CAUSES OF THE GREAT
DEPRESSION
■Essential Question:
–What were the causes of the
Great Depression?
■Warm-Up Question:
–Think about the changes that
took place in America in the
1920s. In what ways were
these changes good? Bad?
The Great Depression Era
The Business of America
 Calvin Coolidge
(President)
 fit pro-business spirit of
the 1920s
 Famous quote:
 “The chief business of
the American people is
business . . .the man
who builds a factory
builds a temple – the
man who works there
worships there”
American Business Flourishes
 President Coolidge
(Republican) successor
Herbert Hoover
favored governmental policies that kept
taxes down and business profits up
Tariffs were high, which helped American
manufacturers
Government interference in business was
minimal
The Impact of the Auto
 Auto
backbone of the
American economy
Ford Model T
came only in black
sold for $290
($3553 in 2013 dollars)
Over 15 million were sold by
1927
How Auto Changed America






Paved roads, traffic lights, motels, billboards
Home design (garages, driveways)
Gas stations, repair shops, shopping centers
Freedom for rural families
Independence for women and young people
By 1920 80% of world’s vehicles in U.S.
American Standard Of
Living Soars
 1920-1929
 (prosperity)
 Americans owned
40% of the world’s
wealth
 average annual
income rose 35%
during the 1920s
(for top earners)
 discretionary
income increased
Electrical Conveniences
 electricity transforms
the nation
 Electric refrigerators
 Stoves
 Irons
 Toasters
 Vacuums
 washing machines
 sewing machines
 All available!
Modern Advertising
Emerges
 Ad agencies no longer
sought to merely “inform”
the public about their
products
 Agencies hired
psychologists to study how
best to appeal to
Americans‘desire for
youthful, beauty, health
and wealth
 “Say it with Flowers”
slogan doubled sales
between 1912-1924
A Superficial Prosperity
 Many during the 1920s
believed the prosperity
would go on forever
 Wages
 Production
 GNP
 stock market
 all rose significantly
But. . . .
Problems on the Horizon?
Causes of the Great Depression
 The 1920s were a decade of consumer
spending & the economy looked
healthy on the surface:
 Income did increase in the 1920s, but
there were some severe problems
with the U.S. economy
 In October 1929, the “Roaring
Twenties” came to an end & the
Great Depression began…why?
The Great Depression
“We in America today
are nearer to the final
triumph over poverty
than ever before in the
history of any land.
The poorhouse is
vanishing from among
us.”
-- Herbert Hoover,
1928
Group Activity:
What caused the Great Depression?
In teams, determine what factors
contributed to the Great Depression:
Examine the documents provided &
complete the chart in your notes
After examining all documents, try to
group the documents into categories
When finished, create a one sentence
thesis that explains why the depression
began…be prepared to discuss
Causes of the
Great Depression
Causes of the Great Depression
 Agricultural
overproduction
bank issue
 Industrial overproduction
 Uneven division of wealth
 Over-extension of credit
bank issue
 International economic
situation
bank issue
■ Banking catastrophe
3 strikes against the
banks
Causes of the Depression
 Agricultural
overproduction:
– The end of WWI led to a
decline in demand for
agricultural products
– Too much food led to a 40%
drop in crop prices
– Farmers could not pay back
loans & many had their
farms foreclosed
– Some rural banks failed
Causes of the Depression
◼ Industrial overproduction:
–Mass-production of
consumer goods led to
overproduction
–People did not need as
many appliances & cars
by the end of the decade
(under-consumption)
–Railroads, textiles, steel,
coal mining, construction
were barely profitable
Overproduction of Consumer Goods
Too much inventory…Not enough buyers
“Traditional” industries suffered in the 1920s
Corporate Profits for Coal and Railroad Industries, 1920-1930
Profits for Railroad Companies
Profits for Coal Mining
Causes of the Depression
◼ Uneven
Division of Wealth
–Despite rising wages, the
gap between the rich &
poor grew wider in the
1920s
–70% of Americans were
considered “poor”
–Most of the spending in
the 1920s was done by
30% of the population
Distribution of Wealth in the 1920s
* An income of
$2,500 per year
was considered
the minimum
amount needed
for a decent
standard of
living
Causes of the Depression
◼
Credit:
– Many Americans used easy
credit to live beyond their
means
– By “buying now & paying
later,” Americans generated
large debts
– As a result, Americans cut
back on spending by the end
of the decade
Americans bought goods on credit &
did not have much in savings accounts
Easy credit created a stock
market bubble
Causes of the Depression
◼ The Stock Market:
–In the 1920s, the stock
market soared & people
speculated with stocks
• bull market – upward
trend in stock market
–Many people borrowed
money to pay for stocks,
called buying on margin
Buying Stocks
on Margin
Causes of the Depression
◼ The Stock Market:
–There was no regulation of
the market & some
