ISSUE 1:The Great

Depression

What is a depression?

A depression in an economic sense is:

A period of drastic decline in a national or international economy, characterized by decreasing business activity, falling prices, and unemployment.

The Great Depressionwhat happened?

• In the 1920’s Americans bought shares on the stock market. As a result share prices kept rising and rising

• Many people bought shares on ‘credit’ and expected to sell them at a higher price to make a profit, then settle their debt (speculation)

• By 1928 the share prices did not rise as much as previous years.

• Companies were not selling as much goods and therefore their profits fell causing people to be less eager to buy shares.

• many speculators started selling their shares, when others saw this many followed.

• This was the immediate cause of the wall street crash.

• On Thursday 24th October this is known as Black Thursday. 13 million shares were sold, prices plummeted as there were hardly any buyers. Bankers invested $250M into the share market to encourage others to stay and to buy rather than sell. It temporarily worked and prices stopped falling.

• On Monday 28th October panic started again and shares were sold at falling prices.

• On Tuesday the 29th October, over 16 million shares were sold by panic investors for little to nothing. Shareholders lost a total of 8000 million dollars that day.

• Share prices continued to fall up till mid November, but by then the Damage had been done.

• This was a very crazy time for America, which then spread to many places over the world. Everybody in America was involved in the stock market whether they could afford it or not.

(Classroom video questions)

(http://www.youtube.com/watch?v=IWrX6kC9Nhs)

(http://www1.teachertube.com/viewVideo.php?title=The_Wall_Street_Crash&video_id=13514

• Crowd control The crash of 1929

Causes of the Great Depression

Short term

• Speculation and doubt

Long term

•Overproduction

•Income equalities

•Government policies

•Decline in Export markets

•Decline in Agriculture

Short Term Causes

Speculation and Doubt

• Buying shares on the stock market for a quick profit (speculators)

• The 1920’s were a time of great prosperity. Prices were rising causing more profits for companies, and increasing the share value for those companies.

• By 1929 buying shares was like a fever.

• But some people started having doubts. In 1929 when profits from companies started decreasing (due to fact that not enough people were buying goods from companies)

• Many people thought that if profits were decreasing, then so would share prices, so people began to sell their shares over a short period of time. On Black Thursday when $13M shares were sold, followed by ‘Terrifying Tuesday’ were $16.5M were sold

• By the end of the year the value of shares had dropped by $40B. Thousands of people who borrowed money to buy shares were in debt and ruined. (Many committed suicide)

Long Term causes

As well as short term causes there were long term causes which had contributing factors developing over time

Overproduction• Mass production methods meant that

goods could be produced quickly and in large amounts

• However this would then leave the American market to be saturated.

• Mass productions of cars, radios, refrigerators, vacuum cleaners, cameras and other consumer goods, were being produced far too much.

• For a while these items were being soaked up by:

-Consumer spending (especially by the rich)

-people buying on credit

-overseas buyers

• So eventually markets reached a saturation point:

-demand for products fell

-high prices drove away smaller consumers

-overseas markets began to close off.

• By 1929 industries began to produce less and less and workers were being laid off.

• Larger industries began taking over smaller industries and laying off men.

• This led to jitters on the stock market and contributed to the crash of 1929.

(The economy in the 1920’s)

Income inequalities

• An unequal distribution of wealth can also be contributed, as many American no longer wanted to buy consumer goods, there were also millions who could not afford to buy.

• In 1928 a survey showed that 60% of families earned less than $2000 a year- the minimum needed to survive.

• Workers wages rose in the 1920’s but not compared to companies profits. Between 1923 and 1929, wages rose 8% where profits rose 72%

• Big bosses took 84% of the total income of industries and by 1929, bosses were still raising prices and denying workers of a pay rise. Working people found it difficult to buy the goods that companies were producing.

Government Policies

• The USA government had put tariffs on foreign goods in the 1920’s. (taxes)

• Therefore other foreign governments did the same to American goods, so American businessmen found it very difficult to sell their goods abroad. Therefore adding to the overproduction problem

Decline in Export Markets(Economic Nationalism)

• After WWI European farmers had increased their crop production again, making it harder for farmers to sell to the European markets.

• American farmers also had competition from Canada, Australia and Argentinean producers who were cheaper than the Americans on the world market.

• Tariffs: American goods became too expensive for Europeans- again contributing to the overproduction.

