Issue 3 An Evaluation Of The Reasons For The Economic Crisis 1929-33: Factor 1: Republican Governments Policies Factor 2: Overproduction & Under-consumption.

Issue 3 An Evaluation Of The Reasons For The

Economic Crisis 1929-33:

Factor 1: Republican Governments Policies Factor 2: Overproduction & Under-consumptionFactor 3: Weaknesses Of The Banking SystemFactor 4: International Economic ProblemsFactor 5: Wall Street Crash

AIMS OF ESSAY:

To Be Able To Discuss the

factors which contributed to the economic

(financial) crisis in

American between 1929

& 1933

Aims Paragraph 1:

Have The Background Knowledge & Argument To Write Your First Paragraph For Essay 3 on the factors which contributed to the economic crisis

• To Understand The 3 Key Republican Economic Policies Of The 1920s

• To Understand The Consequences These Could To Have

PLAN FOR PARAGRAPH 1Republican Policies

1. Start with an Opening Argument e.g. state there is a link between the isolated factor & the question

2. Put in Knowledge – Discuss Republican Policy 1: What does laissez faire mean?

3. Put in Analysis – Explain what did this lack of regulation lead to?

4. Knowledge – Discuss Republican policy 2: What did tax reduction lead rich people into doing more

5. Analysis – Explain what was meant to happen but didn’t & the effect it had

6. Evaluation – Make an evaluation, sum up that it created a flawed system which would eventually fall down

Read Through Paragraph 1 On Handout

WHO WERE THE REPUBLICANS?

Republican Presidents Were In Office From 1921 To 1933.

1. Warren G Harding (1921-1923)2. Calvin Coolidge (1923-1929)3. Herbert Hoover (1929-1933)

What Were Their Economic Policies?

FIRSTLY: • They followed a policy of ’laissez faire’ which

meant that the government interfered as little as possible in the running of the economy

• The term ‘economy’ means: ‘the state of a country in terms of the production and consumption of goods/services and the supply of money’

• Laissez faire meant businesses were essentially unregulated & ‘left alone’

• Business men were left to create jobs and decide on wages… (great for the poor)

• Being unregulated resulted in many businesses investing in the stock market…

• The stock market & banks at the time was also under-regulated resulting to loans being taken out to be spent on stocks

1. LAISSEZ FAIRE

The Problem Being… If The Stock Prices Fall How Will They

Ever Pay Back The Bank??

What Were Their Economic Policies?

SECONDLY: • Keep taxes as low as possible • Resulting in a cut in government spending

from $6.4 billion to $2.9 billion in just 7 years… (e.g. schools)

• This had the dual purpose of (1) allowing businesses to invest more money to expand their operations

• (2) Giving consumers more money in their pockets to keep spending

• The government believed that money would ‘trickle down’ through all levels of society and raise standards of American life…

2. LOW TAXES

… however this didn’t work… during the 1920 60% were living on less than $2,000 a year while the top 5% owned 1/3 of Americas incomeThe rich got richer and the poor stayed poor this had 2 outcomes:(1) The poor could not buy the goods they were producing leading to under-consumption(2)The rich bought more shares in the unpredictable market…

What Were Their Economic Policies?

THIRDLY: • The Fordney-McCumber Act 1922

created strict tariff barriers imposed on foreign imports e.g. goods from Europe

• It reduced the number of foreign goods being sold in America

• The idea behind this was to led to an increase in American own goods being bought at the expensive of foreign goods

• This is known as ’protectionism’ • However this back fired and the

Europeans did the same putting a high tariff on Americans goods!

• Therefore the US economy could not expand into foreign markets as rapidly as they could produce – resulting in over-production/under-consumption

3. Strict Trade Tariffs

SUM UP: Factor

Each of these 3 polices will be mentioned throughout your essay: Laissez Fair; Low Tax & Trade Tariffs

Arguably the Republican policies were key facilitators to the economic situation, leading to:

1. Overproduction & Under-consumption of American Goods

2. The failure of the Banking System3. Problems with International Trade4. The Wall Street Crash

WHY… the lack of regulation (laissez Fair); tax reductions for the rich (Low Tax) & the desire for

protectionism (Trade Tariffs)

Background QuestionsQ1. Who were the Republican Presidents between 1921-31

Q2. What were the 3 main Republican economic policies?

Q3. What does Laissez Faire mean?

Q4. What is the economy of a country?

Q5. What did many business men do with their profit

Q6. Not only were businesses unregulated – which 2 other organisations were?

Q7. What problem could arise here?

Q8. How much was government spending cut by?

Q9. What were the 2 aims of low taxation?

Q10. This was meant to improve living conditions for everyone in America however it did not – how did the rich & poor differ?

Q11. ‘The rich got richer & the poor got poorer’ what 2 outcomes did this have?

Q12. What was the Fordney-McCumber Act of 1922?

Q13. What impact was this meant to have on goods in America?

Q14. How did this backfire?

Q15. What did the Republican policies lead to?

PLAN FOR PARAGRAPH !Republican Policies

1. Start with an Opening Argument e.g. state there is a link between the isolated factor & the question

2. Put in Knowledge – Discuss Republican Policy 1: what does laissez faire mean?

3. Put in Analysis – Explain what did this lack of regulation lead to?

4. Knowledge – Discuss Republican policy 2: What did tax reduction lead rich people into doing more

5. Analysis – Explain what was meant to happen but didn’t & the effect it had

6. Evaluation – make an evaluation, sum up that it created a flawed system which would eventually fall down

Read Through Paragraph 1 On Handout

OPENING ARGUMENT

It can be argued that the laissez-faire approach from the Republican government was the biggest

contributor to the economic crisis.

Republican Policies

KNOWLEDGE 1

Discuss the first policy:• What is laissez faire

and what did this approach lead to?:

• Unregulated Practises

• Easy Credit

ARGUMENT 1

• This led to risky investments in the stock market

• And the vulnerability of losing everything if the market was to crash

Republican Policies

KNOWLEDGE 2

Discuss the next policy: tax reductions

• Ensured the wealthy got richer & profits led to increased investments in the stock market

• However…

ARGUMENT 2

• It can be argued this profit was meant to trickle down to the working classes

• Who could then buy the goods they were producing and support the economy…

• BUT this is not what happened the poor stayed poor & could not afford goods

EVALUATION

EVALUATION:

Overall, Republican policies of the 1920s created a sense of well being and large profits however long-term they created a flawed system that

allowed banks and the stock market to get out of control