The Causes of the Great Depression

1. The Causes of the Great Depression

2. Canada’s Booming Economy • from the mid-1920s Canada’s economy boomed but was heavily dependent on exports and resources • included in this were the following industries: Lumber Hydro-electric Mining Pulp and paper

3. The Roaring Twenties end • Canadian consumers kept the factories and their workers busy • “Branch plants” appeared • stock markets rose although many stocks were overvalued • Canada’s economic potential seemed unlimited and public confidence was generally high • the ‘20s represented an “Age of Materialism” • but the prosperity was shaky at best • for Canada’s economy depended too much on export staples (like wheat) and on trade with the United States • and in the United States things would soon go tragically wrong

4. Stock Markets • during Age of Exploration companies form, each requiring capital to fund their ventures • people begin to invest in these • companies (buying an investment share in the business) • the Dutch East India company is the first to issue stocks (1602) • in Amsterdam the first exchange • appears for trading stocks and bonds • stock markets proliferate globally and market crises occur periodically

5. Black Tuesday • on Tuesday, October 29, 1929, stock markets in the United States and around the world crashed • thousands of investors were wiped out as panic selling set in • banks (and other creditors) were unable to collect loan repayments • stock valuations went down by 50% in a few hours • in the panic $50 billion in investments would disappear

6. Market Crash • fortunes were lost overnight; among the bankrupt some even committed suicide • confidence in the U.S. economy was shattered • stock market crash was a symptom of deep economic instability • in retrospect this crash would signal the start of the Great Depression • at the time, however, it was assumed by government and business leaders alike that the crash would be temporary

7. The King Government’s Response • when the stock market crashed, Prime Minister King told Canadians that “business was never better, nor faith in Canada’s future more justified” • other downturns (1913 / 1922) had come and gone, so too this one • furthermore, he and many leading bankers felt the worst was over by the year’s end • yet the Depression deepened and hardship spread that winter • this prompted many provincial premiers to ask the federal government for assistance in dealing with rising unemployment • King replied, he would not give them “a five-cent piece” • despite economic warnings he and others assumed the crisis would be temporary “Prosperity,” declared Mackenzie King, “was just around the corner”

8. The Business Cycle • it was widely understood that economies go through natural cycles of recession and recovery • during particularly bad recessions a pronounced downward spiral can take place • but this turned out to be no ordinary economic downturn • WHY WOULD IT PROVE SO DESTRUCTIVE IN 1929?

9. in addition to the market crash, there were other inter-related factors contributing to the Depression • for instance, many people had purchased items on credit (using borrowed money for appliances etc.) • finding themselves unable to pay back the money, they would lose their homes to the banks • many companies had likewise borrowed too much and extended themselves dangerously thin: they would end up folding and jobs being lost • farmers also borrowed to buy land and machinery

10. Overproduction • demand for goods declined in the late 1920s but factories had continued to produce goods at a rapid pace • export commodity prices dropped dramatically Buying on Margin • many people bought stocks by putting only 10% down • when stock prices went down they had to pay back the borrowed money • this led to panic and disaster for investors

11. Bank Failures • U. S. banks were poorly regulated and made bad loans, many (some 10,000) were forced to close in the panic • thousands of people lost their savings • many clients simply withdrew their savings from potentially unstable banks and in so doing helped ruin those institutions • Canada was closely tied to the U.S. (if one suffered economically, both suffered)

12. Canada’s Banks • Why? The government saw nothing to be gained in foreclosing on the banks, so it simply let them be • Canadians had, however, also been caught up in the stock market mania (indeed reports surfaced after the Crash of widespread cheating on the Toronto Exchange at the time) • for some the Crash and its aftermath represent a “matter of life or death,” for others, like Sir Herbert Holt, life went on • although most of its major banks were insolvent, no Canadian banks actually failed • (and very few of its brokerages went bankrupt) Herbert Holt “If I am rich and powerful, while you are suffering the stranglehold of poverty… it is [due to] foolishness on your part”

13. High Tariffs • Canada was an exporting nation (exports provided 1/3 of its income) • as the economic crisis worsened, countries tried to safeguard their own industries by erecting protectionist trade barriers (tariffs) • both King’s Liberals and Bennett’s Conservatives, to differing degrees, supported tariff walls for Canada (jobs created and industries protected behind them) • the result would be devastating for Canada and the rest of the world “blast Canada‘s way into the markets of the world”

14. Canadian Exports Today • exports remain important even today • with the U.S.A.- then and now- being of great importance • all of our present day oil exports, for instance, go to America • in some areas (cattle, fruit, vegetables) no trade barriers exist • yet we protect a variety of other industries: dairy & poultry farmers for instance • we restrict imports to protect our dairy farmers (supply management); our trading partners retaliate by blocking Canadian products from their markets

15. Unemployment • industry is hit hard (leading to a decline in investment and in the demand for goods) • businesses retrenched (making no new investments and laying off workers) • some businesses closed and unemployment rose in all industrialized countries • Canada’s unemployment rate quickly reached 13% in 1930 (rising above 25% in ‘33)

