Download The Great Depression: Causes and Effects

The Great Depression:
Causes and Effects
6.3: Explain the causes and consequences of the Great Depression, including the disparities in income
and wealth distribution; the collapse of the farm economy and the effects of the Dust Bowl; limited
governmental regulation; taxes, investment; and stock market speculation; policies of the federal
government and the Federal Reserve System; and the effects of the Great Depression on the people.
Black Tuesday
❖
Stock Market Crash October
29, 1929
❖
Result not Cause
❖
Signals the start of the Great
Depression
❖
*Only WWII gets America out
of the Great Depression, not
New Deal
Causes of the Great
Depression
❖
1. Disparity of Incomes
❖
2. Buying on Credit
❖
3. Farm Economy Collapse
❖
4. laissez-faire policy and the end of Progressivism
❖
5. Taxes
❖
6. Stock Market Speculation
❖
7. Federal Reserve
1. Disparity of income
❖
Roaring 20’s: good times; high
employment and no inflation
❖
However, Gap between rich and
poor was very large
❖
Majority of workers lived below
poverty line ($2500 in 1929)
❖
Companies were making lots of
money, but did not share this with
their employees
2. Buying on Credit
❖
At some point creditors will stop
giving people credit
❖
Consumers cannot buy anymore
❖
Drop in consumer spending =
lay-offs
❖
Layoffs = less spending, which
then = more lay-offs
3. Farm Economy
❖
farmers produce too much
❖
farm prices fall
❖
farmers produce more to keep up
❖
prices fall even more
❖
farmers cannot pay their loans,
default
❖
defaulting puts banks out of
business
4. laissez-faire policy and
the End of Progressivism
❖
❖
Big Business allowed to do whatever
they want - laissez-faire
❖
tariff raised on foreign goods to help
protect US industry
❖
child labor and minimum wage
overturned
Is this an end of Progressivism? Who
does the tariff hurt?
5. Taxes
❖
taxes on the wealthy are slashed
❖
so who is paying taxes to the government?
❖
Wealthy spend money on luxury items, not
items produced by the common factory
worker
❖
Or the tax money saved was put in the stock
market rather than their companies (R&D,
factories, or workers), so why give a tax
break?
❖
**then the companies saw the excess
inventories and started pulling money out of
the Market**
6. Stock Market Speculation
❖
“get rich quick”
❖
buy on margin - investor allowed to
borrow the money to buy stocks now
❖
People had to sell, which drove the
price down even further
❖
Black Tuesday - some wealthy tried to
prop up the Stock Market, but to no
avail
7. Federal Reserve
❖
charged low interest and
businesses would borrow goes to workers who buy
products
❖
charge high interest people
don’t borrow - discouraged
lending
❖
**If government, would have
cut interest rates the Great
Depression would have been
as intense or long lasting**
Government to the aid
❖
1. because of influence of Big Business the
Government issues a tariff - which made goods high
❖
other Countries can’t sell their goods in America
and therefore cannot buy American
❖
Also impose their own tariff on American goods
❖
2. President Hoover urges companies to voluntarily
maintain wages and hours - companies do the
opposite
❖
3. Advocates “rugged individualism”
Impact on the People
❖
25% Unemployment
❖
People lost their homes - took
to the streets
❖
People that still had jobs had
their hours and wages cut
❖
People only bought
necessities - further led to layoffs
❖
“Runs” on banks
❖
people fear losing money
and take all their money out
of banks
Images
❖
Soup Kitchens
❖
Bread Lines
❖
Hoovervilles
❖
Dust Bowls
❖
Okies
❖
Bonus Army
People
❖
people undernourished
❖
schools closed
❖
Abandonment increases – Men
leave families for work or shame
❖
Suicide rate increases sharply
❖
birthrate fell –
❖
Men no longer the head of the
household
❖
People looked to the government
for help
Birth Rates in U.S.