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CAUSES OF THE GREAT DEPRESSION
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■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?
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The Great Depression Era
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The Business of America
Calvin Coolidge (President)
fit pro-business spirit of the 1920s
Famous quote: “The chief business of
the American people is business . . .the man who builds a factory builds a temple – the man who works there worships there”
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American Business Flourishes President Coolidge
(Republican) successor Herbert Hoover
favored governmental policies that kept taxes down and business profits up
Tariffs were high, which helped American manufacturers
Government interference in business was minimal
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The Impact of the Auto
Ford Model T
came only in black
sold for $290 ($3553 in 2013 dollars)
Over 15 million were sold by 1927
Auto backbone of the
American economy
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How Auto Changed America Paved roads, traffic lights, motels, billboards Home design (garages, driveways) Gas stations, repair shops, shopping centers Freedom for rural families Independence for women and young people By 1920 80% of world’s vehicles in U.S.
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American Standard Of Living Soars
1920-1929 (prosperity)
Americans owned 40% of the world’s wealth
average annual income rose 35% during the 1920s
(for top earners) discretionary
income increased
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Electrical Conveniences electricity transforms
the nation Electric refrigerators Stoves Irons Toasters Vacuums washing machines sewing machines
All available!
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Modern Advertising Emerges
Ad agencies no longer sought to merely “inform” the public about their products
Agencies hired psychologists to study how best to appeal to Americans‘desire for youthful, beauty, health and wealth
“Say it with Flowers” slogan doubled sales between 1912-1924
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A Superficial Prosperity Many during the 1920s
believed the prosperity would go on forever Wages Production GNP stock market all rose significantly
But. . . .
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Problems on the Horizon?
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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?
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The Great Depression“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us.”
-- Herbert Hoover, 1928
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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 notesAfter examining all documents, try to
group the documents into categoriesWhen finished, create a one sentence
thesis that explains why the depression began…be prepared to discuss
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Causes of the Great Depression
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Causes of the Great Depression Agricultural
overproduction bank issue
Industrial overproduction Uneven division of wealth Over-extension of credit
bank issue International economic
situation bank issue
■ Banking catastrophe3 strikes against the
banks
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Causes of the Depression Agricultural overproduction:
– 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
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Causes of the Depression◼Industrial overproduction:
–Mass-production of consumer goods led to overproduction
–People did not need as many appliances & cars by the end of the decade (under-consumption)
–Railroads, textiles, steel, coal mining, construction were barely profitable
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Overproduction of Consumer Goods
Too much inventory…Not enough buyers
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“Traditional” industries suffered in the 1920s
Profits for Coal MiningProfits for Railroad Companies
Corporate Profits for Coal and Railroad Industries, 1920-1930
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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
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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
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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
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Americans bought goods on credit & did not have much in savings accounts
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Easy credit created a stock market bubble
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Causes of the Depression◼The Stock Market:
–In the 1920s, the stock market soared & people speculated with stocks• bull market – upward
trend in stock market–Many people borrowed
money to pay for stocks, called buying on margin
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Buying Stocks on Margin
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Causes of the Depression◼The Stock Market:
–There was no regulation of the market & some companies altered stock values to raise profits• bear market – downward
trend in stock market
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Causes of the Depression◼The Stock Market:
–On October 29, 1929 (Black Tuesday) the stock market crashed
–People rushed to sell, prices plummeted, & investors lost $30 billion
–Speculators who bought on the margin, could not pay off their debts
–Many lost their savings
The stock market crash in October 1929 marked
the beginning of the “Great Depression”
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Causes of the Depression■ The Stock Market:
– Speculators who bought on the margin, could not pay off their debts
– Many lost their savings
“Wall Street Lays An Egg”
- Daily Variety (Oct. 30,
1929)
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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
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Causes of the Depression◼ International Economic Situation:
– France / England borrowed $$$ to finance WWI
– Reparations from Germany / Austria used to make payments
– Overtime, G and A could not make the reparation payments
– 1927 – 1928 F and E borrowed more $ to pay debts
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Causes of the Depression◼ International Economic
Situation:– 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%• exacerbated banking crisis
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A Global Depression
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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
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Bank & Business Failures, 1928-1933
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Effects of the Great Depression■ The Great Depression led to a collapse
of the U.S. financial system– 9,000 banks & 90,000 businesses
failed by 1933– Gross National Product (GNP) total value of all goods and services produced in a given year
• 1929 -- GNP = $103 Billion• 1933 -- GNP = $56 Billion
– 15% unemployment throughout the 30s, sometimes reaching as high as 25%
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Effects of the Great 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
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Unemployment & Consumer Spending, 1928-1933
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Depression Life■ Shantytowns or
(“Hoovervilles”)– with no money
for mortgages, many forced onto streets• selling an
apple– America had
record poverty & suicide rates; Fathers abandoned families; Healthcare declined
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Depression Life
– Private charities created soup kitchens & breadlines to help• breadlines and soup kitchens synonymous
with the Great Depression
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Soup Kitchens & Breadlines
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Mortgage Foreclosures
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Poverty in America
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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
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Dust Bowl
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Dust Bowl■ Farmers in crisis
– drought creates setting for (Harvest Gypsies – The Grapes of Wrath)
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The Dust Bowl (1931-1939) worsened the effects of the DepressionAreas Affected by the Dust Bowl drought“Okies” & “Arkies”
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How Herbert Hoover Dealt with the Crisis
■ Confidence economics- “Prosperity is right around
the corner.”
■ Rugged Individualism- Success comes through individual effort / private enterprise
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How Herbert Hoover Dealt with the Crisis
“I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering.... The lesson should be constantly enforced that though the people support the Government the Government should not support the people.” -- Herbert Hoover, 1930
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How Herbert Hoover Dealt with the Crisis
Who should relieve the suffering? Community / Church resources
- Salvation Army, Community Chest, Red Cross
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President Hoover’s Response■President Herbert Hoover
initially rejected bold government action in response to the depression:–He tried to reassure
Americans that prosperity would return
–He called for volunteerism & “rugged individualism”
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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
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■ 15,000 WWI veterans marched to Washington D.C. to get a bonus ($)– they were supposed to receive the bonus
in 1945
The Bonus Army 1932
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■ Hoover called the United States Army in to disperse the Bonus Marchers
The Bonus Army 1932
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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 & a more active government to solve their problems
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