The Great Depression

A Global Issue

U.S Economy Following World War I

• Immediately following war there was brief slowdown – economy exploded during the war

• 1921 – Booming American Economy– Industry booms – automotive industry primarily– Consumer goods (radios and vacuums) produced at an

all time high– Stock Market – the measuring stick of our economy

rose 400%• People began buying on margin – stock prices climb higher

Problems in the Economy

• New wealth in America was not evenly distributed– The top 1% wealthiest people earned 20% of the

nations income– The was huge divide between rich and poor

• Credit was easy to get – borrowing money from banks at all time high– People were reaching credit limit – owed more than

they could pay back

Black Tuesday – Stock Market Crash

• 1929 – saw slowing down of consumer spending– Fears begin about price drops in stocks

• October 29, 1929 – Black Tuesday – Massive sell off of stocks by nervous investors– Stock prices collapse – those who borrowed to buy stocks

were forced to sell to pay off loans• Effects:– Investors ruined– Banks failed – could not get back money they loaned– Industry failed – could not move products

Great Depression

• Great Depression – severe economic downturn following the Stock Market crash

• Causes:– Industry slowdown – Workers losing jobs – 25% unemployed– People lost savings in banks as they failed• People withdrew all money from banks and the banks had to

close down

Government Response

• Herbert Hoover – president when Depression started – Felt government should have a limited role in

business affairs– Favored a minimal response to the crisis• Said Depression was a natural response to correct the

boom in the economy – felt it would last a short time

Franklin D. Roosevelt

• Elected President of the United States in 1932• New Deal – program pushed forward by

Roosevelt which said that government spending could help start economic recovery– Established public works programs– Gave jobs to the unemployed– Provided government money for welfare and other

relief programs– Created new regulations to reform and protect the

stock market and the banking system

John Maynard Keynes

• John Maynard Keynes – British economist who felt that the idea of government spending was what it was going to take fix economies– Unbalanced budgets are fine to help economy– Factories would hire workers with government

help – Workers having money would create spending– People spending would help economy recover

Global Depression

• After American economy was hit – depression spread to other countries– Other nations were having issues before depression• World War I destroyed economies of many European nations• Debt to U.S. by other allies made this worse• Germany was in ruin because of war reparations• Japan saw many banks close before the depression

Smoot-Hawley Tariff Act

• American act that placed a high tariff (tax) on imported goods which was thought to make people buy American products to jump start American economy

• Effects:– Countries around the world increased tariffs on

American goods– Trade globally stopped– Prices on goods dropped and more businesses failed

and more people lost jobs world wide

Political Effects of Great Depression

• Created more unrest on top of issues created by Treaty of Versailles

• Political instability worsened– New governments formed in Britain and France– Extremist political groups grew – made possible by the

widespread misery and hopelessness of the Depression• Germany saw the rise of the NAZI Party• Italy saw the rise of a Fascist dictator – Benito Mussolini

Questions 1 of 2

• Why did the American economy boom following World War I?

• What problems were there in the American economy before the Great Depression?

• What caused Black Tuesday? What the immediate effects?

• What caused the Great Depression?• What differences do you see in the reactions of

Herbert Hoover and Franklin Roosevelt?

Questions 2 of 2

• What was the New Deal and what did it do to stimulate the economy?

• Who was John Maynard Keynes and what did he believe in?

• What were the issues discussed that made this a global depression

• What was the Smoot-Hawley Tariff Act? What effect did it have on the global economy?

• What were the political impacts of the Depression?