Decline in Agricultural production• After the tariffs on international goods, many

farmers especially in the mid west went bankrupt. • Farmers in the south were share croppers (rented

land to produce goods, in turn paid landlord through goods) In 1920’s the landlords took greater portions.

• In other areas, farmers produced too much food which led to declining prices. This inturn meant that the farming communities had less money to buy their goods in order to produce food. Leading to starvation

(Causes spider gram)(Causes/Causes of GD)(Reaction to the crash)

What were the effects of the crash?• Uncertainty about future• unemployment• Closure of banks and businesses• Protests- people lined up to get food• Crime level rose• Political extremist emerged• People moved from country to city in search of work• High suicide rate(effects of the depression)(impact of the depression)(The wall street crash)http://www.youtube.com/watch?v=TpfY8kh5lUw

• Downward trend As 1930 dawned, the tail-end of the stock market crash merged into the beginning of a full-blown recession.

• Over 1,000 banks were said to have failed during 1930, mainly thanks to a collapse in property prices. Industrial production fell by almost one-third, and the first waves of what would become chronic unemployment began to appear.

Hooverville

Songs of the depression

http://www.youtube.com/watch?v=eih67rlGNhU

http://www.youtube.com/watch?v=mc6RS9e3Dhw

http://www.youtube.com/watch?v=m9dP4pL1rW8

WE MUST REMEMBER

• We have to remember that not everyone was affected by the depression. Some actually prospered, by buying up companies cheaply and supplying goods at prices people could not afford.

The Government made various attempts to find a solution to the

problem

‘New Deal’• President Hoover was considered uncaring to

the common people of the USA, he tried to restrict government work in attempt to pour money into big businesses.

• In 1932 he was thrown out of office and the American people elected Franklin D Roosevelt as the new president.

• President Roosevelt promised the ‘New Deal’

• As part of the New Deal, Roosevelt set up government agencies to provide:

- Relief: help the poverty stricken- who had no food or homes

- Recovery: reduce unemployment and get the economy moving

again- Reform: avoid future depression(From depression to New deal)

(Franklin and the new deal)

http://www.youtube.com/watch?v=wF80co_Y_Bc

http://www.youtube.com/watch?v=jQ9oBg6T2UE

This 1934 mural sees

Roosevelt as the

protector and friend

of the working

man.

Government Laws were established to:• Ensure businesses paid fair wages and charged fair

prices• Ensure people had a right to join unions• Guarantee pensions to people who couldn’t provide

for themselves• Set up an unemployment insurance scheme• Ensure loans for householders who couldn’t afford

mortgages• Clear slums and establish building programs• Increase taxes for the wealthy• Pass trade agreements that reduced American

tariffs.

‘Farmers Relief Act’• Roosevelt also introduced the Farmers

Reflief Act, which enabled:

• The Farmers Relief Act:

paid compensation to farmers to reduce production

The National Insurance Recovery ActThis involved:

-public works Administration: allocating money for roads and schools

- National recovery Administration: abolishing child labour and introducing an 8 hour working day

- Social securities Act: giving money to state governments to provide pensions and unemployment insurance (like centrelink)

- Federal Emergency Relief Administration: giving money to States to employ people in government projects like road building, dam construction, ect.

The Tennessee Valley Authority

• Constructed dams to provide cheap electricity and organised conservation, irrigation and forest planting to prevent erosion.

Involvement in World War II• By 1939 unemployment was still high

• The solution was to involve the country in WWII

• Although the USA was not involved in the war, Europe needed armaments and other supplies, which stimulated industry.

• When the USA was finally drawn into war in 1942 because the Japanese attack of Pearl Harbour

• This soaked up the unemployed who were needed for them armed forces.

Unfortunately there was aGlobal Spread of the

Depression

What countries suffered?

• European and Asian countries experienced a similar depression as a result of:

→ stock market crashes

→ overproduction

→Government programs

→withdrawal of American loans

Lets have a closer look at

Great Britain

Germany

Japan

Great Britain

• See sheet

Germany

• See sheet

• Great Depression Begins

Japan

• See sheet

Question????Do you think Russia would have been effected by the

Great Depression?

Why or why not?

WE MUST REMEMBER

• We must remember that the effects of the Great depression do vary from country to country. In your exam you may be asked to talk about one or more countries. Some were worse affected than others.

(Revision sheet)

(Directed Investigation)

(source work causes)

(Great Depression test)