Download The Great Depression

The Great Depression
Mr. Stikes
SSUSH17 The student will analyze the causes
and consequences of the Great Depression.

a. Describe the causes, including overproduction,
underconsumption, and stock market speculation that led
to the stock market crash of 1929 and the Great
Depression.

b. Explain factors (include over-farming and climate) that
led to the Dust Bowl and the resulting movement and
migration west.

c. Explain the social and political impact of widespread
unemployment that resulted in developments such as
Hoovervilles.
Causes of the Great Depression
a. Describe the causes, including overproduction,
underconsumption, and stock market speculation that led to the
stock market crash of 1929 and the Great Depression.
Long Term Causes of Great Depression

Overproduction
excessive production, production in excess of need or stipulated
amount.
[Random House Dictionary, © Random House, Inc. 2012. ]

Underconsumption
Consumption of less than is produced; consumption of less than the
usual amount.
[Webster’s Revised Unabridged Dictionary, © C. & G. Merriam & Co. 1913. ]

Speculation
engagement in business transactions involving considerable risk but
offering the chance of large gains, especially trading in commodities,
stocks, etc., in the hope of profit from changes in the market price.
[Random House Dictionary, © Random House, Inc. 2012. ]
Long Term Causes of Great Depression

Buying on margin
Buying securities with the aid of borrowed money
[http://campus.murraystate.edu/academic/faculty/lguin/Schematic/Margin.htm.]

Dow Jones Industrial Average (DJIA)
Stock index of 30 of the top blue chip stocks on the New York Stock
Exchange – basically, when it is up, prices are up & vice versa
[http://www.personalfinance.duke.edu/glossary-term/dow-jones-industrial-average. ]

Stock
Ownership of a portion of a company that gives you: 1) a vote on
company policy, including picking the board of directors and 2) a right
to a percentage of company earnings
[http://hspm.sph.sc.edu/courses/Econ/Classes/Stocksandflows/Stocksandflows.html. ]
A piece of stock is called a “share”
Causes of the Depression

Federal Reserve
 Founded in 1913 to help keep economy stable
 System made up of 12 regional banks and a
board of directors
 Controls US monetary policy


The control of the supply and cost of money
Practically, the Fed:
Sets interest rates
 Sells government securities
 Set bank reserve levels

Stock Market Crash of 1929

Black Thursday, October 24, 1929:

Many stocks sold; those who bought on margin
are forced to sell to pay back loans


Bankers agreement (led by J.P. Morgan and Co.) –
buy stocks above market value


Public confidence in markets shaken
Attempt to prop up market, restore confidence
Friday-Saturday, October 25, 1929:

Market holds steady
Stock Market Crash of 1929

Black Monday, October 28, 1929:



Average stock price (DJIA) dropped 13%
2nd worst day in the history of the market
Black Tuesday, October 29, 1929:




Rush to sell at opening bell
16,410,030 shares traded
Average stock price (DJIA) dropped another 12%
3rd worst day in the history of the market
Causes of the Depression

“Prosperity





Decade” of the 1920’s
High employment
Low inflation
30% rise in industrial production
US produced ½ of world’s industrial output
Per capita income:
 1919 – $520
 1929 – $681
Causes of the Depression

“False Positives”


Widespread poverty
 60% of nation lived on less than $2,000 annually
 40% of nation lived on less than $1,500 annually
Wealth disparity

Richest 1% of Americans earned 19% of all profits in
1929, versus 12% in 1919
Causes of the Depression

“False Positives”



Lower wages in key industries like mining,
manufacturing, transportation
 Ex. coal miner’s avg. hrly. wage: $0.845 in 1923 vs.
$0.625 in 1929
93% of non-farm population saw disposable income
fall during 1920’s
5,000 of nation’s 30,000 banks failed between 1920
and 1929
Causes of the Depression

“False Positives”

Depression of farm prices
 Revival of European agriculture after WWI
 Introduction of Australian and Argentinean
products to world markets
Long term debt for farmers
 High taxes for farmers

Causes of the Depression

Federal Reserve during the Depression
 Slowed growth of monetary supply leading up
to stock market crash
 “Liquidity crisis”

No cash to spend for local banks or businesses
Causes of the Depression

Tariffs

Fordney-McCumber Tariff of 1922



Return to isolationism
Raised tariffs to an average of 38.5% on imported goods
Hawley-Smoot Tariff of 1930


