Proximate causes vs. ultimate causes Proximate cause: event closest to, or immediately responsible for causing, some observed result. Ultimate cause: original, distant (or “real”) causative factor.
Proximate causes vs. ultimate causes
Proximate cause: event closest to, or immediately responsible for causing, some observed result.
Ultimate cause: original, distant (or “real”) causative factor.
Proximate vs. ultimate:
Choose one of the following, and list as many proximate and ultimate causes as you can:
Why did the Titanic sink?
Why is diabetes on the rise?
What caused the Civil War?
GREAT DEPRESSION: Proximate causes
1. Saturated market for consumer goods
26 million surplus automobiles on factory floors
US population: 123 million
People owned stock
Banks owned stock
2. Stocks crash Anyone who bought stocks in
mid-1929 and held onto
them saw most of his or her
adult life pass by before
getting back to even.
-Richard M. Salsman
$30 billion (~$440B today) lost in two days
3. Run on banks
Bank shuts down – money goes with it
political inertia
Unequal distribution of wealth
99% vs. 1%
Lack of savings
Rural poverty
Stock market crash
Run on banks
Financial panic
(lack of) governmental
response
GREAT DEPRESSION: Ultimate causes
Over-production
1928 farm crisis
Agriculture Industry
Monetary policy
high tariffs
war debt Postwar European
economy
Hoover rampant
speculation
GREAT DEPRESSION: Ultimate causes
Consumer goods bought on credit
First wave of widespread borrowing in US history
Leads to a saturated market
GREAT DEPRESSION: Ultimate causes
Rural poverty in the 1920s
Sudden end to grain exports to Europe halves crop prices
Flip side of urbanization: rural land prices plummet
Increase in prices of consumer goods; decrease/stagnation of all food prices domestically
10% of rural homes electrified
GREAT DEPRESSION: Ultimate causes
Unequal distribution of wealth
Aggregate wealth grew by billions – but not evenly
Top 1%: 75% increase in disposable income
Bottom 99%: 9% increase in disposable income
GREAT DEPRESSION: Ultimate causes
Unequal distribution of wealth
80% of Americans had no savings at all
Unskilled workers’ wages cut, limited
Major factor in rural poverty
GREAT DEPRESSION: Ultimate causes
Tariffs and war debt
European nations owed over $10B ($128B today) to U.S.
U.S. forces allies to pay; allies pressure Germany
Fordney-McCumber Act (1922) raises tariffs on industrial goods; Europe retaliates
GREAT DEPRESSION: Ultimate causes
Industrial overproduction
Workers’ wages not rising fast enough
Tariff policy guts foreign market
GREAT DEPRESSION: Ultimate causes
Federal monetary policy
Federal Reserve System (1913) created to stabilize economy
Fed’s goal: head off bank panics
Fed does not address failing banks following crash of 1929
HOOVER = IDIOT?
1. Bad policy decisions
Old-school protective tariff, largely on agriculture
1930: Smoot-Hawley Act
20,000 imports taxed at record levels
Killed international trade for U.S.
2. Laissez-faire approach
No direct aid from government
Followed Andrew Mellon’s theory: “Leave it alone”
3. Evident neglect of downtrodden
Rampant homelessness; unemployment up to 24.9%
Bonus Army fiasco
4. Too little, too late
HOOVER = SCAPEGOAT?
1. Blame the boss
Hoover Pullmans
Hoovervilles
Hoover blankets
Hoover flags
2. Government aid was unprecedented
No direct aid, but economic stimulus
Reconstruction Finance Corporation
3. Not enough effort, or not enough time?
Replaced Mellon; started to listen to VP Charles Curtis
Hoover hogs
Will Rogers’ apple story
Agriculture Marketing Act
From disrespect to assassination attempts
The New Deal
1933: The First Hundred Days
1. Bank Holiday
March 9: Congress passes Emergency Banking Act
End to hoarding
FDR: Close the banks and reopen under federal overview
March 4: Banks close
Guaranteed federal loans are available when needed
The New Deal
1933: The First Hundred Days
2. FDIC
US Government guarantees deposits up to $5,000
Restores faith in banks
Federal Deposit Insurance Corporation
Clear populist message: “Government has your back”
The New Deal
1933: The First Hundred Days
3. Repeal of Prohibition
Why repeal?
Unintended consequences?
The (rest of the) New Deal
4. Farming programs
Agricultural Adjustment Administration
“Enforced scarcity”: Reward farmers for not farming
Farm Security Administration
1936: Found to be unconstitutional
Cooperative farming under government “experts”
Fears of collectivization
California camps for displaced farmers, like Weedpatch Camp in The Grapes of Wrath
The (rest of the) New Deal
4. Farming programs, continued
Resettlement Administration
Relief camps for displaced farmers
Low-interest loans for farmers hoping to move
Soil Conservation Service
Agricultural education
Engineering projects to control erosion
The New Deal
5. Works Progress Administration (WPA)
Largest New Deal agency
75% went to public facilities and infrastructure
The New Deal
5. Works Progress Administration (WPA)
Largest New Deal Agency
75% went to public facilities and infrastructure
650,000 miles of road
700 miles of airport runway
78,000 bridges
Public buildings, airports, sewers, dams, parks, libraries, fields
The New Deal
5. Works Progress Administration (WPA)
Largest New Deal Agency
75% went to public facilities and infrastructure
650,000 miles of road
700 miles of airport runway
78,000 bridges
Public buildings, airports, sewers, dams, parks, libraries, fields
Remaining 25% went to arts projects
The New Deal
6. Further employment relief
Civilian Conservation Corps
Building and trails in national parks and forests
Indian Division of CCC built reservations
Planted an estimated five billion trees
Rural Electrification Administration
Established co-ops to bring power to rural areas
Tennessee Valley Authority
Dams and flood prevention on unprecedented scale