The Great Depression

The Depression

• The Wall Street stock-market crash of 1929 precipitated the Great Depression, the worst economic downturn in the history of the United States. The depression had devastating effects on the country. Many banks couldn't continue to operate. Farmers fell into bankruptcy. A quarter of the working force, or 13 million people, were unemployed in 1932, and this was only the beginning. The depression lasted over a decade, with hundreds of thousands of Americans losing their jobs, businesses failing, and financial institutions collapsing.

How it happened

Firms cut back their plans for further purchase of producer durable goods (materials); firms making producer durables cut back production; out-of-work consumers and those who feared they might soon be out of work cut back purchases of consumer durables (products), and firms making consumer durables faced falling demand as well.

Work cycle in U.S.

• Workers were idle because firms would not hire them to work their machines; firms would not hire workers to work machines because they saw no market for goods; and there was no market for goods because workers had no incomes to spend.

In a nut shell….

• The Depression became a worldwide business slump of the 1930's that affected almost all nations. It led to a sharp decrease in world trade as each country tried to protect their own industries and products by raising tariffs on imported goods. Some nations changed their leader and their type of government. In Germany, poor economic conditions led to the rise to power of the dictator Adolf Hitler. The Japanese invaded China, developing industries and mines in Manchuria. Japan claimed this economic growth would relieve the depression. This militarism of the Germans and Japanese eventually led to World War II (1939-1945).

In a nut shell…

• In the United States, President Herbert Hoover held office when the Great Depression began. The economy continued to slump almost every month. Franklin D. Roosevelt was elected President in 1932. Roosevelt's 'new deal' reforms gave the government more power and helped ease the depression. The Great Depression ended as nations increased their production of war materials at the start of World War II. This increased production provided jobs and put large amounts of money back into circulation.

Why did the world experience depression in the 1930’s?

• Causes of worldwide depression:– German reparations– Expansion of production capacities and dominance of the

United Sates in the global economy– High protective tariffs– Excessive expansion of credit– Stock Market Crash (1929)

What political changes resulted from the worldwide depression?

• Impact of world depression– High unemployment in industrial countries– Bank failures and collapse of credit– Collapse of prices in world trade– Nazi Party’s growing importance in Germany; Nazi

Party’s blame of European Jews for economic collapse

Key Terms

• Stock Market

• “Black Thursday”

• Welfare and Public Works

• Franklin D. Roosevelt—”New Deal”

Essential Understanding

• A period of uneven prosperity in the decade following World War I (1920’s) was followed by worldwide depression in the 1930’s. Depression weakened Western democracies, making it difficult for them to challenge the threat of totalitarianism.– Totalitarianism: a modern autocratic government in which the state

involves itself in all facets of society, including the daily life of its citizens. This gov’t seeks to control all economic and political matters, the attitudes, values, and beliefs of its population, erasing the distinction between state and society. The citizen’s duty to the state becomes the primary concern of the community, and the goal of the state is the replacement of existing society with a perfect society.