Goal: raise tariffs on agricultural products, increase domestic
prices/production
Actual result: decrease in exports, perhaps retaliation
DID YOU KNOW: Economic historians debate whether or not HawleySmoot made the Great Depression worse. Traditionally, historians have argued
this protectionism further damaged the American economy. Newer studies,
however, show the tariff being responsible for about 21% of the decline in GDP.
Tariffs Rates under Fordney-McCumber
vs. Smoot-Hawley (equivalent ad valorem rates)
Product
Fordney-McCumber
Smoot-Hawley
29.72%
36.09%
Earthenware, and Glass
48.71
53.73
Metals
33.95
35.08
Wood
24.78
11.73
Sugar
67.85
77.21
Tobacco
63.09
64.78
Agricultural Products
22.71
35.07
Spirits and Wines
38.83
47.44
Cotton Manufactures
40.27
46.42
Flax, Hemp, and Jute
18.16
19.14
Wool and Manufactures
49.54
59.83
Silk Manufactures
56.56
59.13
Rayon Manufactures
52.33
53.62
Paper and Books
24.74
26.06
Sundries
36.97
28.45
38.48
41.14
Chemicals
TOTAL:
Source: U.S. Tariff Commission,
The Tariff Review, July 1930,
Table II, p. 196.
The Dust Bowl
b. Explain factors (include over-farming and climate) that led to
the Dust Bowl and the resulting movement and migration west.
Farm Problems

Overfarming



Need to produce more to make same amount of
money
Leads to poor soil quality, etc.
Debt


Needed to borrow to produce more
High interest rates and low prices led to more
debt
Farm Problems

Natural Phenomenon

Boll Weevil
In Georgia by 1915
 Forced farmers to
abandon fields
 Many farms fore closed
 Sharecropping increased


Drought

Georgia’s worst drought in history: 1930-1931
Typical Georgia farm family during the
Depression:







No electricity
No running water
No indoor bathroom
Inadequate diet (mainly of molasses, fatback & cornbread)
No education system to speak of
Few rural clinics, hospitals, or health care workers
Much sicknesses (tuberculosis and malaria were common)
Conditions were described as "depleted soil, shoddy livestock, inadequate
farm equipment, crude agricultural practices, crippled institutions, a
defeated and impoverished people."
Arthur F. Raper, Preface to Peasantry: A Tale of Two Black Belt Counties (1936)
Farm Problems

Natural Phenomenon

Dust Bowl
Period of environmental disaster during the 1930’s in
the Great Plains
 Caused huge dust storms of top soil to blow
throughout the country


Causes of the Dust Bowl

Overfarming / Overgrazing
 Sod
on the Great Plains was thin, leaving it vulnerable to
being overfarmed and overgrazed

Drought
"Fleeing a dust storm”
Farmer Arthur Coble and sons walking in the face of a dust storm, Cimmaron County, Oklahoma. Arthur Rothstein, photographer,
April, 1936.
From the Library of Congress.
“Black Blizzard”
A black blizzard over Prowers Co., Colorado, 1937.
From Western History Collection, University of Oklahoma.
“Black Blizzard”
A black blizzard over Prowers Co., Colorado, 1937.
From Western History Collection, University of Oklahoma.
“A dust cloud approaches a small town in Oklahoma.”
http://www.weru.ksu.edu/new_weru/multimedia/dustbowl/big/weokla.jpg
Dust storm approaching Stratford, Texas
Dust bowl surveying in Texas
Image ID: theb1366, Historic C&GS Collection
Photo Date: April 18, 1935
Location: Stratford,Texas
Credit: NOAA George E. Marsh Album
Results of the Dust Bowl

Environmental Disaster


Lost between 2.5 and 5 inches of topsoil over
almost 25 million acres of land in the Great Plains
Movement west

Over 1,000,000 migrant farm workers moved
west by 1939
Social and Political Impact of the
Great Depression
c. Explain the social and political impact of widespread
unemployment that resulted in developments such as
Hoovervilles.
Daily Life in the Depression

Unemployment / Loss of income




> 3 million in 1929
4 million in 1930,
8 million in 1931,
12 1/2 million in 1932
 About ¼ of American families did not have one
wage earner
 ¾ of American workers were part-time
“Hoovervilles”

Towns of shacks and shantys set up by people out of
work
Bread Lines
Dow Jones Industrial Average,1920-1939