Causes of Great Depression
 Tariffs and war debt policies that cut down the
foreign market for American goods
 The farmer crisis
 The availability of easy credit
 An unequal distribution of income
 These factors led to fall in the demand for
consumer goods
 By keeping interest rates low, it was easy to
borrow money and build up large debts
Threats to Economic Prosperity
As the 1920s advanced, serious problems threatened
economic prosperity
 1. Income gap increased
 2. Consumers and farmers were going deep into
dept
 Farms suffered losses with new machinery, they
were producing more food than needed and this
drove down food prices (remember: war created a
need for bulk of food supply; after war, need went
down)
 3. Superficial prosperity- idea that prosperity
would go on forever (businesses expanded, chain
stores, installment plan)
 Signaled the onset of the Great Depression
Industries in Trouble
Railroad
Replaced by other types of
transformation (cars, trucks,
buses)
Mining and Lumber No longer in high demand
after the war
Coal mining
New forms of energy
Housing Starts
Housing starts fall, led to loss
of jobs in industries such as
furniture manufacturing and
lumbering
(beginning construction of a
new home)
Agriculture
 WWI- international demand for wheat and corn
 Prices soared
 After the war, the demand fell and crop prices
fell 40%
 Farmers boosted production
 Idea: producing more= selling more
 Affect: caused prices to go further down
 Hard time getting out of dept
 Congress support- McNary-Haugen bill
 Federal price-support for key products: wheat,
tobacco, corn
 Buy surplus at a guaranteed price and sell them on
the world market
Consumers- late 1920s
 What is a consumer?
 By the late 1920s Americans were buying less
 Rising prices
 Stagnant wages
 Unbalanced distribution of income
 Overbuying on credit
 Production expanded faster than wages
Credit
 During the 1920s- it seemed Americans were
prosperous BUT they were living beyond their
means
 Credit- consumers agree to buy now and pay later
for purchases (monthly payments with interest)
 Many people had trouble paying off their debt and
this caused consumers to cut back on spending
Uneven Distribution of Income
 During the 1920s, the rich got richer and poor got
poorer
 $2500- the minimum amount needed for a decent
standard of living
 70% of families made less than $2500 per year
 Unequal distribution of income meant that most
Americans could not participate fully in the
economic advancements in the 1920s
 Many people did not have the funds to purchase the
new goods or goods being produced
Wealth distribution
 1920- The wealthiest Americans made up 1% of
the population
 By 1929, the income for the 1% rose 75%.
 For the rest of the American’s, their income rose
9%.
1% vs Rest of Nation
Income distribution
1%
Rest of Nation
75% increase
9% increase
1% Wealthy/ Rest of Nation
US Wealth Distribution in 1920s
75% Income Increase
Wealthiest
1% of population
Everyone
Else
9% Income Increase
Reflection
 Who helps the poor?
 What have we previously discussed that
encouraged the government helping the people
(the poor)?
 How does the 1920s prove that history
repeats itself?
 How does the economy in the 1920s relate to
the term gilded?
Election of 1928
 Herbert Hoover (R) vs Alfred Smith (D)
 Hoover, “We in America are nearer to the final
triumph over poverty than ever before.”
 Nation has the attitude of national prosperity but
we know that it was actually gilded
 Hoover has overwhelming support because
Americans saw that the previous republican
presidents (Harding and Coolidge) were successful
with economic prosperity, and majority of the
public believed Hoover’s statement.
 HOOVER WINS!!
 By 1929, some economists had warned about the
economy, but most Americans had full confidence
in the nation’s economic health.
Stock Market
 Symbol of prosperous American economy
 Dow Jones Industrial Average- barometer of the
stock market’s health
 Measure based on the stock prices of 30 representative
large firms trading on the New York Stock Exchange
 Based on points
 1920s- stock prices rose steadily (reached 381 points)
 300 points higher than 5 years earlier
 “bull market”- period of rising stock prices
 Americans rushed to buy stocks
 1929-4 million Americans (3% of nation) owned stock
 Many were already wealthy but others were Average
Americans who hoped to strike rich
Stock- the ups and downs
 Seeds of trouble taking root!
