The Great Depression: Causes and Effects

1. The Great Depression: Causes and Effects • 6.3: Explain the causes and consequences of the Great Depression, including the disparities in income and wealth distribution; the collapse of the farm economy and the effects of the Dust Bowl; limited governmental regulation; taxes, investment; and stock market speculation; policies of the federal government and the Federal Reserve System; and the effects of the Great Depression on the people.

2. Black Tuesday • Stock Market Crash October 29, 1929 • Result not Cause • Signals the start of the Great Depression • *Only WWII gets America out of the Great Depression, not New Deal

3. Causes of the Great Depression • 1. Disparity of Incomes • 2. Buying on Credit • 3. Farm Economy Collapse • 4. laissez-faire policy and the end of Progressivism • 5. Taxes • 6. Stock Market Speculation • 7. Federal Reserve

4. 1. Disparity of income • Roaring 20’s: good times; high employment and no inflation • However, Gap between rich and poor was very large • Majority of workers lived below poverty line ($2500 in 1929) • Companies were making lots of money, but did not share this with their employees

5. 2. Buying on Credit • At some point creditors will stop giving people credit • Consumers cannot buy anymore • Drop in consumer spending = lay-offs • Layoffs = less spending, which then = more lay-offs

6. 3. Farm Economy • farmers produce too much • farm prices fall • farmers produce more to keep up • prices fall even more • farmers cannot pay their loans, default • defaulting puts banks out of business

7. 4. laissez-faire policy and the End of Progressivism • Big Business allowed to do whatever they want - laissez-faire • tariff raised on foreign goods to help protect US industry • child labor and minimum wage overturned • Is this an end of Progressivism? Who does the tariff hurt?

8. 5. Taxes • taxes on the wealthy are slashed • so who is paying taxes to the government? • Wealthy spend money on luxury items, not items produced by the common factory worker • Or the tax money saved was put in the stock market rather than their companies (R&D, factories, or workers), so why give a tax break? • **then the companies saw the excess inventories and started pulling money out of the Market**

9. 6. Stock Market Speculation • “get rich quick” • buy on margin - investor allowed to borrow the money to buy stocks now • People had to sell, which drove the price down even further • Black Tuesday - some wealthy tried to prop up the Stock Market, but to no avail

10. 7. Federal Reserve • charged low interest and businesses would borrow - goes to workers who buy products • charge high interest people don’t borrow - discouraged lending • **If government, would have cut interest rates the Great Depression would have been as intense or long lasting**

11. Government to the aid • 1. because of influence of Big Business the Government issues a tariff - which made goods high • other Countries can’t sell their goods in America and therefore cannot buy American • Also impose their own tariff on American goods • 2. President Hoover urges companies to voluntarily maintain wages and hours - companies do the opposite • 3. Advocates “rugged individualism”

12. Impact on the People • 25% Unemployment • People lost their homes - took to the streets • People that still had jobs had their hours and wages cut • People only bought necessities - further led to lay-offs • “Runs” on banks • people fear losing money and take all their money out of banks

14. Images • Soup Kitchens • Bread Lines • Hoovervilles • Dust Bowls • Okies • Bonus Army

15. People • people undernourished • schools closed • Abandonment increases – Men leave families for work or shame • Suicide rate increases sharply • birthrate fell – • Men no longer the head of the household • People looked to the government for help

16. Birth Rates in U.S.