causes of the depression
TRANSCRIPT
The Great Depression
Unequal distribution of wealth
• 2% of people owned 60% of wealth• 50% of families lived below poverty level =
made less than $1500 per year• Most could not afford electricity/furnace heat• On average = $10 - $20 per week• Unequal balance btwn production &
distribution• CREDIT and BUYING ON MARGIN
Unequal distribution of corporate power
• Mergers led to reduced competition.• 200 companies owned 50 % of nation’s wealth• When one company went bankrupt… huge
impact on economy and society• 86,000 businesses failed• wages were decreased by an average of 60%• unemployment rate from 9% to 25%• about 15 million jobless
•
Corporations
Poor Banking Structure• http://www.youtube.com/watch?v=qu2uJWSZkck
Poor Banking Structure
• Small, local banks owned by larger city banks
• Not backed up or regulated by government
• Lent out more than they took in• larger banks called in loans, smaller
banks were forced to give money• 9,000 banks went out of business• 9 million savings accounts wiped out• http://www.youtube.com/watch?v=qu2uJWSZkck
High Tariffs and War Debts
• European countries hit the depression before U.S.
• Hawley-Smoot Tariff: placed a high tax on imports to keep Americans buying American products
• Other countries retaliated• Effectively halted international trade• Difficult for World War I payments to be
made
Overproduction in Industry & Agriculture
• Farmers purchased new machines with credit during the 1920s to increase their production yield.
• Laid off workers in the process.• Planned to pay off credit debt with
“increased” income from “increased” sales• Too much of a product = lower price• Combined with unemployment • Didn’t pay off debt = farms repossessed
Stock Market Crash
• 1920s: invest in stock market to make money• What is stock? • Early investors saw dips and sold• What if no one buys the stock?• October 24th – people who bought on margin
sold• JP Morgan & banks tried to stabilize market• October 29th – FEAR led to increased selling