The Great Depression 1929-1941

Causes of the great depression Overproduction Laissez Faire policies that left the economy unregulated Fraud Over speculation on the stock market Decline in foreign trade

Laissez faire a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights Businesses report record profits Uneven distribution of wealth 5% earned 33% of income Less real spending, but production levels continued to rise

Background 1920’s a time of great prosperity, but problems exist under the surface Conservative policies of Harding, Coolidge & Hoover administrations don’t, can’t help Depression doesn’t begin with the Stock Market Crash in 1929 Starts 10 years earlier in Europe – WW1, war damage, reparations

Early Signs Agricultural overproduction Prices drop, supply & demand Tractors, Combines, etc. Prices drop, supply & demand Farmers default on loans, banks foreclose

Dustbowl Three waves: 1934, 1936, 1939-40 In some areas lasted as long as 8 years New technologies encouraged farmers to cultivate arid grassland (<10 inches rain/year) Unanchored soil turned to dust Centered on panhandle of Texas & Oklahoma, affected parts of New Mexico, Colorado, Kansas Tens of thousands forced off farms, “Okies”

“okies” Midwestern farmers, many from Oklahoma, migrate to California looking for work Begin to compete with Mexican farm workers for scarce jobs Hobos Hoovervilles “Grapes of Wrath”

Overproduction Companies producing more than could be consumed Lost profits and debt Companies go out of business Poor management Fraud Inflated profit reports to drive up stock prices

Foreign Debt WW1 – America becomes World’s leading creditor nation Foreign powers owe US government and American companies @ $1Billion annually Debt goes unpaid Declining US trade Demand for reparations Continuing European depression

Crash Investor confidence, government policies lead to increasing stock investment Unprecedented rise starts in 1928, record high of 381 by Sept 1929, decline begins Panic selling starts on Oct 24, 1929, 12.8 million shares traded Oct 29, 1929 “Black Tuesday,” market plummets

Depression 9000 banks close between 1930 and 1932 Bank customers panic, try to pull funds As money disappears, deflation sets in Businesses close or lay off workers Unemployment rises to 25-35% Toledo, Ohio unemployment rises to 80%

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