The Great Depression The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s. ◦ It was the longest, most widespread, and deepest depression of the 20th century.

The Great Depression Due to the high level of unemployment, and the impact that the great depression had on the economy, this is often seen as a time when government intervention in the economy and society in general became more prominent or important.

The Great Depression What do you think? ◦ To what extent do you think the government should intervene in the economy and provide social programs to all citizens?

The Great Depression Three main causes: 1) People over-speculated on stocks using borrowed money. When stock prices fell, they could not repay the loans. 2) The Federal Reserve (the central or “main” U.S. bank) failed to prevent the collapse of the banking system. 3) High tariffs (import taxes) on foreign goods discouraged international trade.

The Great Depression The depression originated in the U.S., starting with the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929 ◦ (known as Black Tuesday). From there, it quickly spread to almost every country in the world.

The Great Depression As stock prices fell with little hope of recovery, panic struck. ◦ Masses of people tried to sell their stock, but no one was buying. ◦ The stock market, which had appeared to be the surest way to become rich, quickly became the path to bankruptcy.

The Great Depression The Stock Market Crash was just the beginning. ◦ Since many banks had also invested large portions of their clients' savings in the stock market, these banks were forced to close when the stock market crashed.

The Great Depression Seeing a few banks close caused another panic across the country. Nearly 10,000 banks failed. ◦ Afraid they would lose their own savings, people rushed to banks that were still open to withdraw their money. ◦ This massive withdrawal of cash caused additional banks to close.

The Great Depression Since there was no way for a bank's clients to recover any of their savings once the bank had closed, those who didn't reach the bank in time also became bankrupt.

The Great Depression Businesses and industry were also affected. ◦ Having lost much of their own capital in either the Stock Market Crash or the bank closures, many businesses started cutting back their workers' hours or wages.

The Great Depression In turn, consumers began to slow down their purchasing of things as luxury goods. This lack of consumer spending caused additional businesses to cut back wages or, to lay off some of their workers. Some businesses couldn't stay open even with these cuts and soon closed their doors, leaving all their workers unemployed.

The Great Depression The Great Depression had devastating effects in virtually every country, rich and poor. ◦ Personal income, tax revenue, profits and prices dropped while international trade plunged by ½ to ⅔. ◦ Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%. ◦ Cities all around the world were hit hard, especially those dependent on heavy industry.

USA annual real GDP from 1910–60, with the years of the Great Depression (1929–1939) highlighted. Considering the graph above… What is the significance of the graph in terms of the economic situation before and after the Great Depression?

Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted. Considering the graph above… What is the significance of the graph in terms of the economic situation before and after the Great Depression?

Great Depression Considering what you know so far about the Great Depression… ◦ What class of people do you think were hit the hardest by the economic downturn? Why?

The Great Depression During the Great Depression, millions of people were out of work across the United States. Unable to find another job locally, many unemployed people hit the road, traveling from place to place, hoping to find some work. ◦ A few of these people had cars, but most hitchhiked or "rode the rails."

The Great Depression They would board freight trains and crisscross the country, hoping to find a job in one of the towns along the way.

The Great Depression When there was a job opening, there were often literally a thousand people applying for the same job. Those who weren't lucky enough to get the job would perhaps stayed in a shantytown (known as "Hoovervilles") outside of town. ◦ Why do you think they were called “Hoovervilles”?

Great Depression

The Great Depression Housing in the shantytown was built out of any material that could be found freely, like driftwood, cardboard, or even newspapers.

The Great Depression Consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent. Likewise, beginning in the summer of 1930, a severe drought ravaged the agricultural heartland of the USA.

The Great Depression What happens to the economy when consumers don’t spend as much as they normally would? Why?

The Great Depression In previous economic depressions, farmers were usually safe from the severe effects of a depression because they could at least feed themselves. Unfortunately, during the Great Depression, the Great Plains were hit hard with both a drought and horrendous dust storms, creating what became known as the Dust Bowl.

The Great Depression Years of overgrazing combined with the effects of a drought caused the grass to disappear. ◦ With just topsoil exposed, high winds picked up the loose dirt and whirled it for miles. ◦ The dust storms destroyed everything in their paths, leaving farmers without their crops. Gasoline powered farm machinery plowed millions of acres of grasslands into wheat fields, exposing the topsoil. Overproduction of wheat caused prices to fall. Farmers then plowed more for other crops to make up for their losses.

