Transcript Great Depression, Part 1

Great Depression –
Part I
Causes of the Great Depression –
Poor Presidents and
Government Policies
Warren G. Harding (1921-1923), Calvin Coolidge
(1923-1929), Herbert Hoover (1929-1933)
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Not paternal
For self-help
Favored laissez-faire
Appointed people sympathetic to big businesses
Anti-trust laws were ignored
Didn’t support labor
Raised tariffs
Trickle-down policy – helped banks rather than the people
Causes of the Great Depression –
WWI Debt
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Key problem was the $10 billion that the U.S.
government had loaned to the Allies during and after
the war
The U.S. wanted to be paid back
Britain & France protested that the demand for
repayment was unfair:
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The French and British had taken most of the deaths in
WWI
The debtors complained that their dollars had fueled the
wartime boom in America, so they should be happy
Causes of the Great Depression –
High Tariffs
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European countries were bankrupt after WWI and
needed to sell their products to the U.S. to recover
America raised tariffs, which didn’t give foreign nations
a chance to make a profit so they could repay debts
they owed to the U.S.
It turned into a cycle, where the U.S. would raise their
tariffs and Europe would do the same
Created a decline in exports
Plunged both America and other nations deeper into
the depression
Causes of the Great Depression –
Globalization
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As the price of natural resources fell, the
poorest parts of the world earned less and
less, giving them less to spend on goods
India and Japan were beginning to
industrialize, and their low labor costs drove
countries out of many traditional markets
Causes of the Great Depression –
Reparations
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Because the Americans were demanding
repayment, the French and British demanded
that the Germans make reparations payments
equaling $32 billion
The French, hoping to increase lagging
reparation payments, sent troops into Germany’s
industrialized Ruhr Valley in 1923
As a result, Germany printed lots of money,
causing hyperinflation
Causes of the Great Depression –
Reparations
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Dawes Plan of 1924
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Temporarily helped Germany pay loans until the stock
market crashed
It created a cycle:
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U.S. banks loaned money to Germany
Germany paid reparations to France and Britain
France and Britain paid war debts to the U.S.
The plan would play a part in the development of the
Great Depression, because when America had financial
problems, it caused financial problems with the entire
world due to this cycle
Causes of the Great Depression –
WWI Debt
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Results of the Dawes Plan
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It helped restore some faith in the
Weimar Republic (until 1929)
The U.S. never was fully repaid its money
The U.S. caused European countries to
be resentful of them
The whole episode contributed to the
U.S. wanting to remain neutral during the
1930s
Causes of the Great Depression –
Overproduction
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Too many products, too
little demand Industries were
producing goods much
faster than people
could buy them
The automobile and
related industries
began to slump as
early as 1925 because
of overproduction
Causes of the Great Depression –
Weak Farm Economy
Prosperity During Wartime
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Much of the food was shipped to the Allied soldiers
from the U.S. and other nations
Europe couldn’t support themselves with food during
the war because:
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Men were fighting in the war
The war was being fought where they’d grow crops
Government guaranteed prices
Now that the war was over, foreign production
reentered world commerce
Causes of the Great Depression –
Weak Farm Economy
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Machines Threaten Farmers
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The gasoline-engine tractor helped cultivate many crops
than they could with a horse-drawn plow. Farmers
owned 10 times as much equipment in 1930 as they did
in 1920
The wartime boom had encouraged farmers to bring
vast new tracts under cultivation, especially in the
“wheat belt” of the upper Midwest
Improved efficiency and expanded agricultural acreage
helped to pile up more surpluses
In the 1920s, 1 in 4 farms was sold for debt or taxes
Causes of the Great Depression –
Speculation
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“Get rich quick” attitude- The
rising stock prices encouraged
speculation, the practice of
making high-risk investments in
hopes of getting a high return
Before WWI, only the wealthy
played the stock market. Now,
more and more ordinary people
were risking their money on the
stock market
Causes of the Great Depression –
Buying on Credit and Margin
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Buying on credit - People began to
buy items whether they could
afford them or not, resulting in an
increase in personal debt
Buying on margin- Allowed
investors to purchase a stock for
part of its price and borrow the rest
until they could pay it off.
Investors hoped that the stock
price went up so that they could
both pay off the loan and still make
money
Causes of the Great Depression –
The Last Straw
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The British raised interest rates so
that people who spent money on
American investments would save
their money rather than invest in
American businesses/stocks
Businesses/stocks might start to
decline and not make as much of a
profit as before because the British
are no longer investing in them, so
people started selling as quickly as
possible in order to not lose all
their profits
Causes of the Great Depression –
Stock Market Crash (1929)
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Black Thursday - Investors began to sell, causing
stock prices to fall. Investors who had bought a
share at $400 were now selling at $283
Black Tuesday - On October 29th, a record 16.4
million shares were sold, compared to the usual
average of 4-8 million that were bought and sold
each day earlier in the year
Great Crash - The collapse of the stock market.
By Nov. 13th, the Dow Jones had gone from 381
to 199. Loses totaled $30 billion
Causes of the Great Depression –
Stock Market Crash (1929)
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Some banks began to fail because they had
invested people’s savings in the stock market
As a result, people went on a bank run to
withdraw their savings because they thought
their bank would go bankrupt
Between 1929-1932
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11,000 of the U.S.’s 25,000 banks had failed
90,000 businesses went bankrupt
The GDP went from $104 billion to $59 billion
Unemployment went from 3% to 25%
Reality of the Stock Market Crash
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The U.S. weathered the Crash
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Fewer than 5% of people in the United States owned
stock so most were not affected
By April 1930 share prices had actually regained a fifth
of the losses of the previous autumn
The really disastrous fall came in 1931–1932 and
lasted until the mid-1930s
Arguably the Crash was more a symptom than a
cause of the Depression
Causes of the Great
Depression – Canada
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33% of Canada’s GDP came from exports, so
this was hurt when countries began using
more tariffs
As a result, the price of wheat fell. Four
western provinces were completely
dependent on the export of wheat
Because of their close links with the United
States and their need to export, it caused
economic upheaval
Effects of the Great
Depression – Canada
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Canada improved in national industry in order to
replace the importation of industrialized products
(industrialization)
1 in 5 depended on gov’t relief
30% were unemployed
Net farm income went from $417 million to $109
million
Effects of the Great
Depression – Canada
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The government turned to intervention and
management in the economy (New Policy in
Canada)
Massive movement to cities, urbanization
Mechanization of agriculture made it more
profitable to find other work
Causes of the Great
Depression – Latin America
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Speculation in the U.S. in
the 1920s led to less
investment in Latin
America
Depended on trading
cheap exports
Their main trading partner
was the U.S., so when the
stock market fell it had a
bad affect on them
Effects of the Great
Depression – Latin America
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Almost every Latin American country had a
revolution in the early 1930s. Most doubted the
current system and blamed the government for the
economic chaos
Thus, there was a heightened ideological conflict –
many solutions were socialism, communism,
fascism, native solutions
Dictators arose in most Latin American countries.
They tried to intervene to help the economy
Import substitution – tried to produce the item in
your own country