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.