The Great Depression (1929- 40) Unit Objectives Analyze and Explain: 1. What a “depression” is 2. Causes of the “Gr. Dep.” 3. Solutions? 4. How it affected people 5. Re-shaping role of gov’t
Dec 29, 2015
The Great Depression (1929-40)
Unit Objectives Analyze and Explain: 1. What a “depression” is 2. Causes of the “Gr. Dep.” 3. Solutions? 4. How it affected people 5. Re-shaping role of gov’t
What is a depression?
• When an economy stops growing for 6 months…called a “recession”
• Symptoms of a recession:- Business failures - Unemployment rises - Homes lost - Hunger, divorce, crime
• Depression= a prolonged or particularly severe recession
A recession on steroids???•
Root Causes of Great Depression
• #1: Uneven distribution of wealth
• While the overall economy boomed in the 1920s, the wealth created by the boom flowed to only a small %...
• half of American families lived in poverty
#2: Agriculture
• Overproduction & low prices–Farmers produced more…drove
prices even lower–Farmers couldn’t make
payments on farms & equipment–Banks repossessed farms &
equip
#3: Personal Debt
• New technologies, products, and advertising techniques created a mass consumption in the 1920s
• But people bought on credit… went into debt to acquire modern conveniences (“installment plan”)
#4: Shaky Banking System
• Many banks also invested depositor’s $ in the stock market
• Many banks were unable to cope with the number of defaulted loans…simply closed their doors and went out of business
#5: Gov’t. Policy
• Commonly accepted belief: “laissez faire”– not the role of gov’t to interfere with
markets– Not much regulation (control)
The Catalyst? Stock Mkt. Crash
• Many individuals investors had bought stock “on margin”
• Stock prices declining in late summer• Big sell-off on “Black Thursday” Oct.
24, 1929• Total collapse “Black Tuesday” Oct.
29th
• Many were wiped out…financially ruined
Panic and A Run on Banks
• Banks were mobbed by depositors wanting to get their money out…
• Many banks went under• Many Americans lost entire
life savings
Hoover’s response…
• President Hoover stated publicly that “the Government should not support the people.”
• Believed in “rugged individualism” (people rescuing themselves by their own efforts)
Hoover eventually acted…
• spent hundreds of millions of dollars on public works projects such as:
• the construction of Boulder (later renamed Hoover) Dam in Nevada.
• The Federal Farm Board loaned farmers money and bought up tons of their surplus crops
• Called on churches & charities to offer more help
Hoover’s response (con’t.)
• However, these policies did not go far enough to help those who needed it most, and economic conditions did not improve
HHH blamed & criticized…• “Hoovervilles: shanty towns of “houses”
made from wood scraps, newspaper, etc.