Unit 3 lesson 1 causes of the depressionPresentation Transcript
Unit 3, Lesson 1
Which do you agree with? A) The U.S. Government should intervene in the economy during a depression. B) The U.S. government should intervene in the economy during a boom. C) The U.S. government should intervene in the economy during either a depression or a boom. D) The U.S. government should never intervene in the economy.
Objectives•Discuss the weaknesses in the economy of the1920s.•Explain how the stock market crash contributed tothe coming of the Great Depression in conjunctionwith spreading unemployment in America’s cities.•Examine how the Dust Bowl worsened theDepression and its overall impact on America.
Terms and People• speculation – when investors gamble that stock prices will rise• Black Tuesday – October 24, 1929, the day the stock market crashed• business cycle – periodic expansion and contraction of the economy• Great Depression – The collapse of the United States and world economies beginning in 1929
• bread line – where charities or local agencies gave food to the poor• Hoovervilles – shantytowns set up on empty land in cities and named after the President• Dust Bowl – millions of acres in the Great Plains that were destroyed when dust storms blew away the soil• repatriation – policy whereby local, state, and federal governments encouraged or coerced Mexican immigrants – some of them U.S. citizens – to return to Mexico
How did the prosperity of the 1920s give way to the Great Depression? During the 1920s, many Americans enjoyed whatseemed like an endless era of prosperity. But in 1929, the stock market crashed. Production fell, unemployment rose, and the economy went into a period of dramatic decline. Years after the Great Depression began, periodic contraction was seen as part of the business cycle.
The Republicans tookIn the 1928 credit for the strongpresidential economy.race, theRepublican Their presidentialParty was candidate was Herbertconfident. Hoover. He believed in voluntary cooperation between business and labor.
Despite Hoover’s confidence, some sawsigns of weakness in the economy.The agricultural sector Farmers could was in trouble. Rural not afford tofarmers produced huge buy goods or surpluses of food that repay their depressed prices. loans.
Easy credit and installment buying lead peopleto purchase goods they can’t pay for. By 1929, Americans racked up more than $6 billion in personal debt — more than double the 1921 level.
Rising wages masked an uneven distribution ofwealth. While factory workers’ wages rose 8%, factory output increased by 32%. As a result, worker incomes rose modestly, while rich investor incomes skyrocketed.
Until September 1929, the stock marketcontinued to rise. Many people borrowed money to buy stock, assuming prices would continue to go up. Some economists feared that stocks were over-priced.
On October 29th, the stock market went into afree fall as investors tried to sell at any price. 16 million shares were sold on “Black Tuesday.” Billions of dollars were lost in a few hours. Many who bought stocks on margin were wiped out.
• In growth periods, workers are hired, wages rise, and demand forThe Great Crash products increases.was a hallmarkof the nation’s • In contraction periods,business cycle. workers are fired, wagesThe economy drop, and demand forperiodically products falls.grows and thencontracts.
The stock market crash didn’t start the GreatDepression by itself. Instead, it quickened thecollapse of the U.S. economy.
The banking system feels the effects of the crashfirst. People fear that their money will be lost sothey run to the bank and attempt to withdraw theirfunds. But banks don’t have enough of their money on hand as cash. These bank runs cause banks to fail.
• Factories closed, causing worker layoffs.• This lowered demand for goods.• By 1933, the unemployment rate reached 25%.
Congress passed the Hawley-Smoot Tariffto protect American manufacturers fromforeign competition.The strategy was The resulting dropa mistake. Other in world trade onlynations retaliated made the glut ofand raised tariffs American factory as well. and farm products harder to sell.
As international trade falls, a global drop inbusiness leads to a worldwide depression.
There were several causes of the GreatDepression. There is still disagreement overwhich are most important. hardships in Europe and rural America Each of the uneven distribution following of wealth contributed to speculation in the stock dangerous market economic increased personal debt conditions:
How did the Great Depression affect thelives of urban and rural Americans?The stock market crash signaled the end of boomtimes and the economy staggered into the GreatDepression. Desperate poverty gripped thenation leaving a permanent impression on thosewho lived through it.Tested by extreme hardship, this generationforged a strong character and will to restoreprosperity.
Between 1921–1929,Few Americans the unemploymentunderstood rate never rose abovethe causes 4%. By 1933,of the Great however, it was nearDepression, but 25%.everyone felt theimpact. Those who managed to keep their jobs had their wages and hours cut.
For many, the only foodavailable came from publicsoup kitchens or breadlines run by charitableorganizations.People sold their propertyto buy food.
The homeless lived in empty railroad cars, incardboard boxes, or in shacks built on publicland or empty lots. Hoovervilles appeared in major cities across the country.
Between 1930 Bankers sold theand 1934, nearly land and equipmenta million farmers at auction. Somelost their farms, farmers becamehomes, and farm tenant farmers,equipment working for biggerbecause they landowners. Otherscould not pay decided to leave intheir mortgages. search of work elsewhere in the U.S.
The remainingfarmers on theGreat Plainssuffered a terribledrought, which ledto the Dust Bowl.Dust stormsdestroyedmillions of acresof farmland.
Millions of tons of topsoil were blown away in giant dust storms.• Farmers had dug up thick prairie grasses to plant wheat so there was nothing to hold the soil in place.• 100 mile-per-hour winds blew dust clouds 8,000 feet tall in Oklahoma, Texas, New Mexico, and Colorado.• Wildlife and farm animals suffocated in the choking winds.
In old trucks, they moved west or to northern cities.Farmers who 800,000 Okies left Texas,had lost their Oklahoma, Missouri, andland, called Arkansas alone. RuralOkies regardless states lost populationof where they during the 1930s.were from, wereforced to leave. Those who could afford it bought distressed neighbors’ farms at low prices to build expanded commercial farms.
Family life was hurt by the Great Depression.Those who still had jobs lived in fear that theirnext paycheck would be their last.Those who were still working felt guilty becausefriends and relatives were unemployed.America’s birthrate fell to its lowest levelon record.Some teens ran away and families broke up.
Minorities suffered even more during the depression. • As Okies moved west to• Even in good times, find work, Mexicans and African Americans were Mexican Americans faced “last hired and first fired.” fierce competition for jobs.• Many were thrown off • Local governments urged southern farms where they repatriation for Mexican were sharecroppers. Americans.