Causes of the Great Depression “We in America are nearer to the final triumph over poverty than ever before” Herbert Hoover

Causes of the Great Depression 1. Unequal distribution of income 2. A crisis in the farm sector 3. Easy credit 4. Old and decaying industrial base 5. Unwise government policies 6. Stock speculation

The Great Depression  Longest and most severe in history  October 1929 – December 1941

1. Unequal Distribution Of Income  Rich are getting richer  Profits were not reinvested in operating the business

2. A Crisis In The Farm Sector  Hit the farmers first  WWI generated demand  Farmers borrowed  Prices fell after the war  Farmers grew more – reducing prices

2. A Crisis In The Farm Sector  Farmers couldn’t pay their debt  Failed to secure farm subsidies McNary-Haugen Act – purchasing surpluses  Lost farms/rural banks closed

3. Easy credit  Consumer spending not based on “real” consumer income  Inventories built up Jobs were lost

4. Old and decaying industrial base  Mining and railroads faced competition from new industries  Profits went into stock speculation not the business

5. Unwise government policies  Lower taxes and spending Worsened wealth distribution  Favored monopolies Insensitive to laws of supply and demand  Anti-labor policy Low wages

5. Unwise government policies  Ineffective Farm Policies  High Tariffs – Smoot-Hawley Cut trade Hurt foreign economies Raised prices  Weak banking system No regulation

6. Stock speculation  Stocks purchased on margin Allowed many more people to invest Share prices did not reflect corporate profits Did not reflect consumer spending Created a mania