Causes of the Great Depression: 1

Though not everyone shared in the prosperity of the 1920s, there was a general mood of optimism in the country… But this changed drastically in the early 1930s. Canada was plunged into the Great Depression - the worst economic downturn the country has ever faced. 2

How could prosperity turn to Poverty for so many so quickly How could prosperity turn to Poverty for so many so quickly? What Caused the Great Depression? 3

Why do we NEED to learn about the Great Depression?

#1. Over-Production and Over-Expansion During the 1920s, agriculture and industry reached high levels of production. Many industries were expanding Industries influenced by the “boom”: food, newsprint, minerals, and manufactured goods Huge supplies of everything were produced and were stockpiled… Surplus ears of corn 6

Even in the general prosperity of the 1920s, Canadians could afford to buy only so many goods - as a result, large stocks of newsprint, radios, shirts, shoes and cars piled up unsold in warehouses. Soon factory owners began to panic and slowed down their production. They laid-off workers. Laid-off workers & their families had even less $$ to spend on goods. Sales slowed down even more!!!! 7

Farms and factories overproduced beyond the demand. Businesses cut production Demand for goods fell. Workers suffered from wage cuts and lay offs. People had little or no money to spend.

#2. Canada’s Dependence on a Few Primary Products These primary products are also known as “staples” (ex. Wheat, fish, minerals & Pulp and Paper) These goods were Canada’s most important exports - However, there was a surplus of these goods on the World market… If foreign countries stopped buying from Canada, our economy would be in serious trouble 9

What do you think the environmental legacy of this era will be?

#3. Canada’s Dependence on the United States During the 1920s, Canada bought 65% of our imports from the americans & 40% of our exports were being sent to the United States The United States had become Canada’s greatest trading partner (Britain had been replaced!) It was not surprising that when the American economy got sick, Canada also suffered

#4. High Tariffs choked Off International Trade Many countries developed a policy of “Protective Tariffs”, and this policy was often reciprocated!!! What does the word “Tariff” mean? How can a “Tariff” be “Protective”? What does the word “Reciprocated” mean? 12

While High Tariffs (taxes on imported goods) were used to protect home industries, they choked off international trade!!!

#5. Too Much Buying on Credit “buy now, Pay Later!” By 1929, credit-buying was already a well established custom Many Families got themselves hopelessly into debt with credit- buying Interest Rates were high and people ended up paying much more than the original price of their goods If you fell behind on the payments, the person who sold you the goods had the right to repossess them!

#6. Buying Stocks “on Margin”… To many people in the 1920s, the stock market seemed an easy way to get rich quickly (like gambling…) Rich business tycoons invested in shares, but so did their chauffeurs and the typists in their offices…

It was not even necessary to have a lot of money to play the stock market… You could buy stocks on Credit just as you could buy a phonograph or a washing Machine

You only needed a small cash down payment (usually around 10%)- the broker loaned you the rest of the money at a high interest rate. The idea was that as soon as your stocks went up in value you could sell them - then you would pay back your loan and pocket the profits - this process was referred to as “Buying on Margin”

In order for the stock brokers to lend this money to investors, they asked for “collateral” to secure the loan… this was often a purchaser’s house or car!

Why was this so risky? What have you learned about the stock market that could suggest risk for those who “played”? Explain.

But relatively few Canadians were investing in the stock market… so how do so many “go broke” during the Depression?

#7. The Stock Markets Crash! Black Tuesday: Share prices on the New York Stock Exchange had been sliding gradually downward for some time. Then, on Tuesday, October 29th, 1929, worried investors started trying to sell their shares. This started a panic, and prices plummeted. Suddenly the downward slide turned into a crash! This disaster sparked similar crashes on the other stock markets in Canada (Toronto and Montreal) and around the world. Millions of investors lost huge amounts of money.

Stock 1929 High Price 1932 Low Price Decline in Price 1929-1932 Bell Telephone $183.00 $78.00 $105.00 Canadian Pacific Railway $67.50 $8.50 $59.00 Ford of Canada $70.00 $5.75 $64.25 Imperial Oil $41.25 $7.40 $33.85 Steel Company of Canada $69.25 $11.00 $58.25

#8. Drought in the Prairies Three Serious Challenges for Canadian Farmers in the 1930s: A Sudden Drop in Wheat Prices In 1929 a Terrible Drought began in the Prairies (No Rain for 10 years in some Places) Swarms of Grass-hoppers ate their way across the Prairies & destroyed many of the crops that had survived the drought

How do you think Canadian farm families would survive in these conditions? Watch the video clip “Blown Away” and make some jot notes on the impact that the drought had on the Canadian families living on the Prairies. 35:15- 39:24

#9. The Downward Spiral & Deflation of the Economy Not All Canadians Invested in Stocks… However, Most Canadians would be effected by this “Bust” in the business world… How do you think ordinary Canadians who had never even invested in stock would be effected by the crash?