Mass production was too successful. Not enough consumers. New technologies and techniques improved farming production as demand decreased. Overproduction = products not selling. Underconsumption = people were not buying as much as was being produced. Farmers had made money supplying food for the Allies during the war. Consumption dropped, so did prices, resulting in less income for farmers, who then turned to credit to buy the consumer items of the day. For the first time in history the number of farmers decreased. Livestock slaughtered in attempt to control prices. Business, dwindled, companies cut back, so declared bankruptcy (sound familiar). Unemployment grew, leave people with debt and no money to consume. As businesses boomed in the first half of the 20s, workers saw gradual increases in their wages, but it still wasn’t enough to solve overconsumption. 1929 top 1% controlled 56% of the wealth, bottom 99% controlled 44% People compensated for the unequal distribution of wealth by buying on credit. When the wealth in concentrated, it prevents most of the people from buying stuff.
Germany had to borrow money from the US to pay off reparations to the Allies. Therefore, The Germans needed to sell stuff.To protect American business from foreign competition, Congress passed the Hawley-Smoot.In reaction, European countries, raised their own tariffs.Businesses with surpluses couldn’t sell their extra stuff to foreign markets.
Causes of The Great Depression
President Herbert Hoover
From a speech given October 22, 1928:
….When the war closed, the most vital of issues both in our own country and
around the world was whether government should continue their wartime
ownership and operation of many [instruments] of production and
distribution. We were challenged with a... choice between the American
system of rugged individualism and a European philosophy of diametrically
opposed doctrines -doctrines of paternalism and state socialism.
…. our American experiment in human welfare has yielded a degree of well-
being unparalleled in the world. It has come nearer to the abolition of
poverty, to the abolition of fear of want, than humanity has ever reached
before. Progress of the past seven years is proof of it....
Yee Haw Stock Market Crash 1929
Students selected the “Go for the
Some students bought bonanza
Point values decreased
dramatically, all but those who held
tight lost everything they had and
Even those who played it safe lost
Overproduction, Underconsumption, and
• Mass production
• Wealth Gap
• Downward spiral
Speculative bubbles from the
to buy goods
• Tariffs worsen things
• Hawley – Smoot Tariff Act 1929
The Stock Market Crash of 1929
The Banks The Borrowers The Businesses
The bank gives a $100 loans for
$20 up front. The bank has $20.
The bank gives a $150 loan for
$30 up front. The bank has $50
The recipient takes a $100 loan from the bank. The
recipient has $100.
The recipient buys two shares of stock for $50 each.
The recipient has $0. Buying with loaned money is
referred to as buying on the margin.
Speculation causes stock prices to rise to $75.
The recipient takes another $150 loan. And buys two
more shares of stock. The recipient has $0.
European investors get nervous and start selling their
stock investments. As prices fall, they gain
momentum. The recipient attempts to sell all four of
his stocks for $25 each, for a total of $100.
The business sells two
shares of stock for $100
and invests it in land. The
businessman has $0
The land that the business
bought was overpriced
because of speculation
and becomes worthless.
The business no longer
has enough money to
1. How did the Great Depression effect the characters in The Grapes of Wrath?
2. How did the characters deal with these circumstances? What did they do?