16. The Dust Bowl • demand for Canadian wheat fell as did prices for the commodity • struggling leveraged farmers could not meet their debt obligations • poor farming practices damaged the topsoil • drought struck in 1930, topsoil disappeared, crops failed and the “Dust Bowl” was created

17. A PLAGUE • dry, warm weather brought clouds of grasshoppers • nutrient-rich top soil literally blew away • the ravages of nature led farmers to line up for “relief” or public assistance

18. agriculture represented 32% of Prairie-province income • farms were wiped out (250,000 abandoned) and farmers went bankrupt • many would abandon their farms

19. STUDENT NOTES • The following were immediate causes of the Great Depression: • Canada’s economy had been booming throughout the 1920s • but the economy was not as strong as people assumed • Canada depended too much on export staples (like wheat) and on trade with the United States • then in October, 1929, a stock market crash, which ruined many investors, sending shock waves around the world • the crash had such serious repercussions for a number of reasons: people were relying overly much on credit purchases and some bought stocks on margin • also companies meanwhile had over produced and unwisely expanded their operations • nations, including Canada, erected protectionist tariffs to defend their industries (but this only served to strangle world trade) MAKE SURE YOU UNDERSTAND: Black Tuesday 1929 / tariffs / exports

20. The Impact of the Depression THE DIRTY THIRTIES • the Depression would mark a turning point • previously the government did not intervene in the economy (no unemployment insurance or social welfare programs existed) • also social assistance was considered the domain of private charities and churches (not the government)

21. Homelessness • there were no protective social security measures for the unemployed, the sick or destitute • unable to pay the rent, people were evicted from their homes • in the cities, as factories closed in the sour economic environment, people faced deplorable poverty • forced to act, the government would provide limited assistance (Bennett’s government spent some $20 million on relief: a drop in the bucket)

22. Hunger • the needy received relief in kind or government vouchers for food, clothing, coal, etc. • people existed on public assistance (pogey or relief payments) that brought shame on those who had no other alternative • soup kitchens fed the long lines of the unemployed { Why vouchers? }

23. Riding the Rails • many young, unemployed men went in search of work and food • they hopped aboard trains & slept in “hobo jungles” near the rail lines

24. squatters in Hotel Room • a “Bennettville” outside Toronto

25. Drifters • “Drifters” were not treated well on arrival in new cities • they were always under suspicion and police were constantly ushering them out • relief was only provided to people who lived in a community for at least six months (the drifters therefore- moving from city to city looking for work- could never qualify for such assistance) • single, unemployed women were not eligible for relief payments

26. Bennett Buggies • people unable to afford gas hooked horses or oxen to their cars • these were derogatorily named “Bennett Buggies”

27. Declining Income • it became a time of desperation for the unemployed and farmers • incomes fell, even for those with jobs • The Depression impacted the various provinces unevenly • the income of the average Canadian fell by half (and it was even worse in the Prairie provinces)

28. Declining Immigration • the government passed a law in 1930 to stop almost all immigration • only immigrants with considerable personal wealth would be afforded entry to Canada (similarly farmers with the money to start a farm operation were accepted) • accordingly, immigration declined by 75% during the Great Depression • with unemployment so high most Canadians agreed with these laws • some, like Jews and Asians, were not welcome at all • recent immigrants faced discrimination • many were deported if they could not provide for themselves (30,000 were deported during the first five years of the Depression) “the line must be drawn somewhere” Frederick Charles Blair

29. They used to tell me I was building a dream, and so I followed the mob, When there was earth to plow, or guns to bear, I was always there right on the job. They used to tell me I was building a dream, with peace and glory ahead, Why should I be standing in line, just waiting for bread? Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it's done. Brother, can you spare a dime? Once I built a tower, up to the sun, brick, and rivet, and lime; Once I built a tower, now it's done. Brother, can you spare a dime?

30. Women and the “Lost Years” • wives and daughters were often the only employed family members (they often were hired on part-time basis) • as the Depression deepened, employed women were seen to be stealing much-needed work from men • unemployed single women faced considerable hardships (they were not eligible for relief payments married men could collect) • the birth rate declined noticeably during the Depression • ethnic, visible minority, and Aboriginal women faced discrimination and found it difficult to secure employment • women typically earned only 55% of the pay given to their male counterparts in the work place.

31. Canada’s Depression British Columbia - heavily dependent on resource exports, it struggled considerably Maritimes - had prospered less, it therefore was impacted less Prairies - had prospered mightily in the ’20s, would struggle the most in the 1930s Central Canada - markets dried up, manufacturers suffered, and many jobs were lost

32. STUDENT NOTES • The following describe the impact of the Depression on Canadians: • to make matters worse a severe drought hit the farm lands of North America • unemployment increased and many lost their homes • the government was not prepared for this tragedy and social support mechanisms (unemployment insurance) did not exist • many poverty stricken individuals turned to public assistance • incomes declined across Canada but regions were impacted unevenly • the Prairies were hardest hit (due to the drought and export declines) • manufacturing in Central Canada experienced severe declines • young men were without work, riding the rails and restless MAKE SURE YOU UNDERSTAND: Public Assistance / Bennett Buggies / pogey / hobo jungles Dust Bowl