22.1: The Nation’s Sick Economy
OBJECTIVES: Understand the causes of the Great
Depression
Economic Troubles Brewing
• Big industries (steel, textiles, railroads)
not making profits
• Diminishing demand for new products
and new construction
• Agricultural business withering
• Congress passes price supports for
farmers
• Pres. Coolidge vetoes price supports twice,
1927 & 1928
HOW ARE THESE BUSINESS
CHANGES RELATED TO WWI?
“Farmers
have never
made money.
I don’t believe
we can do
much about
it.”
Increased Profits
Innovation
EX: Ford’s
Assembly Line
THE MASSCONSUMPTION
ECONOMY
Increased Credit
Increased Production
=BAD HABITS
Increased Consumption
Advertising
CONSUMER’S BAD HABITS
• Americans are buying less. Why?
• Business are producing more. Why?
• Americans use credit more. Why?
OUTCOME: The gap between rich and poor was
rapidly spreading.
FACT: In 1929 5% of US controlled nearly a third of its wealth,
while 40% of US only has 10% of its wealth.
ELECTION OF 1928
CANDIDATES:
Al Smith runs for Democrats
Herbert Hoover runs for Republicans
ISSUES:
Smith’s Catholicism, opposition to
prohibition, and connections to NYC
VERSUS
the apparent prosperity under
Republicans
OUTCOME: Hoover wins handily.
http://fisher.lib.virginia.edu/collections/stats/elections/maps/1928.gif
STOCK MARKET CRASH
CAUSES
• Buying on margin
• Speculation
• Why did these things
contribute to the stock
market crash?
STOCK MARKET CRASH
EFFECTS
• Black Tuesday (10/29/29)
• Run on banks
• Great Depression
http://www.ambrosevideo.com/resources/docs/56.JPG
BEGINNING OF THE GREAT DEPRESSION
CAUSES
EFFECTS
• Old and decaying industrial
base
• Falling demand for consumer
goods
• A crisis in the farm sector
• Dow Jones Industrial
Average drops from 38181
• The availability of instant
credit
• Gross Nat. Product cut in half!!!
• An unequal distribution of
income
• Unemployment rises to 25%!!!
• Hawley –Smoot Tariff
• Interests rates fall, people borrow
$ and fall into deeper debt
• Buying on margin
• Collapse of investment and banks
• Global Depression
TERMS
• Price support
• Credit
• Summarize some of the
problems threatening the
American economy in the late
1920s
• Alfred E. Smith
• Speculation
• Buying on margin
• Black Tuesday
• Great Depression
• Dow Jones Industrial Average
• Hawley-Smoot Tariff Act
• Describe the causes of the
stock market crash and of the
Great Depression
• Explain how the Great
Depression affected the
economy in the United States
and throughout the world