Its about Great Depression in 1930. It describes the incidents occured during these period of time.Its mainly focused at US and its economy

1. Great Depression of
the 30s Affected the
World Economy
BY
SOUMIK GHOSH

3. Background
● Severe economic depression which preceded World
War II
● Started in the US on October 29th , 1939 with the
fall of US stock market
● Impacted the major European and Asian economies
of the world
● Lasted till early 1940s - longest , most widespread
and deepest depression of 20th centery

4. Major Causes
High Tariff
Barrier
Stock
Market
Crash
Over
Production
Inequality
Monetary
Poilicy

5. High Tariff Barrier
● During initial stages of Great Depression, the
USA’s main goal emerged to protect American jobs
and farmers from forgien competition
● So, the Smooth-Hawley Tariff Act was enacted in
1930
● But it led to worsening of depression by reducing
international trade and causing retaliatory tariffs
in other countries

6. THE CIRCULAR
FLOW
BUSINESSES HOUSEHOLDS
RESOURCE
MARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
PRODUCT
MARKET
GOODS &
SERVICES
GOODS &
SERVICES
$ CONSUMPTION$ REVENUE

7. THE CIRCULAR
FLOW
BUSINESSES HOUSEHOLDS
RESOURCE
MARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
PRODUCT
MARKET
GOODS &
SERVICES
GOODS &
SERVICES
$ CONSUMPTION$ REVENUE
GOVERNMENT

8. Monetary Policy
● Monetary contraction, the consequence of poor
policy-making by the American Federal Reserve System and
continue crisis in the banking system responsible for Great
Depression
● The Federal Reserve, by not acting, allowed the money
supply to shrink by one-third, transforming a normal
recession into Great Depression
● Led to the closure of more than 11000 banks and increased
conservatism in remaining banks in extending credit

9. Stock Market Crash
● The American stock markets were the most visible symbol of
prosperous American economy in 1920’s
● Stock prices rose steadily in 1920’s and in 1929 Dow peaked
at its highest level of 381 points
● On October 29th, 1929 the stock market plummeted leading
to a loss of $30 billion
● The industries were not performing well and in stock market
there were 2 major problems:
○ Speculation
○ Margin

10. Inequality : Unequal distribution of
Wealth
● National wealth grew steadily in 1920’s but it was not
distributed evenly
● The income rose to 75% for the top 1% and for the remaining
it was only 9%
● 80% of Americans had no savings at all
● 70% of families had annual earning <$2500

11. 1920s and 30s Salaries
● Bus Driver - $1300 or $0.43/hr
● Teacher - $1227
● Waitress - $520 or $0.20/hr
● Framland - $216 or $0.07/hr
● First minimum wage under FDR - $0..25/hr
● Highest paid production workers in 1920s (Ford Motor
Company) - $5.00/day or $0.48/hr
● Fram Product prices:
○ Potatoes - $0.01/pound
○ Cotton - $0.05/pound
○ Pork - $0.05/pound

12. Over Production
● Farm:
○ The production rose to very high level to meet the demand during WW-I
but the consumption dropped in 1902’s
○ The prices of the agricultural land and crops fell and the average annual
income of farmers dropped to $273
○ 30% of Americans were dependent on farming
● Industry:
○ Factories were producing products at a higher rate but wages of
workers were not increasing in the same proportion
○ Consumers were buying less than the production and their was
overproduction

13. What about the people?
● Farmers were already feeling the
effects
○ Prices of crops went down
○ Many farms foreclosed
● People could not afford luxury
○ Factories shut down
○ Businesses went out
● Banks could not pay out money
● People could not pay their taxes
○ School shut down due to lack of
funds
● Many Families become homeless
and had to live in shanties

14. The Great Dust Bowl
● Over use & Over grazing
○ No crop rotation
● No soil conservation
● No wind breaks
● Loss of natural grass and animals
● Climate changes - The Drought of the 30’s

15. Why was this Bad?
● Credit System
○ These was a new concept
○ People didn’t really have money they
were spending
○ No money to replenish what was
borrowed
● WWI
○ The US was a major credit loaner to
other nations in need
○ Many of these nations could not pay
them back

