Agenda
• Bell work MME 397-398
Question
What is the Great Depression?
• Notes over Great Depression
– Writing down the red notes
• Finish questions from 405 (1-8)
The Great Depression Mystery
THE AMERICAN ECONOMY WENT
FROM UNPRECEDENTED PROSPERITY
IN THE 1920s TO UNPRECEDENTED
MISERY IN THE 1930’s
WHY?
Laissez Faire Economic Policy
• Prior to the Great
Depression the US.
Government ignored
the business cycles of
the US economy.
• The Government until
FDR believed that the
American Economy
The Great Depression is a could fix itself.
Turning Point in US History!
Government Today is in charge of
the US Economy!
• Presidents win or lose
elections based on
economic
performance!
• Government control
over one third of our
$10 trillion economy!!
THE BUSINESS CYCLE
Boom
DESIRE FOR MORE PROFITS = GREATER INVESTMENT
MORE PRODUCTION = HIGHER EMPLOYMENT
MORE DEMAND = HIGHER PRICES (INFLATION)
THE BUSINESS CYCLE
Bust
LESS PRODUCTION = LAY OFF
LESS SPENDING = LOWER CONFIDENCE
LESS INVESTMENT = HIGHER UNEMPLOYMENT
CAUSES OF THE
GREAT DEPRESSION
• AGRICULTURAL OVERPRODUCTION
– POOR ENVIRONMENTAL POLICIES & PRACTICE
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INDUSTRIAL OVERPRODUCTION
UNEVEN DISTRIBUTION OF WEALTH
OVER SPECULATION +MARGIN BUYING
EASY MONEY (CREDIT)
POOR MONETARY POLICY
POOR FISCAL POLICY
HIGH TARIFFS
AGRICULTURAL OVERPRODUCTION
• INCREASED TECHNOLOGY
• GOOD GROWING CONDITIONS
• SUPPLY GREATER THAN DEMAND
The Great Dust Bowl
• Over use & Over grazing
– No crop rotation
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No soil conservation
No wind breaks
Loss of natural grasses and animals
Climatic change – the drought of the 30’s
INDUSTRIAL OVERPRODUCTION
• WAGES NOT KEEPING UP WITH INFLATION
• SUPPLY GREATER THAN DEMAND
UNEVEN DISTRIBUTION OF WEALTH
• Many Poor and Very Few Rich! 90/10
• Workers earn so little they can’t buy the products
they produce!
• Wages were as little as 20 – 25 cents per hour!
• Even the best employer Ford Motor Company
paid only $5.00/Day for a 6AM-6PM shift!
Prices in the 1920’s & 1930’s
• Hamburger 20-30 cents
a pound
• Butter 28 cents a pound
• Potatoes 2 cents a
pound
• Bedroom set $50
• Blanket $1
• Gas 20 cents/gallon
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Vacuum cleaner $18
Women’s Coat $6
Shoes $2
Men’s Suit $11
Baseball Glove $1.19
BB Gun $2
Chrysler 4 door $1000
Chevy 2 Door $540
6 Room House $3000
Prices in the 1920’s & 1930’s
• Hamburger 1 pound for
1 hours work
• Butter 1 pound for 1
hours work
• Potatoes 10 minutes
work/pound
• Bedroom set - 200 hrs.
• Blanket - 4 hours
• Gas - 45 minutes
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Vacuum cleaner - 72 hours
Women’s Coat - 24 hours
Shoes - 8 hours
Men’s Suit - 44 hours
Baseball Glove – 5 hours
BB Gun – 8 hours
Chrysler 4 door – 4000 hrs.
Chevy 2 Door – 2160 hrs.
6 Room House – 12,000 hrs.
Salaries 1920’s and 1930’s
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• First minimum wage under
Bus driver: no power
FDR?
steering or brakes?
• $0.25/hr
$1300 or $0.43/hr
• Highest paid production
Teacher?
workers in the 1920’s – Ford
$1227
Motor Company?
