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CAUSES & EFFECTS OF THE GREAT DEPRESSION

CAUSES & EFFECTS OF THE GREAT DEPRESSION. What we don’t usually learn about the 1920s…. An average of 600 banks failed each year Agricultural, railroad, and coal mining sectors were continually depressed Value of farmlands fell 30-40% between 1920-1929

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CAUSES & EFFECTS OF THE GREAT DEPRESSION

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  1. CAUSES & EFFECTS OF THE GREAT DEPRESSION

  2. What we don’t usually learn about the 1920s… An average of 600 banks failed each year Agricultural, railroad, and coal mining sectors were continually depressed Value of farmlands fell 30-40% between 1920-1929 Organized labor declined throughout the decade

  3. ‘Technological unemployment’ enters the nation’s vocabulary • 200,000 workers replaced by machinery each year • By 1929, only 200 corporations controlled over half of all American industry • By 1929, the richest 1% owned 40% of the nation’s wealth • The middle class comprised only 15-20% of all Americans • BIG gap between rich and poor

  4. Was the United States’ Economy Destined to Fall into Depression?

  5. 1. Poor distribution of income • Chart ~ page 369 • Wages did NOT increase at the same rate as companies’ profits • Purchasing power in the top 10% of the nation’s population • Couldn’t buy enough to keep the country booming

  6. 2. Purchasing power fell behind rate of production Low incomes Expanding production

  7. 3. Farm depression Debt from WWI Overproduction + lower demand = low prices Low purchasing power

  8. 4. Too much (easy) credit • Change in American mentality • “Go into debt to achieve the American dream” • Stock market speculation (i.e. gambling) • Too much debt • Eventually led to decreased spending

  9. 5. Decline in foreign trade • Foreign nations could not afford American goods • War debts • Reparations payments

  10. 6. Lack of government regulation of stock market • Over-speculation • Stock Market Crash – October 1929 • Represents the Business Cycle (pg 368) • “What goes up, must come down” • Began spiral effect that led the United States into severe depression

  11. Immediate Effects of the Stock Market Crash

  12. Federal Reserve (“The Fed”) limited the amount of money in circulation • Banks collapsed (pg 374) • Businesses closed (pg 374) • Unemployment skyrocketed (pg 375) • Hawley-Smoot Tariff Act • Depression went global • Led to cycle of poverty and political instability

  13. Mid-range Effects of the Depression

  14. Distrust of government (Hoover) Rise of radicalism (socialism, communism, fascism) Violence Escapism in pop culture Shift from pro-business to anti-business Dislocation of families Uncertainty, despair Weakened U.S. foreign policy – no economic power

  15. Long Term Effects of the Depression

  16. Rise of centralized, powerful government Regulation of stock market, banks, and economy (managed economy) Democratic party as majority party (1932-1968) Shift of power from Congress to the Presidency Rise of labor unions Legacy of fear of banks and business

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