 People engaging in Speculation- buying stocks on
the chance of a quick profit while ignoring the
risk
 Many began buying on margin paying a small
percentage of a stock’s price as a down payment
and borrowing the rest
 If stock value declined, people who bought on
margin had no way to pay off loan.
 The stock market rose quickly and the rising
prices did not reflect companies worth.
Stock- the crash
 September 1929, stock prices peaked and then fell
 Confidence in the market declined- investors quickly
sold stock and pulled out
 October 24, 1929 the stock market plunged
 By mid November, investors had lost about $30 billion,
an amount equal to how much America spent in World
War I.
 Black Tuesday October 29- the bottom fell out of the
stock market
 Signal of the Great Depression (1929-1940)-period of
time when the economy plummeted and unemployment
skyrocketed
 The crash did NOT cause the depression alone, but it
accelerated the collapse of the economy and made the
depression more severe
The Dow Jones Industrial Average (DJIA)© index climbed
to an all-time high on Sep. 3,1929 (Close: 381.17).
34 months later Oct. 7, 1932 the DJIA© was at 41.22 (89.19%)
Bank Failure
 Run on the Bank
 After the crash, many people panicked and
withdrew their money from the bank
 Banks invested in the stock so some could
not get their money
 1929- 600 banks closed
 1933- 11,000 of the 25,000 banks had failed
 Because the government did not protect or
insure bank accounts, millions of people lost
their savings
 ** What protects banks today?
Business failure
 Approximately 90,000 businesses went bankrupt
 Millions of workers lost their jobs
 Unemployment:
 1929- 3%
 1933- 25%
 1 out of every 4 workers was out of a job
 Those who were fortunate to keep their job still
faced pay cuts and reduced hours
Global effects of the depression
 The depression affected Europe
 US investors withdrew their money from
European markets
 To keep US dollars in America, the government
raised tariffs on goods
 Hawley-Smoot Tariff- worlds largest protective
tariff
 Designed to protect American farmers and
manufactures from foreign competition
Hawley-Smoot Tariff Reverse effect
 reduced flow of goods
 prevented other countries from collecting American
currency to buy American goods
 unemployment in US industries who depended on
exports to Europe
 many countries retaliated by raising their own
tariffs
World trade fell more than 40%
Depression Devastation
 People lost jobs, homes
 Some slept in parks, sewer pipes wrapping
themselves in newspapers to keep warm
 Makeshift shack- a place to live that was made
out of scrap materials
 Old rusted car parts, orange crates, piano box
 Shantytowns- little towns consisting of shacks
 Soup Kitchen- free or low cost food
 Bread lines- lines of people waiting to receive
food provided by charities
 African Americans- faced racial violence because
competing with whites for similar jobs
 Mexican Americans- faced deportation (even if
born in US)
 Farmers- advantage, able to grow food;
disadvantage, thousands lost land through
foreclosure- process by which a mortgage holder
(loan company) takes back property if an occupant
has not made payments.
 Resulted to tenant farming
Mississippi River Flood 1927
 April 21, 1927 levy broke 20 miles north of
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Greenville (mounds landing)
April 22, 10 ft of water
30,000 African Americans “farm hands”,
“convicts” worked to stop levees from breaking
(worked at gun point)
Tons of houses destroyed
African Americans were gathered to stay on
Greenville levy
waters rose, AA were left stranded for days
without food or drinking water, while white women
and children were hauled to safety.
MS River Flood, 1927
 William Percy- wants to evacuate 13k AA
 Planters say no- do not want to loose the labor
 President Coolidge at the time appoints
Hoover to head up relief effort (colored
advisory commission)
 Does not fulfill his duties for the AA once
president
 Migration to the north (Chicago)
 Political party switch
 Followed republicans (Lincoln’s party)
 Switched to democrat
When the
Levee Breaks
1971
http://www.youtube.com/watch?v=Lvh
c0WvTJfE
1929
Dust Bowl
 1930s- a drought hit the Great Plains, destroying
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crops, leaving the earth dry and cracked
Then came the deadly dust storms
Drought and winds lasted for more than 7 years
Farmers methods of plowing during the 1920s
removed the protective layer of prairie grass thus the
soil was depleted.