16. EASY MONEY (CREDIT)
• INTEREST RATES ON LOANS WERE TOO LOW =
TOO MUCH BORROWING INTEREST RATES ON
SAVINGS WERE TOO LOW = TOO MUCH
SPENDING (INFLATION) EXCESSIVE REAL
ESTATE CONSTRUCTION = OVERSUPPLY
GHS Rules

18. The New York Stock Exchange
Black Friday, October 24, 1929

19. Runs on Banks
● The crisis in confidence frightened depositors
who feared for their money.
● Millions tried to withdraw their money because
they feared the banks losing it.
● 1929- 641 banks Failed
● 1930- 1350 banks Failed
● 1931- 1700 banks Failed

20. The Business Cycle
● BOOM/PROSPERITY/PEAK
● High Demand = Desire for more Profits = Greater Investment =
More Production = Higher Employment = More Demand =
Higher Prices(Inflation)

21. The Business Cycle
● CONTRACTION / SLOWDOWN
● Inflation/Overproduction = Less Production = Lays off = Less Spending =
Lower Confidence = Less Investment = Higher Unemployment
● UNTIL SURPLUSES ARE USED UP

22. Business Cycle Throughs
● RECESSION = Two Successive ¼’s (3 months periods)
of declining GDP ($ of GOVT, Consumer and Business
Spending)
● DEPRESSION = Unemployment greater than 12%

23. The Business Cycle
● EXPANSION / RECOVERY
● Higher Demand = Surplus Reduction = more production = Recall
of workers = More purchasing = Increase Investments =
Economic Growth

25. Christmas Day
Breadlines in
New York City,
1931

26. Police stand
guard outside
the entrance to
New York's
closed World
Exchange Bank,
March 20, 1931

27. Unemployed
men vying for
jobs at the
American
Legion
Employment
Bureau in Los
Angeles
during the
Great
Depression.

28. Unemployed
workers in
front of a
shack with
Christmas
tree, East
12th Street,
New York
City.
December
1937

30. Man in hobo jungle killing
turtle to make soup,
Minneapolis, Minnesota.
Hard Times
Unemployment
· By the early 1930’s,
approximately 25% of the
nation was unemployed.

31. · Fathers
and some
children left
home to
find work.
Families
in Crisis
· Marriage
and birth
rates
dropped.

32. Evicted family with
belongings on street,
December 14, 1929.

33. President Hoover
● Herbert Hoover was
President at the start
● Philosophy : We’ll make it
● What he did : NOTHING
● The poor were looking for
help and no idea on how to
correct or help were coming

34. · These shacks were
known as Hoovervilles.
Seattle, Washington
Homelessness
· Homeless families
build shacks out of
wooden crates and scrap
metal.

35. Central Park,
New York City

36. “Hooverville,"
New York City,
December 8
1930
[Sign on shack
reads:
"House of
Unemployed"]

37. Hoover Takes Action • At first,
President
Hoover was
against
offering direct
government
relief.
• Instead, he
asked private
charities, such
as the YMCA,
to help.

38. Many waited in unemployment
lines hoping for a job.

39. People in cities would wait in line for
bread to bring to their family.

41. Some families were forced to
relocate because they had no
money.

42. “Hooverville”• Some families were
forced to live in shanty
towns
– A grouping of shacks and
tents in vacant lots
• They were referred to as
“Hooverville” because
of President Hoover’s
lack of help during the
depression.

45. A drought in the South lead to
dust storms that destroyed crops.
“The Dust Bowl”

46. The South Was Buried
• Crops turned to dust=No food to be
sent out
• Homes buried
• Fields blown away
• South in state of emergency
• Dust Bowl the #1 weather crisis of the
20th century

48. A Farm Foreclosure

49. Some families tried to make money by
selling useful crafts like baskets.

50. Different views of causes
➢ There are various approaches for explaining the causes of the
first downturn in 1929:
○ Demand-driven
■ Keynesian
■ Breakdown of international trade
■ Debt deflation
○ Monetarist
○ Inequality
○ Productivity Shock
○ Austrian School
○ New classical approach

