The Great Depression:

Causes and Effects

.
 Black Tuesday

❖ Stock Market Crash October

29, 1929

❖ Signals the start of the Great

Depression

❖ *Only WWII gets America out

of the Great Depression, not
New Deal
 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
 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
 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
 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

 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?
 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**
 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
 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

❖ differences of opinion also

existed about whether to help
and how much assistance to
extend to financial institutions
 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
 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
 Images

❖ Soup Kitchens

❖ Bread Lines

❖ Hoovervilles

❖ Dust Bowls

❖ Okies

❖ Bonus Army
 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