Transcript File

Canada in the Interwar Years
Canada in the Thirties:
Causes of the Great Depression
The World Economy after 1919
• 19th century (1800’s) was referred to as
“laissez faire” - which translates to ‘let do’
• Government did not interfere with the
economy.
• After WW1 this changed and government
became more controlling over the economy.
The World Economy after 1919
• After WW1 the world’s financial centre
moved from London to New York.
• USA became the financial capital of the
world.
• Most industrialized countries experienced an
economic boom in the 1920’s
– Because of the demand for consumer goods like
automobiles, and electronic appliances.
– This boom ended in 1929
Inflation
• Inflation is a rise in the general level of prices
of goods and services in an economy over a
period of time
• during inflation everything gets more valuable
except money
• each unit of currency buys fewer goods and
services = is worth less
Economic Vocabulary
• Revenue
– Money taken in by government (mostly taxes and
customs duties)
• Expenditures
– Any money spent by the government
• Budget
– Spending plan made by gov’t. Revenues are totaled
and expenditures for the coming year are announced.
Economic Vocabulary
• Balanced Budget
– Budget where expenditures and revenues are
equal. Before the Great Depression, governments
always balanced (except during wartime)
• Deficit
– When government spending exceeds its revenue.
The difference between the expenditure and
revenue is known as the deficit. Also, the amount
borrowed by the government is also called a
deficit.
Economic Vocabulary
• Currency
– The actual money used in a country. Many factors
effect the value of a currency.
• Capitalism
– Economic system in which private individuals
produce and exchange goods and services
through markets.
Economic Vocabulary
• Market Economy
– Countries that have a capitalist economic system
are said to have a market economy.
– The most basic part of the market economy is
the market itself - which is anyplace where
goods (things) and services (mechanic) are
bought and sold
– Markets allow buyers and sellers to come
together, so goods and services can be
exchanged for a profit
Economic Vocabulary
• Market Economy
– Example the stock market
• Investors meet to buy and sell stocks
• Supply and Demand
– Explains pricing in the market economy
– Supply is availability of a particular product
– Demand is how badly people want that product
–
–
–
–
Great supply equals lower prices
Low supply equals higher prices.
Great demand equals higher prices
Low demand equals lower prices
Economic Vocabulary
• Business Cycle
– It is normal for market economies to go through
cycles of prosperity and recession (when
economic activity is in decline) every 5 or 6
years.
– Sometimes market economies have a boom
(extreme growth and prosperity) followed by a
serious downturn (bust) and a prolonged
recession (depression).
Causes of the Great Depression
• On October 29, 1929 the economic boom of
the 1920’s came to an abrupt end.
• The stock exchanges of New York, Toronto,
and Montreal ‘crashed’ and North
Americans were now in the Great
Depression.
– Massive unemployment
– Thousands of bankruptcies
– Widespread poverty
Causes of the Great Depression
• The Great Depression
– Canadian’s attitudes
towards the poor began to
change and Canadians
developed a safety net for
people who needed money.
– New political parties began
and new ideas for dealing
with economic problems
were created.
1. Overproduction
• Overproduction
– During the 1920’s, industries spent profits on
building bigger and newer factories.
– Huge supplies were stockpiled (overproduction)
– Factory owners panicked, since there was so
much extra goods.
• Slowed down production of goods and laid off workers
1. Overproduction
• Overproduction
– These workers now had
less to spend on buying
goods, and the economy
slowed down even more.
– North American industrial
economy expanded beyond
how much the consumer
would consume.
2. Canada’s reliance on
exporting staple products
– Canada’s economy relied heavily on a few
products known as staples (crops, timber,
minerals)
– These were Canada’s most important exports
• As long as other countries bought these staples
Canada’s economy would be strong
2. Canada’s reliance on
exporting staple products
– From 1925 to the end of the decade, Canadian
wheat farmers grew record quantities of crops
and sold them at record prices.
– In 1929, USA, Australia, and Argentina also
grew record numbers of crops and sale
competition grew.
– Canadian farmers – left with large quantities of
unsold wheat and prices dropped dramatically
(recall: Great supply = lower prices)
2. Canada’s reliance on
exporting staple products
– To add to the problem prairie farmers faced drought over
several summers
– This time referred to as the “Dust Bowl of the 1930’s”
– Without enough rain, crops died.
• No wheat or flower could be shipped and money began to
be lost.
The Dust Bowl
3. Canada’s Dependence on
the US
– Because Canada relied so much on staples, and
exports to other countries, any decline in foreign
economies hurt Canada
– Canada relied the most on the US
• When US economy fell, the Canadian economy was
soon to follow
• 40% of Canadian exports were sold to USA
4. The Stock Market Crash
– The day the stock
market crashed was
called Black Tuesday
– This was not the only
cause of the
depression
Stock Market Explanation
• Stock Market works by companies selling
stocks / shares in their company to investors
(people with $$$) to get money to run their
companies
• In return, investors get a share of the profits
of the company (how much depends on the
amount of shares they own)
– If the company does well = stock values rise
– Stockholders may choose to sell shares at a profit,
or hold on to them in the hopes that they will
continue to increase in value, and make even more
money in the future
4. The Stock Market Crash
– In the 1920’s many investors bought stock shares on
margin.
– Buying on margin meant that investors were buying
stocks with borrowed money.
– They hoped that they would make quick money (their
purchased stocks would rise) and pay off their loan, and
still make a large profit.
– This whole process was known as speculation
4. The Stock Market Crash
– In Canada, bank leaders and business men
strongly believed the Canadian economy
depended on international trade. Especially
wheat crops.
– Despite indicators that the price of wheat was
falling, investors kept putting money into the
stock market
4. The Stock Market Crash
• The Stock Market Crash
– As stocks began to drop, investors worried and wanted
to sell the shares they had purchased.
– Investors sold their stocks quickly before prices dropped
even further. Sold off stocks in large volumes.
– As more investors panicked, more and more stocks
were sold and the market began to drop severely.
4. The Stock Market Crash
• The Stock Market Crash
– Many stocks became worthless.
– On October 29, 1929 the value of some stocks in
Toronto dropped 1 dollar a minute!
– Although few Canadians owned stocks, millions
were impacted through the loss of their jobs and
falling prices for their products
5. Economic Protectionism and
Tariffs
– Tariffs are duties (money) collected on goods
coming into a country.
– The US did not need other countries raw
materials nearly as much as other great powers
– US became protectionist
• Government protected home industries from foreign
goods by using tariffs.
5. Economic Protectionism and
Tariffs
– American protectionism caused other countries
to lose their export markets
– Example, Canada trying to sell the US wheat,
but tariffs made Canadian wheat much more
expensive for Americans by charging tariffs.
5. Economic Protectionism and
Tariffs
– Other countries
suffered because of
this
– Countries responded
by also raising tariffs
– This made the problem
worse since trade was
very restricted
6. International Debt after WW1
– USA lent money to foreign nations after WW1
– These nations made money to pay back their
loans by selling their products to the USA
– Protectionist economy reduced international
trade, and those countries could no longer repay
their loans