ® The stock market crash shook peopleвЂ™s confidence in the economy. Farm income shrank. For many farmers, years of dry weather made the situation even worse. In parts of the Great Plains a long drought turned fertile land into a Dust Bowl. In months before the stock market crash, the automobile and construction industries suffered from lagging orders and laid off workers. The Economy Crumbles пЃ® пЃ® Many small banks suffered when consumers failed to meet loan payments. Large banks, which had bought stocks as an investment, suffered huge losses in the crash and were forced to thousands of banks to close вЂ“ many depositors lost their money. Joblessness and Poverty пЃ® пЃ® пЃ® пЃ® As the depression tightened its grip, millions lost their jobs. Long lines of hungry people snaked through the streets of cities, waiting for hours to receive a slice of bread or a bowl of soup donated by local government charities. Those who had lost their homes build shelters out of old boxes and other debris. These shantytowns became known as Hooverville's after President Hoover. Many Americans blamed President Hoover for their hard times because none of his policies eased the suffering of massive unemployment. RooseveltвЂ™s New Deal пЃ® пЃ® пЃ® пЃ® Franklin Delano Roosevelt was elected president in 1932. He sent Congress proposals to fight the Depression that collectively became known as the New Deal. The New Deal created jobs which put men to work on projects such as planting trees, building levees, roads, hospitals, and schools. It also created the Social Security Act which is a tax paid by all workers that was used to pay pensions to retired people. RooseveltвЂ™s New Deal пЃ® пЃ® пЃ® Another tax funded unemployment insurance вЂ“ payments to people who lost their jobs. By the late 1930s, the economy had almost recovered. Just as the domestic problems seemed to be ending World War II began.