Long and Short-Term Causes of the Great Depression
Long and Short-Term Causes of the Great DepressionWhat was the
Great Depression?The worst economic crisis of the centuryLasted for
ten terrible years.In 1929, the stock market collapsed, businesses
went bankrupt, workers lost their jobs and trade between provinces
and countries collapsed. Great unemployedDust bowl as a result of
drought in Canadas west. This destroyed farms, crops and
liveliehoods.Many lost their homesLong-Term Causes1. Dependence on
Natural ResourcesCanadas economy depended on a few basic products
(staples) such as wheat, fish, minerals, and pulp and paper. As
long as world demand for these remained high, Canada would prosper.
When the depression hit countries around the world, demand for
Canadas products fell. Fish in the Maritimes and wheat in the West
were especially hard hit. Argentina and Australia were producing
wheat in large quantities the resulting surplus drove prices down.
At the same time terrible droughts on the prairies destroyed crops.
Farmers could not pay mortgages. Industries such as flour mills,
railways, also slowed down without the production of wheat.
2. Buying on CreditThroughout the 1920's credit buying became
more and more popular. With added interest payments many families
got themselves hopelessly into debt. If the wage owner became sick
or was laid off it was impossible to keep up payments. Many people
gambled on the stock market in the 1920's. People began "buying on
margin". This meant that you only needed 10% of the money you
invested, the broker loaned you the rest at a high interest rate.
The idea was that as soon as your stocks went up in value, you
could sell them then pay back your broker and keep the profits.
Unfortunately, stocks do not always go up, in fact they sometimes
go down, this is what happened in October 1929. When stock prices
dropped, people panicked and sold their shares as a result prices
fell even lower. Most stocks nosedived more than 50%. Many people
were wiped out.
3. Overproduction of GoodsDuring the 1920's almost every
industry was expanding. Large amounts of profits and investments
resulted in the expansion of existing factories or construction of
new ones. As a result huge supplies of food, minerals, radios,
cars. ... remained stock piled. Soon factory owners panicked and
slowed down production by laying off workers. Workers and their
families had even less money to spend therefore sales slowed down
even more.Industrialists forgot the basic economic rule: only make
as many items as you can sell. Wages simply were not high enough to
buy all the products made.
4. Raising TariffsIn the 1920's many European countries
recovering from W.W. I. needed our goods however because of their
war dept. They often could not afford our goods.
At the same time many other countries put high tariffs on goods
coming into their country to protect home industries. Thus trade
between nations began to slow down.
5. A Low Standard of LivingThe boom and prosperity of the 1920s
was not shared by all Canadians. Some workers remained in poor
paying jobs and their standard of living remained low. These people
could not afford to buy as many goods and services as other
Canadians. Wheat farmers received high prices for their grain up to
1928, but those who produced other crops were not as fortunate.
Also, most Maritimers in Eastern Canada di not share in the
economic boom of the 1920s. The fact that these Canadians could not
buy their way into the economy further weakened the Canadian
economy.Short-Term Causes Stock Market CrashMany stocks purchased
Stock prices fellHuge sums of money lost
Thursday, October 24, 1929
The ResultsBank Failure
Unemployment
Loss of homesHoovervilles
Here were all these people living in old rusted-out car bodies.
... One family ... [was] living in a piano box. This wasn't just a
little section, this was maybe 10 miles wide and 10 miles long.
People living in whatever theycould junk together. ..."
Dustbowls
A traveler noticed a nice new hat by the side of the road, and
he stopped to pick it up. Under the hat was a man, buried up to his
neck in the dust! As he dug the poor fellow out, the traveler asked
if he wanted a ride into town. "No, I'll get there myself," the man
replied, "I'm on a horse." (Excerpt from THE DUST BOWL by Tricia
Andryszewski, p. 33.)
Depression