The Great Depression

Small farmers were hit especially hard. ◦ Even before the dust storms hit, the invention of the tractor drastically cut the need for manpower on farms. ◦ These small farmers were usually already in debt, borrowing money for seed and paying it back when their crops came in. When the dust storms damaged the crops, not only could the small farmer not feed himself and his family, he could not pay back his debt. ◦ Banks would then foreclose on the small farms and the farmer's family would be both homeless and unemployed. The Dust Bowl left more than 500,000 Americans homeless. Many packed their cars or trucks and headed West.

The Great Depression The farmers who had lost their homes and land usually headed west to California, where they heard rumors of agricultural jobs. By 1940, 2.5 million people had left the plain states. The largest number went to California. Unfortunately, although there was some seasonal work, the conditions for these families were transient and hostile. ◦ Since many of these farmers came from Oklahoma and Arkansas, they were called the derogatory names of "Okies" and "Arkies.“  The stories of these migrants to California were immortalized in the fictional book, The Grapes of Wrath by John Steinbeck.

The Great Depression A theory about the cause of the Great Depression held that the economy produced more than it consumed, because the consumers did not have enough income. ◦ Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.

Great Depression Why do you think the unequal distribution of wealth is bad for the economy?

The Great Depression This economic hardship led to many great changes in economic thinking at the time, and led to a greater government involvement in the economy.

The Great Depression The U.S. economy broke down and entered the Great Depression during the presidency of Herbert Hoover. ◦ Although President Hoover repeatedly spoke of optimism, the people blamed him for the Great Depression.

The Great Depression ◦ Just as the shantytowns were named “Hoovervilles” after him, newspapers became known as "Hoover blankets," pockets of pants turned inside out (to show they were empty) were called "Hoover flags," and broken-down cars pulled by horses were known as "Hoover wagons."

The Great Depression During the 1932 presidential election, Hoover did not stand a chance at re-election and Franklin D. Roosevelt won in a landslide. People of the United States had high hopes that President Roosevelt would be able to solve all their woes. As soon as Roosevelt took office, he closed all the banks and only let them reopen once they were stabilized. Next, Roosevelt began to establish programs that became known as the New Deal.

The Great Depression From 1933 to 1936 President Roosevelt argued a reconstruction of the economy would be needed to prevent another, or avoid prolonging, the current depression.

The Great Depression These New Deal programs were most commonly known by their initials, which reminded some people of alphabet soup. ◦ Some of these programs were aimed at helping farmers, like the AAA (Agricultural Adjustment Administration). ◦ While other programs, such as the CCC (Civilian Conservation Corps) and the WPA (Works Progress Administration), attempted to help curb unemployment by hiring people for various projects like roads and buildings.

The Great Depression These programs expanded the role of the government in peoples’ daily lives People came to expect that the government would provide certain services for them. ◦ SSA– Social Security Administration: Senior Citizens ◦ AAA– Agricultural Assistance Administration: Farm Assistance ◦ NLRA– National Labor Relations Act: Rights for labor

The Great Depression The idea of government intervention in the economy was supported heavily by economist John Maynard Keynes. ◦ Keynes, was a British economist whose ideas have profoundly affected the theory and practice of economics, as well as the economic policies of governments.

The Great Depression He argued heavily in favour of the government intervening in times of recession in order to lessen the harshness of the economic turmoil.

Great Depression How would Keynes’ idea of government intervention help the economy in times of recession?

The Great Depression

What brought the world out of the Great Depression?

The Great Depression To many at the time, President Roosevelt was a hero. ◦ They believed that he cared deeply for the common man and that he was doing his best to end the Great Depression. ◦ Looking back, however, it is uncertain as to how much Roosevelt's New Deal programs helped to end the Great Depression. ◦ By all accounts, the New Deal programs eased the hardships of the Great Depression; however, the U.S. economy was still extremely bad by the end of the 1930s.

The Great Depression The major turn-around for the U.S. economy occurred after the bombing of Pearl Harbor and the entrance of the United States into World War II. Once the U.S. was involved in the war, both people and industry became essential to the war effort. ◦ Weapons, artillery, ships, and airplanes were needed quickly. Men were trained to become soldiers and the women were kept on the home front to keep the factories going. It was ultimately the entrance of the U.S. into World War II that ended the Great Depression in the United States.