companies altered stock
values to raise profits
• bear market – downward
trend in stock market
Causes of the Depression
◼ The Stock Market:
–On October 29, 1929
(Black Tuesday) the
stock
market
crashed
The stock
market
crash
–People
rushed
sell,
in October
1929 to
marked
the beginning
of the&
prices
plummeted,
“Great Depression”
investors
lost $30 billion
–Speculators who bought
on the margin, could not
pay off their debts
–Many lost their savings
Causes of the Depression
■ The Stock Market:
– Speculators who bought on the
margin, could not pay off their debts
– Many lost their savings
“Wall Street Lays An Egg”
- Daily Variety (Oct. 30, 1929)
The U.S. stock market had only about 3 million
active buyers & sellers but the spillover into the
greater economy led to the Great Depression
Causes of the Depression
◼
International Economic Situation:
– France / England borrowed
$$$ to finance WWI
– Reparations from Germany /
Austria used to make
payments
– Overtime, G and A could not
make the reparation
payments
– 1927 – 1928 F and E
borrowed more $ to pay debts
Causes of the Depression
◼
International Economic
Situation:
– Post-war debts in Europe &
high protective tariffs in
America limited international
trade
– The Great Depression led to
a global depression in
Europe, Asia, & Latin
America
– World trade fell by 40%
• exacerbated banking crisis
A Global Depression
Causes of the Depression
◼ Bank
Failures:
–After the crash, people
tried to withdraw their
money from banks
–In 1929, 600 banks failed
due to lack of funds & the
inability to recoup loans
–The failure of the banks
left many Americans
without their life savings
Bank & Business Failures, 1928-1933
Effects of the Great Depression
■ The Great Depression led to a collapse
of the U.S. financial system
– 9,000 banks & 90,000 businesses
failed by 1933
– Gross National Product (GNP)
total value of all goods and services
produced in a given year
• 1929 -- GNP = $103 Billion
• 1933 -- GNP = $56 Billion
– 15% unemployment throughout the
30s, sometimes reaching as high as
25%
Effects of the Great Depression
■ Consumer Confidence:
– Millions of Americans lost their jobs or
took pay cuts to keep jobs
– The lack of confidence in the future
kept people from spending money
– The lack of spending made the
depression drag on until the 1940s
Unemployment & Consumer Spending, 19281933
Depression Life
■ Shantytowns or
(“Hoovervilles”)
– with no money
for mortgages,
many forced
onto streets
• selling an
apple
– America had
record poverty
& suicide rates;
Fathers
abandoned
families;
Healthcare
declined
Depression Life
– Private charities created soup kitchens &
breadlines to help
• breadlines and soup kitchens synonymous
with the Great Depression
Soup Kitchens & Breadlines
Mortgage Foreclosures
Poverty in America
The Dust Bowl
■ The effects of the depression were
made worse by the Dust Bowl:
–Heavy droughts & over-farming in
the West destroyed the Plains
–In the early 1930s, windstorms
swept away loose soil
–Farmers in the Plains left their
farms & searched for work or
better land in West coast states
Dust Bowl
Dust Bowl
■ Farmers in crisis
– drought creates setting for (Harvest
Gypsies – The Grapes of Wrath)
The Dust Bowl (1931-1939)
Areas
Affected
by
the
Dust
Bowl
drought
“Okies”
&
“Arkies”
worsened the effects of the Depression
How Herbert Hoover
Dealt with the Crisis
■ Confidence
economics
- “Prosperity is
right around
the corner.”
■ Rugged
Individualism
- Success
comes through
individual
effort / private
enterprise
How Herbert Hoover
Dealt with the Crisis
 “I do not believe that the
power and duty of the
General Government
ought to be extended to
the relief of individual
suffering.... The lesson
should be constantly
enforced that though the
people support the
Government the
Government should not
support the people.”
-- Herbert Hoover, 1930
How Herbert Hoover
Dealt with the Crisis
Who should relieve the suffering?
 Community / Church resources
- Salvation Army, Community Chest, Red Cross
President Hoover’s Response
■President Herbert Hoover
initially rejected bold
government action in
response to the depression:
–He tried to reassure
Americans that prosperity
would return
–He called for volunteerism &
“rugged individualism”
President Hoover’s Response
■ As the depression worsened,
Hoover called for more gov’t action
–The gov’t issued relief checks to
help the unemployed
–The Reconstruction Finance
Corps (RFC) loaned money to
failing businesses
–Building projects like Hoover
Dam
■ These efforts did not end the
depression & many citizens lost
faith in President Hoover
The Bonus Army 1932
■ 15,000 WWI veterans marched to
Washington D.C. to get a bonus ($)
– they were supposed to receive the bonus
in 1945
The Bonus Army 1932
■ Hoover called the United States Army in to
disperse the Bonus Marchers
Conclusions
■ The Depression of the 1930s came
as a shock to Americans:
–When the stock market crashed
in 1929, businesses closed &
millions were unemployed
–Americans lost faith in Hoover &
began looking for new leadership
& a more active government to
solve their problems