51. Demand-Driven
● Keynesian :
○ Lower aggregate expenditures in the economy contributed to a massive decline in
income and to employment that was well below the average
○ To keep people fully employed, governments have to run deficits when the
economy is slowing
● Debt deflation :
○ Predominant factor leading to the Great Depression was over-indebtedness and
deflation
○ Margin requirements were only 10% - People took the loan to invest in stock
market, but when the market crashed they were unable to repay these loans
leading to default
● Breakdown of international trade :
○ American Smoot-Harley Tariff Act responsible for worsening the situation of the
crisis
○ American exports declined from about $5.2 billion in 1929 to $1.7 billion in 1933

52. Monetarist
● Monetary contraction, the consequence of poor policy-making
by the American Federal Reserve System and continued crisis in
the banking system responsible for Great Depression
● The Federal Reserve, by non-acting, allowed the money supply to
shrink by one-third, transforming a normal recession into the
Great Depression
● The Federal Reserve Act limited the amount of credit the
Federal Reserve could issue

53. Inequality
● Root Cause : Global over-investment in heavy
industry capacity compared to wages and earnings
from independent businesses
● Solution : Redistribute purchasing power, maintain
the industrial base, but re-inflate prices and wages to
force as much of the inflationary increase in
purchasing power into consumer spending

54. Productivity Stock
● The first three decades of 20th century witnessed
rapid growth in productivity and production
capacity
● According to this school of thought “The Great
Depression” was a result of these long term trends

55. Other Views
● Austrian School :
○ The key cause of the Depression was the expansion of the money supply
in the 1920s that led to an unsustainable credit-driven boom
○ This inflation of the money supply that led to an unsustainable boom in
both asset prices by the late 1920’s and led to economic contraction
● New classical approach :
○ Initial severe decline but rapid recovery in productivity, relatively little
change in the capital stock, and a prolonged depression in the labour
force
○ Focuses on the decline in productivity that caused the initial decline in
output and a prolonged recovery due to policies that affected the labour
market

56. Effect on the Major Economies of the
World and US

57. IMPACT
United States Great Britain France Germany
Industrial
Production
-46% -23% -24% -41%
Wholesale
Prices
-32% -33% -34% -29%
Foregin Trade -70% -60% -54% -61%
Unemployment +607% +129% +214% +232%

58. Franklin Delano Roosevelt
● When he inaugurated
unemployment had increased by 7
million
● Poor section had 50 % of pop
unemployed
● Instated the “New Deal”
● People everywhere were effected by
the Depression till President
Roosevelt took over and tried to put
the economy back together that
people ever saw a glimmer of hope

59. Recovery Steps New Deal
● In March 1933, the country was virtually leaderless
● The Banking system had collapsed
● He provided dynamic leadership in a time of crisis
● Series of economic programs enacted in USA between 1933 and
1936
● 3R’s - Relief, Recovery and Reforms
○ RELIEF for the unemployed and poor
○ RECOVERY of the economy to normal levels
○ REFORM of the financial system to prevent a repeat depression

60. Source of New Deal Ideas
● Specialists and experts, mostly college
professor and idea men
● New Economists : Government spending,
deficit spending and public spending,
government should prime economic pump
● Roosevelt Cabinet : included
conservatives, liberals, Democrats,
Republicans, inflationists, anti-inflationists
often conflicting, compromising, blending
ideas

61. First New Deal(1933-34)
● Primary aim of this deal was to
achieve Economic Recovery
● PHILOSOPHY : Economic nationalism
and economic scarcity(i.e., raise
prices by creating illusion of scarcity)
● OBJECTIVES : higher prices for
agriculture and business
● BENEFICIARIES : big business and
agriculture business

62. Second New Deal(1934-41)
● Primary Aim : permanent reform
● Philosophy : international economic
cooperation economic abundance
● Objectives : increased purchasing
power and social security for public
● Beneficiaries : small farmers and
labor

65. The End of Great Depression
● The Great Depression ended when US entered World War II in December 1941
● Massive war spending doubled the GNP
● Military Keynesianism brought Full Employment
● Military Keynesianism : the position that the government should increase military
spending in order to increase economic growth.
● The mobilization of manpower following the outbreak of war in 1939 ended
unemployment
● Spending on the New Deal was far smaller than spending on the war effort, which passed
40% of GDP in 1944
● Massive war spending doubled economic growth rates, either masking the effects of the
Depression or essentially ended the Depression
● Businessmen ignored the mounting national debt and heavy taxes, redoubling their
efforts for greater output to take advantage of generous government contracts.