Download Unit 6.2 Causes of the Great Depression

Unit 6 Roaring 20’s and The Great
Depression
■ Part 2 – Causes of the Great Depression
■Essential Question:
–What were the causes of the
Great Depression?
■Warm-Up Question:
–Think about the changes that
took place in America in the
1920s. In what ways were these
changes good? Bad?
Causes of the Great Depression
■The 1920s were a decade of
consumer spending & the economy
looked healthy on the surface:
–Income did increase in the 1920s,
but there were some severe
problems with the U.S. economy
–In October 1929, the “Roaring
Twenties” came to an end & the
Great Depression began…why?
Group Activity:
What caused the Great Depression?
■In teams, determine what factors
contributed to the Great Depression:
–Examine the documents provided &
complete the chart in your notes
–After examining all documents, try to
group the documents into categories
–When finished, create a one sentence
thesis that explains why the depression
began…be prepared to discuss
Causes of the Great Depression: A
Distribution of
Wealth in the
1920s
* An income of
$2,500 per year
was considered
the minimum
amount needed
for a decent
standard of living
Causes of the Great Depression: B
Causes of the Great Depression: C
Benefits & Risks of Buying Stock “on Margin”
Causes of the Great Depression: D
Causes of the Great Depression: E
Corporate Profits for Coal and Railroad Industries, 1920-1930
Profits for Railroad Companies
Profits for Coal Mining
Causes of the Great Depression: F
Causes of the
Great Depression
Causes of the Depression
■Weak Industries:
–Mass-production of
consumer goods led to
overproduction
“Traditional industries” faced new
–People did
need as
competition
in not
the 1920:
many appliances
& cars
Cars, synthetic
clothes, natural
gas
by the end of the decade
(under-consumption)
–Railroads, textiles, steel,
coal mining, construction
were barely profitable
Overproduction of Consumer Goods
Too much inventory…Not enough buyers
“Traditional” industries suffered in the 1920s
Corporate Profits for Coal and Railroad Industries, 1920-1930
Profits for Railroad Companies
Profits for Coal Mining
Causes of the Depression
■Depressed Farming:
–The end of WWI led to
a decline in demand for
agricultural products
–Too much food led to a
40% drop in crop prices
–Farmers could not pay
back loans & many had
their farms foreclosed
–Some rural banks failed
Causes of the Depression
■Credit:
–Many Americans used
easy credit to live
beyond their means
–By “buying now & paying
later,” Americans
generated large debts
–As a result, Americans
cut back on spending by
the end of the decade
Americans bought goods on credit &
did not have much in savings accounts
Causes of the Depression
■Uneven Division of Wealth
–Despite rising wages,
the gap between the
rich & poor grew wider
in the 1920s
–70% of Americans were
considered “poor”
–Most of the spending in
the 1920s was done by
30% of the population
Distribution of Wealth in the 1920s
* An income of
$2,500 per year
was considered
the minimum
amount needed
for a decent
standard of
living
Causes of the Depression
■The Stock Market:
–In the 1920s, the stock
market soared & people
speculated with stocks
–Many people borrowed
money to pay for stocks,
called buying on margin
–There was no regulation
of the market & some
companies altered stock
values to raise profits
Buying Stocks
on Margin
Causes of the Depression
■The Stock Market:
–On October 29, 1929
(Black Tuesday) the
stock market crashed
The stock
markettocrash
–People
rushed
sell,
in October
1929 marked
prices
plummeted,
&
the beginning
of the
investors
lost $30
billion
“Great Depression”
–Speculators who bought
on the margin, could not
pay off their debts
–Many lost their savings
The U.S. stock market had only about 3 million
active buyers & sellers but the spillover into the
greater economy led to the Great Depression
Causes of the Depression
■Bank Failures:
–After the crash, people
tried to withdraw their
money from banks
–In 1929, 600 banks failed
due to lack of funds & the
inability to recoup loans
–The failure of the banks
left many Americans
without their life savings
Bank & Business Failures, 1928-1933
Causes of the Depression
■Foreign Trade:
–Post-war debts in Europe
& high protective tariffs
in America limited
international trade
–The Great Depression
led to a global
depression in Europe,
Asia, & Latin America
–World trade fell by 40%
A Global Depression
Causes of the Depression
■Consumer Confidence:
–Millions of Americans
lost their jobs or took
pay cuts to keep jobs
–The lack of confidence
in the future kept people
from spending money
–The lack of spending
made the depression
drag on until the 1940s
Unemployment & Consumer Spending,
1928-1933
Effects of the Great Depression
■ The Great Depression led to a
collapse of the U.S. financial system
–25,000 banks & 90,000
businesses failed by 1933
–Unemployment peaked at 25%
–Many Americans lost their homes
–America had record poverty &
suicide rates; Fathers abandoned
families; Healthcare declined
–Private charities created soup
kitchens & breadlines to help
Soup Kitchens & Breadlines
Mortgage Foreclosures
Poverty in America
The Dust Bowl
■The effects of the depression were
made worse by the Dust Bowl:
–Heavy droughts & over-farming
in the West destroyed the Plains
–In the early 1930s, windstorms
swept away loose soil
–Farmers in the Plains left their
farms & searched for work or
better land in West coast states
The Dust Bowl (1931-1939)
Areas
Affected
by
the
Dust
Bowl
drought
“Okies”
&
“Arkies”
worsened the effects of the Depression
Group Activity:
■ In teams, play the role of an economist &
try to bring the Great Depression to an end
–Examine each of the “Economic Briefing”
sheets provided & choose a solution
based upon the choices provided
–After examining each briefing sheet,
choose a presenter & discuss as a class
–When finished, examine “Conservative,
Liberal, & Radical Solutions” sheet &
examine the reading on how President
Hoover responded to the Depression
President Hoover’s Response
■President Herbert Hoover initially
rejected bold gov’t action in
response the depression:
–He tried to reassure Americans
that prosperity would return
–He called for volunteerism &
“rugged individualism”—
Americans need to work
together to end the depression
President Hoover’s Response
■As the depression worsened,
Hoover called for more gov’t action
–The gov’t issued relief checks to
help the unemployed
–The Reconstruction Finance
Corps (RFC) loaned money to
failing businesses
–Building projects like Hoover Dam
■These efforts did not end the
depression & many citizens lost
faith in President Hoover
Employment Agencies &
Relief-Check Lines
Americans who lost their homes, lived in
shantytowns nicknamed “Hoovervilles”
The March of the Bonus Army
■Washington DC, 1932
■event where thousands of
unemployed World War I
veterans marched to the capital
city.
■Looking to Congress for an
advance on the bonus
compensation promised to them
Conclusions
■The Depression of the 1930s
came as a shock to Americans:
–When the stock market crashed
in 1929, businesses closed &
millions were unemployed
–Americans lost faith in Hoover
& began looking for new
leadership & an more active
gov’t to solve their problems