Wind scattered the topsoil, dust traveled hundreds of
miles
The region that was hardest hit came to be known as
the Dust Bowl
 KA, OK, TX, NM, CO
 Thousands in this area migrated west along route 66 to
California
The thick clouds of dust would force businesses and schools to
close as residents sought shelter. People got dust in their eyes
and noses and grit between their teeth. Dust piled up like snow
against houses and fences. People would hang wet sheets in
windows and doorways to catch the dust. Housecleaning after a
storm involved removing buckets of dirt. Baking in the oven was
preferable to cooking on the stovetop, because the oven offered
better protection from dust. Meals were eaten immediately after
preparation; otherwise dust would cover them. The storms were
especially hard on farm animals. Range cattle died in the fields
with two inches of dirt lining their stomachs. Chickens were
smothered in henhouses.
Black Sunday
The worst of all the dust storms descended on Kansas on April 14, 1935.
Severe storms had been blowing for weeks, destroying millions of acres
of wheat in Kansas and Nebraska. But the sun had broken out in Kansas
on Sunday, April 14, and people ventured out for church and other
activities. Then with sudden fury a black cloud appeared on the horizon.
It descended with terrifying energy—sixty- to seventy-mile-per-hour
winds—and total blackness. Though few people died from this or other
such dust storms, many suffered serious lung ailments, commonly called
dust pneumonia. This storm, and other major dust storms, also caused
substantial economic hardship for farmers and rural communities due to
the major loss of topsoil and damaged houses and farm property. The
April 14 storm literally buried farm equipment and partially covered
houses in dust dunes created within hours. The day became known as
"Black Sunday."
Effects of Depression on the Family
 Men- used to working and supporting the family,
some left the family and became hoboes
 Women- canned food and sewed clothes, helped
families survive, managed household budgets,
many worked outside home
 many resented if women (esp married woman) had
jobs. They had no right to work when men were
unemployed
 Some cities refused to hire married women as
schoolteachers
 Children-malnutrition, lack of health care, schools
closed, teens traveled nation in hope for work,
adventure (dangerous)
Hoovervilles
Hoover blankets
Hoover flags
Hoover struggles
 The nation is in a depression, Hoover is president,
 After the stock crashed, Hoover tried to
reassure nation that the economy was strong
“remain optimistic and go about your business as
usual”
 Hoover- “government’s role is to encourage and
facilitate cooperation, not to control it”
 Opposed federal welfare or direct-relief for the
needy
 His answer- individuals, charities, and local
organizations chip in to help each other
 Federal handouts would weaken people’s self-
respect
Hoover tries to help
 Federal farm board- raise crop prices by helping
members buy crops and keep them off the market
temporarily until prices rose
 Federal home Loan Bank Act- lowered mortgage
rates for homeowners and allowed farmers to
refinance their farm loans and avoid foreclosure
 Reconstruction Finance Corporation (RFC)authorized $2 billion for emergency financing for
banks, life insurance companies, railroads, and
other large businesses. Hoover believed money
would trickle down to the average citizen through
higher wages (would not directly help the poor)
Hoover and his dam
 Hoover administers the Boulder Dam
(Hoover Dam) on the Colorado River
 Use profits from sales of the electric
power to finance dam’s construction
 World’s tallest dam
 Provide: electricity, flood control,
regular water supply
 Help CA agricultural economy
 Today: water for LA and Vegas
 Boulder City- town to house workers
 Recreation- harsh summers, rugged landscape
 In 1931, Nevada legalized gambling
 Las Vegas started to develop 25 miles from dam
 Today- Vegas provides employment for 1000s and
taxes on gaming prove a substantial amount of
money for the state
Another strike against Hoover
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WWI Veterans want compensation
Patman Bill 1924- pay $500 by 1945 to compensate
Vets want compensation now
March on Washington
Shantytowns near Capitol
General Douglas MacArthur sent in to disband
veterans
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Tear gas
Burned shacks
Two people shot
Many injured
11 month old died and 8 year old blinded
 Election 3 months away
 http://www.youtube.com/watch?v=dWvCCxOUsM8