The Great Depression (1929-40)

The Great Depression (1929-40)Unit Objectives Analyze and Explain: 1. What a “depression” is 2. Causes of the “Gr. Dep.” 3. Solutions? 4. How it affected people 5. Re-shaping role of gov’t

What is a depression?• When an economy stops growing for 6

months…called a “recession”• Symptoms of a recession:

- Business failures - Unemployment rises - Homes lost - Hunger, divorce, crime

• Depression= a prolonged or particularly severe recession

A recession on steroids???•

Root Causes of Great Depression

• #1: Uneven distribution of wealth

• While the overall economy boomed in the 1920s, the wealth created by the boom flowed to only a small %...

• half of American families lived in poverty

#2: Agriculture

• Overproduction & low prices–Farmers produced more…drove

prices even lower–Farmers couldn’t make

payments on farms & equipment–Banks repossessed farms &

equip

#3: Personal Debt• New technologies, products, and

advertising techniques created a mass consumption in the 1920s

• But people bought on credit… went into debt to acquire modern conveniences (“installment plan”)

#4: Shaky Banking System• Many banks also invested

depositor’s $ in the stock market

• Many banks were unable to cope with the number of defaulted loans…simply closed their doors and went out of business

#5: Gov’t. Policy• Commonly accepted belief: “laissez

faire”– not the role of gov’t to interfere with

markets– Not much regulation (control)

The Catalyst? Stock Mkt. Crash• Many individuals investors had bought

stock “on margin”• Stock prices declining in late summer• Big sell-off on “Black Thursday” Oct.

24, 1929• Total collapse “Black Tuesday” Oct.

29th

• Many were wiped out…financially ruined

Panic and A Run on Banks• Banks were mobbed by

depositors wanting to get their money out…

• Many banks went under• Many Americans lost entire

life savings

Hoover’s response…• President Hoover stated publicly

that “the Government should not support the people.”

• Believed in “rugged individualism” (people rescuing themselves by their own efforts)

Hoover eventually acted…• spent hundreds of millions of dollars

on public works projects such as:• the construction of Boulder (later

renamed Hoover) Dam in Nevada. • The Federal Farm Board loaned

farmers money and bought up tons of their surplus crops

• Called on churches & charities to offer more help

Hoover’s response (con’t.)

• However, these policies did not go far enough to help those who needed it most, and economic conditions did not improve

HHH blamed & criticized…• “Hoovervilles: shanty towns of “houses”

made from wood scraps, newspaper, etc.