Causes of “The Great Depression”

Throughout the years of 1929 to 1939, Throughout the years of 1929 to 1939, there was a world wide depression and there was a world wide depression and Canada was one of the worst affected Canada was one of the worst affected countries. Financially and countries. Financially and economically, the country began to economically, the country began to collapse regardless of what was done collapse regardless of what was done by political power.by political power.

As the depression carried on, 1 in 5 As the depression carried on, 1 in 5 Canadians became dependent on Canadians became dependent on government relief. 30% of the labour government relief. 30% of the labour force was unemployed, where as the force was unemployed, where as the unemployment rate had previously unemployment rate had previously never passed 12%. never passed 12%.

Over-production of goods.Over-production of goods. Canada’s dependence on a few Canada’s dependence on a few

primary products.primary products. Canada’s dependence on the U.S.Canada’s dependence on the U.S. High tariffs.High tariffs. Too much buying on credit.Too much buying on credit.

Underlying causesUnderlying causes

Over-production of goodsOver-production of goods Stock piles of almost all goods were Stock piles of almost all goods were

everywhere.everywhere. Factories had to slow down their Factories had to slow down their

production; many employees were laid production; many employees were laid off.off.

E.g. Automobile centres such as E.g. Automobile centres such as Oshawa and Windsor produced 400,000 Oshawa and Windsor produced 400,000 cars in 1930. To do this made little cars in 1930. To do this made little sense because Canadians already sense because Canadians already owned over 1,000,000 cars and in the owned over 1,000,000 cars and in the best year ever had purchased only best year ever had purchased only 260,000.260,000.

Canada’s dependence on a Canada’s dependence on a few primary productsfew primary products

Canada’s economy depended heavily on Canada’s economy depended heavily on exports of natural resources to other exports of natural resources to other countries (e.g. Europe, U.S.)countries (e.g. Europe, U.S.)

E.g. In the late 1920s Canada’s wheat industry E.g. In the late 1920s Canada’s wheat industry faced growing competition from Argentina faced growing competition from Argentina and Australia which were also wheat-and Australia which were also wheat-exporting countries. The price of wheat on the exporting countries. The price of wheat on the world market dropped. With little income, world market dropped. With little income, farmers could not purchase machinery and farmers could not purchase machinery and manufactured goods from Eastern Canada.manufactured goods from Eastern Canada.

In 1928, Canadian farmers bought 17,143 In 1928, Canadian farmers bought 17,143 tractors. Five years later, they bought only tractors. Five years later, they bought only 777.777.

Canada’s dependence on the Canada’s dependence on the U.S.A.U.S.A.

In the 1920s, the U.S. had replaced Britain as In the 1920s, the U.S. had replaced Britain as the largest buyer of Canadian products and the largest buyer of Canadian products and the largest investor into our economy.the largest investor into our economy.

When the depression hit the U.S., banks When the depression hit the U.S., banks closed, industries collapsed, and people closed, industries collapsed, and people were out of work as factories shut down. No were out of work as factories shut down. No longer did Americans need our lumber, longer did Americans need our lumber, paper, wheat, and minerals. It was inevitable paper, wheat, and minerals. It was inevitable that Canada's economy would suffer too.that Canada's economy would suffer too.

It was not surprising that when the American It was not surprising that when the American economy got sick, Canada also suffered. One economy got sick, Canada also suffered. One comedian said, "When the United States comedian said, "When the United States sneezed, the rest of the world got sneezed, the rest of the world got pneumonia."pneumonia."

High tariffsHigh tariffs In the 1920s, war-torn countries needed many of In the 1920s, war-torn countries needed many of

the surplus manufactured goods Canada the surplus manufactured goods Canada produced. Unfortunately, they were heavily in produced. Unfortunately, they were heavily in debt from the war and often could not afford to debt from the war and often could not afford to buy them.buy them.

At the same time, many countries adopted a At the same time, many countries adopted a policy known as protective tariffs (a tax on policy known as protective tariffs (a tax on imported goods). In order to protect their home imported goods). In order to protect their home industries from foreign competition, they placed industries from foreign competition, they placed high tariffs on foreign imports. Country X found high tariffs on foreign imports. Country X found that its goods were being kept out of country Y that its goods were being kept out of country Y by high tariffs. Soon, country X placed high by high tariffs. Soon, country X placed high tariffs on imports from country Y.tariffs on imports from country Y.

World trade began to slow down. Surplus goods World trade began to slow down. Surplus goods in one country were kept out of another country in one country were kept out of another country that needed them. that needed them. 

Too much buying on creditToo much buying on credit

Many families got themselves Many families got themselves hopelessly into debt with credit buying. hopelessly into debt with credit buying. The piano that cost $445 cash was The piano that cost $445 cash was purchased with $15 down and $12 a purchased with $15 down and $12 a month for the next four or five years. month for the next four or five years. Goods ended up costing far more than Goods ended up costing far more than they were worth.they were worth.

If the wage earner became sick or was If the wage earner became sick or was laid off work it was often impossible to laid off work it was often impossible to keep up the payments. As the keep up the payments. As the depression worsened, many people depression worsened, many people lost everything.lost everything.

Immediate CausesImmediate Causes

DroughtDrought

Stock Market CrashStock Market Crash

DroughtDrought In 1929, a terrible drought (a long In 1929, a terrible drought (a long

period with no rain) began that lasted period with no rain) began that lasted nearly 10 years.nearly 10 years.

Crops dried up and the soil turned to Crops dried up and the soil turned to dust; the wind then blew away the dry dust; the wind then blew away the dry soil.soil.

Storms of dust occurred often leading Storms of dust occurred often leading parts of Alberta and Saskatchewan to parts of Alberta and Saskatchewan to be referred to as the “Dust Bowl”.be referred to as the “Dust Bowl”.

Nearly 14,000 farms were abandoned Nearly 14,000 farms were abandoned during the depression.during the depression.

Stock Market CrashStock Market Crash Too many people were buying stocks “on Too many people were buying stocks “on

margin” which means that they borrow margin” which means that they borrow money from the bank in order to buy more money from the bank in order to buy more stocks.stocks.

Often investors had to put up collateral to Often investors had to put up collateral to back up their loans; homes, businesses, back up their loans; homes, businesses, cars and other assets were usedcars and other assets were used

The crash occurred on “Black Tuesday”, The crash occurred on “Black Tuesday”, October 29, 1929.October 29, 1929.

Families lost all their money and Families lost all their money and businesses went bankrupt.businesses went bankrupt.

“Black Tuesday”