Waitress
• $5.00/day or $0.48/hr.
$520 or $0.20/hr
• Farm Prices: Potatoes, Cotton, Pork?
Farmhand
• $0.01/pound potatoes
$216 or $0.07/hr
• $0.05/pound cotton
• $0.05/pound pork
OVER SPECULATION
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“GET RICH QUICK SYNDROME”
MARGIN BUYING
LACK OF GOVT. REGULATION
PANIC SELLING
• ‘29 MARKET CRASH
The New York Stock Exchange
Black Tuesday October 29, 1929
EASY MONEY (CREDIT)
• INTEREST RATES ON LOANS WERE TOO LOW = TOO
MUCH BORROWING
• INTEREST RATES ON SAVINGS WERE TOO LOW = TOO
MUCH SPENDING (INFLATION)
• EXCESSIVE REAL ESTATE CONSTRUCTION = OVERSUPPLY
POOR MONETARY POLICY
• FED RESERVE INCREASED INTEREST RATES WHICH MADE
MONEY/BORROWING MORE EXPENSIVE & SAVING MORE
ATTRACTIVE
• INSTEAD OF LOWERING INTEREST RATES TO GIVE THE
ECONOMY A “JUMP START”
POOR FISCAL POLICY
• HOOVER ADMIN. & CONGRESS CUT SPENDING & RAISED
TAXES TO BALANCE THE BUDGET
• INSTEAD OF INCREASING SPENDING & CUTTING G TAXES
TO “JUMP START” THE ECONOMY
How Bad Was the Great
Depression?
• Unemployment –
wanting to work and
not being able to find
a job
• Underemployment –
working but not
getting to work full
time
• 56% of African
Americans and 40% of
White Americans
Unemployment Statistics for 1932 The
Depressions Cruelest Year
• 16,000,000 to
25,000,000 in 1932
• 25% of the workforce
• In 2003 that would
mean: 32,500,000
unemployed!
• For our workforce
today in the 2000’s
– 5.8% in 2003
– 7,200,000
Layoffs
• Willy's – Jeep
- 28,000 workers 1929
- 4,000 workers 1932
• Ford
– 128,000 workers 1929
– 37,000 workers 1932
Underemployment
• 21% of the workers
who kept their jobs
saw hours cut
• 20% of workers who
kept their jobs took
pay cuts
• Some worked only for
food or a place to
sleep – No pay jobs!
Child Labor!
• Some businesses fired
the adults and hired
kids as replacement
workers
• Child laborers were
paid $0.06/hr.
Business Failures & Bank Runs
• 85,000 businesses
failed!
• 25% of the Banks in
the US closed
• Bank Runs led to
people losing their life
savings
Job Posting
• Rumor of a job
opening led to near
riots as 1000’s showed
up hoping to work
• Snow shoveling jobs in
Chicago led to fist
fights for shovels as
over 5,000 showed up
for 10 jobs.
Depression Era Survival
• Lose your home or
apartment: sleep in the
park
• Move to a Hooverville
• Ride the subway all night
in New York
• Sleep in the Library or
Museum during the day
walk the street at night
Depression Era Survival
• Wash in the bus depot
or train station
• Make your own soap:
Pork-fat + ashes + salt
+ sun
• Hole in your shoe?
• Put a roof shingle in
the bottom
Depression Era Survival
• Cold make a tea from
the bark of the willow
tree, it’s?
• Aspirin
• Make a tea from the
bark of a cherry tree,
it’s?
• Cough syrup
Depression Era Survival
• Rent a hot bed for
$0.05
• Hot because it was
rented out for 8 hours
and it never cooled off
• Eat in a soup kitchen
or stand in a
breadline.
Depression Era Survival
• Prison had 3 hot's and
a cot
• Even the chain gangs
of the South had 3
meals and a place to
stay
• Prison over
starvation?
Depression Era Survival
• Hobos and bums
• 250,000 children
under age 18
• Need a blanket use
newspapers
• Need a house use
cardboard
• Riding the Rails