Issue 3
An Evaluation Of The Reasons For The Economic
Crisis 1929-33:
Factor 1: Republican Governments
Policies
Factor 2: Overproduction &
Under-consumption
Factor 3: Weaknesses Of The
Banking System
Factor 4: International Economic
Problems
Factor 5: Wall Street Crash
AIMS OF
ESSAY:
To Be Able To
Discuss the
factors which
contributed to
the economic
(financial) crisis
in American
between 1929 &
1933
Aims Paragraph 1:
• To Understand The 3 Key Republican
Economic Policies Of The 1920s
• To Understand The Consequences These
Could To Have
Have The Background Knowledge & Argument To
Write Your First Paragraph For Essay 3 on the
factors which contributed to the economic crisis
PLAN FOR PARAGRAPH 1
Republican Policies
Read Through Paragraph 1 On Handout
1. Start with an Opening Argument e.g. state there is a link
between the isolated factor & the question
2. Put in Knowledge – Discuss Republican Policy 1: What does
laissez faire mean?
3. Put in Analysis – Explain what did this lack of regulation
lead to?
4. Knowledge – Discuss Republican policy 2: What did tax
reduction lead rich people into doing more
5. Analysis – Explain what was meant to happen but didn’t &
the effect it had
6. Evaluation – Make an evaluation, sum up that it created a
flawed system which would eventually fall down
WHO WERE THE REPUBLICANS?
Republican Presidents Were In Office From 1921 To 1933.
1.
Warren G Harding (1921-1923)
2. Calvin Coolidge (1923-1929)
3. Herbert Hoover (1929-1933)
What Were Their Economic Policies?
FIRSTLY:
• They followed a policy of ’laissez faire’ which
meant that the government interfered as little
as possible in the running of the economy
• The term ‘economy’ means: ‘the state of a
country in terms of the production and
consumption of goods/services and the supply
of money’
• Laissez faire meant businesses were essentially
unregulated & ‘left alone’
• Business men were left to create jobs and
decide on wages… (great for the poor)
• Being unregulated resulted in many businesses
investing in the stock market…
• The stock market & banks at the time was also
under-regulated resulting to loans being taken
out to be spent on stocks
1. LAISSEZ FAIRE
The Problem Being…
If The Stock Prices
Fall How Will They
Ever Pay Back The
Bank??
What Were Their Economic Policies?
SECONDLY:
• Keep taxes as low as possible
• Resulting in a cut in government spending from
$6.4 billion to $2.9 billion in just 7 years… (e.g.
schools)
• This had the dual purpose of (1) allowing businesses
to invest more money to expand their operations
• (2) Giving consumers more money in their pockets
to keep spending
• The government believed that money would ‘trickle
down’ through all levels of society and raise
standards of American life…
2. LOW TAXES
… however this didn’t work… during the 1920 60% were living on less than
$2,000 a year while the top 5% owned 1/3 of Americas income
The rich got richer and the poor stayed poor this had 2 outcomes:
(1) The poor could not buy the goods they were producing leading to underconsumption
(2)The rich bought more shares in the unpredictable market…
What Were Their Economic Policies?
THIRDLY:
3. Strict Trade Tariffs
• The Fordney-McCumber Act 1922 created
strict tariff barriers imposed on foreign
imports e.g. goods from Europe
• It reduced the number of foreign goods being
sold in America
• The idea behind this was to led to an increase in
American own goods being bought at the
expensive of foreign goods
• This is known as ’protectionism’
• However this back fired and the Europeans
did the same putting a high tariff on
Americans goods!
• Therefore the US economy could not expand
into foreign markets as rapidly as they could
produce – resulting in over-production/underconsumption
SUM UP: Factor
Each of these 3 polices will be mentioned throughout your
essay: Laissez Fair; Low Tax & Trade Tariffs
Arguably the Republican policies were key facilitators to the
economic situation, leading to:
1.
2.
3.
4.
Overproduction & Under-consumption of American Goods
The failure of the Banking System
Problems with International Trade
The Wall Street Crash
WHY… the lack of regulation (laissez Fair); tax reductions for
the rich (Low Tax) & the desire for protectionism (Trade
Tariffs)
Background Questions
Q1. Who were the Republican Presidents between 1921-31
Q2. What were the 3 main Republican economic policies?
Q3. What does Laissez Faire mean?
Q4. What is the economy of a country?
Q5. What did many business men do with their profit
Q6. Not only were businesses unregulated – which 2 other organisations were?
Q7. What problem could arise here?
Q8. How much was government spending cut by?
Q9. What were the 2 aims of low taxation?
Q10. This was meant to improve living conditions for everyone in America however
it did not – how did the rich & poor differ?
Q11. ‘The rich got richer & the poor got poorer’ what 2 outcomes did this have?
Q12. What was the Fordney-McCumber Act of 1922?
Q13. What impact was this meant to have on goods in America?
Q14. How did this backfire?
Q15. What did the Republican policies lead to?
PLAN FOR PARAGRAPH !
Republican Policies
Read Through Paragraph 1 On Handout
1. Start with an Opening Argument e.g. state there is a link
between the isolated factor & the question
2. Put in Knowledge – Discuss Republican Policy 1: what does
laissez faire mean?
3. Put in Analysis – Explain what did this lack of regulation
lead to?
4. Knowledge – Discuss Republican policy 2: What did tax
reduction lead rich people into doing more
5. Analysis – Explain what was meant to happen but didn’t &
the effect it had
6. Evaluation – make an evaluation, sum up that it created a
flawed system which would eventually fall down
OPENING ARGUMENT
It can be argued that the laissez-faire
approach from the Republican government
was the biggest contributor to the
economic crisis.
Republican Policies
KNOWLEDGE 1
ARGUMENT 1
Discuss the first policy:
• What is laissez faire
and what did this
approach lead to?:
• This led to risky
investments in the
stock market
• Unregulated Practises
• Easy Credit
• And the vulnerability of
losing everything if the
market was to crash
Republican Policies
KNOWLEDGE 2
ARGUMENT 2
Discuss the next policy:
tax reductions
• It can be argued this
profit was meant to
trickle down to the
working classes
• Who could then buy the
goods they were
producing and support the
economy…
• BUT this is not what
happened the poor stayed
poor & could not afford
goods
• Ensured the wealthy
got richer & profits led
to increased
investments in the
stock market
• However…
EVALUATION
EVALUATION:
Overall, Republican policies of the 1920s
created a sense of well being and large
profits however long-term they created a
flawed system that allowed banks and the
stock market to get out of control