Download The Great Depression (1929-40)

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
- Homes lost
- Unemployment rises
- 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.