2. boom to bust, depression

From Boom to Bust

Black Tuesday Europe had no money to buy Canadian goods US raised tariffs to highest ever to protect their own

goods Canadian factories began to close Shareholders in companies began to sell and prices

fell quickly October 29, 1929 the US stock market crashed

The Business Cycle The business cycle is marked by three stages

1. The first stage is a period of prosperity where the economy approaches full employment. This stage is often accompanied by inflation as full employment and high income levels drive up the price of labour and goods.

2. In stage two the economy slows down bringing about a recession. Few new jobs are created and some jobs are lost, as companies reduce their production of goods and services. This is known as cyclical unemployment.

3. The final stage is a period of economic recovery where production increases in response to increased consumer demand. New jobs are created and the cycle starts over.

A depression occurs when the period of economic decline is prolonged and severe. During a depression prices of goods and services fall dramatically. This is known as deflation. Wages also fall. Generally wages fall faster than prices during a depression

Economic Terms

Supply and Demand: Prices are determined by the market's demand for and availability of the goods.

Tariffs: A tax on goods imported or exported.

Buying on Margin: Purchasing an asset by giving a down payment (a margin) and getting a loan. The asset is then collateral for the money owed.ex. Mortgages, and if you don't pay, they will take your house.

The Crisis of Credit

The Great Depression The greatest social upheaval in Canada in the twentieth

century

Also known as The Dirty Thirties The Dust Bowl

The Great Depression is the source of our social welfare system. It was developed in response to the suffering of the population during the Great Depression

R.B. Bennett RB Bennett was the new Conservative leader in Canada King was convinced that Bennett was trying to blame the depression on him Most people thought the depression would be over in months. King announced that Ottawa had financial aid for western farmers, but

not even a “five cent piece” for conservative supporters.

Causes1. The Stock Market Crash: October 1929

2. Protectionism: Countries around the world react by restricting imports from foreign nations. Canada’s economy was heavily dependent on exporting wheat and paper products

- The result is a massive loss of jobs. The U.S. legislates its highest tariff barriers in history.

Causes (cont.)3. The dust bowl: Farmers lose their crops due

to the drought on the prairies.

4.The economic contraction feeds on itself. The loss of jobs leads to less purchasing which leads to more loss of jobs.

The Dust Bowl

Drought, that started in 1929, continued into 1931, and by then the topsoil of Southern Alberta and Saskatchewan was so dry that it blew away in the wind.

Dust clouds blew so far that they were felt on ships in the Atlantic ocean.

...and it doesn't get better

In 1932, a plague of grasshoppers devoured every living plant.

The next year, they had wheat rust and frost, followed by drought and hail

Farmers struggled, often living off a bag of flour and a few vegetables for a whole family.

Some Statistics1. Decline in income from 1928 to 1933:

B.C.: 47%Ont.: 44%Sask.: 72%

2. Increase in unemployment from 1929 to 1933: from 2.8% to 19.3%

Statistics (cont’d)3. Decline from 1929 to

1933:GNP: 42.8%Exports: 54.1%Farm Income: 83.2%

• From 1933 onward the economy recovers, until the recession of 1939. It does not regain its 1929 levels.

Depression Bottoms Out By 1933 the depression was at its worst. With 25% of the workforce unemployed the

government is pressured to take immediate action.

United States

Great Britain

France Germany

Industrial production –46% –23% –24% –41%

Wholesale prices –32% –33% –34% –29%

Foreign trade –70% –60% –54% –61%

Unemployment +607% +129% +214% +232%

Effects of The DepressionGreat loss of jobs and thousands exist on “pogey,” government relief payments. People had to wait in line for hours in order to receive it.

Thousands without work rode the train back and forth across Canada in search for work. This was known as “Riding the Rails” or “Riding the Rod.”

Transients were considered bums or hobosNewspapers were called a “Bennet Blanket”

Making Do Without

A lot of the burden was shouldered by the homemaker, who had to keep the family fed.

Meat, dairy, eggs, and vegetables were a luxury not many could afford

Newspapers published “mock” recipes.

*There is a mock apple pie recipe made with Ritz crackers on the website, if anyone likes baking...

The Relief Camps During the Great Depression there was no EI or welfare.

The Governments solution was to send unemployed men in Government work camps.

The men worked for 20 cents a day in hard labour: road construction, etc.

The camps had poor living conditions and food, since the goal was to provide food, housing, and wages for $1 a day.

By 1932: 2,000 men were in camps 1935: 150,000 had worked on 200 projects in the relief

camps 1936: The Liberal Gov’t closed the camps

On to Ottawa Trek

In April, 1935, Communist organizers persuaded half the 7000 workers in BC to strike for work and wages.

With no success in Vancouver, they decided to lobby the federal government in Ottawa

BC strikers led unemployed people from Vancouver to Ottawa

Social Unrest: Political Opposition

1. Communist Party active: but banned in 1931, its leaders jailed. Tim Buck was the General Secretary.

2. The Co-operative Commonwealth Federation (CCF):− Formed 1932 to replace the injustice of

capitalism− The Regina Manifesto: “No C.C.F. Government

will rest content until it has eradicated Capitalism . . .”

− Socialist− Leader: J.S. Woodsworth

Social Unrest: Political Opposition

3. Social Credit Party• William Aberhart• The Gov’t to give citizens money to make up deficit

in purchasing power• Elected in 1935 in Alberta and remained in power until 1971

4. Fascist movements gain some support

Political SituationDuring The Depression

PM William Lyon Mackenzie King (King) has been kicked from power in 1930.

R.B. Bennett comes to power under the Conservatives promising to

end unemployment. King will later return in 1935.

No Progress

In 1930, Canadians had voted for Bennett because he had promised them a cure for the depression

By 1932 four provinces were bankrupt The Liberals did not have the solution

either Canadians were looking for something new

to ease the suffering

New Deal Introduced in US by Franklin Roosevelt Canadians were exposed to him via radio Even Bennett was impressed The New Deal of 1935 called for unemployment

insurance, minimum wage, maximum hours, marketing boards to raise farm prices and government intervention

Montage of the New Deal in the US

Provincial Issues Many provincial governments went bankrupt

during the depression and needed help being able to run their day to day affairs.

Provinces were responsible dealing with unemployment but did not have the necessary tools to handle this duty.

The reactions of the provincial governments varied depending on which province you were in.

Duff Pattullo, elected Premier of BC in 1933,instituted a mini new-deal similar to the US: shortened work day, increased minimum wage, and increased work relief payments by 20%

The federal government challenged Pattullo on this issue.

Election 1935

The liberals won the election of 1935 easily following Bennett and the conservatives inability to lift Canada from the depression

In 1938 King and the Liberals put the bank of Canada under government control

The economy was beginning to improve under a new reciprocity agreement with the United States

Reciprocity= removal of tariffs, free trade = beneficial economic ties, but increased threat of Americanization