Great Depression Canadian History 1201 February 2016

Unit Overview World-wide economic downturn Began with the crash of the stock market on October 29, 1929 (Black Tuesday) Dirty Thirties Breadlines, Relief Camps, Unemployment Emergence of the Welfare State Emergence of new political parties (left wing) WWII helped economic growth

After the boom years of the 1920s, a dramatic economic shift in 1929 would change the Canadian economy & society The good times of the 1920s ended in Canada AND in most industrialized countries To understand the Great Depression, we must look at the business cycle & the stock market

The Business Cycle Economic conditions always change - there are good times & bad times, economists call these upswings and down swings the business cycle. There are four stages to the cycle: Recovery (Expansion) Prosperity (Boom) Recession Trough (Depression)

The Business Cycle

Lets apply this cycle to the “Roaring Twenties”

The Business Cycle

How the Stock Market Works The boomtime of the 1920s created such confidence in the economy that many people bought stocks in businesses Stocks: shares in a company that can be bought & sold Stock market: a place where businesses raise money by selling stocks, or shares, in their business

How The Stock Market Works The owners of Nova Co. want to expand To get the money they need, they sell stocks in the company People who buy the stocks will get a part of the profits of the company depending on the number of shares they own (dividend) If Nova Co is profitable, the stock value will rise Then the stockholder may choose to sell shares at a profit or hold on to them, hoping the value will increase even more

How The Stock Market Works

The Stock Market During the 1920s, a stock market boom developed as stocks increased in value It was a quick, easy way to become wealthy In1929 Canadian investors were very confident that stocks would remain high despite some notable economic problems By September, American stock market shares began to drop & Canadian stock values followed

The Stock Market Worried investors began to lose confidence in the companies whose shares they had purchased & wanted to sell their stocks quickly before prices decreased any further As investors began selling large volumes of stock, people panicked & tried to sell their stocks, the values of which fell dramatically By Tuesday October 29 th, stock exchanges in New York, Toronto, & Montreal “ crashed”

The Stock Market These headlines signify the 1929 stock market crash which led to the beginning of the Great Depression

Impacts of the “Crash” Many Canadian investors were financially ruined left with stocks worth a fraction of earlier values Many Canadians had bought stocks on margin (10% down payment) or with borrowed money & were unable to sell their stocks to pay their debts

Impacts of the “Crash” While only a small % of Canadians owned stocks, millions of Canadians were affected by the crash of 1929 This was the first visible evidence of a worldwide economic collapse that became known as the Great Depression

Great Depression: Underlying Causes While the 1929 stock market crash served as a catalyst of the Depression, there were underlying contributing factors: 1.Over-production 2.Purchasing stock/buying on margin 3.Purchasing on credit/high consumer debt 4.Overdependence on primary industries 5.Dependence on the U.S.A. for trade 6.High tariffs/limited trading partners/ protectionism

1. Over Production During the prosperous 1920s, agriculture & industry reached high levels of production Almost every industry was expanding which meant that huge supplies of food, newsprint, minerals, & manufactured goods were produced & simply stockpiled

1. Over Production There was an over-supply while demand was low Example: 1930 over cars produced while was the most cars sold in a year

1. Over Production Industrialists seemed to forget a basic lesson in economics: produce only as many items as you can sell Even in the prosperity of the 1920s, Canadians could afford to buy only so many goods So warehouses became full of unsold goods, and factory owners slowed down production & laid off workers Laid off workers & their families had even less money to spend on goods which slowed sales even more.

2. Purchasing Stocks/Buying on Margin For many people during the 1920s, the stock market seemed an easy way to get rich quickly You could buy stocks on credit just as you could a washing machine or phonograph For only a 10% down payment, a stock broker loaned you the rest of the money at a high rate of interest To buy $1000 worth of stock you needed only $100

2. Purchasing Stocks/Buying on Margin The idea was that as soon as your stocks went up in value, you could sell them, pay back your broker, & pocket the profit This risky process was called “ buying on margin ” What if the stocks didn’t go up? Or, worse still, what if they went down? You would have to sell your stocks at a loss and face financial ruin

2. Purchasing Stocks/ Buying on Margin This is exactly what happened in October 1920 When stock prices started to fall, people freaked, decided to sell and get out of the market Prices fell even lower as more and more stocks were dumped On Black Tuesday, Oct 29, 1929 stocks decreased by 50% Shareholders lost millions & many investors were wiped out in a few hours

3. Credit Buying/ High Consumer Debt Throughout the 1920s, Canadians were encouraged by ads to “ buy now, pay later ” Why wait to buy a car when you could have it immediately with a small down-payment? Many families got themselves hopelessly into debt with credit buying

3. Credit Buying/ High Consumer Debt The piano that cost $445 was purchased with $15 down & $12 a month for the next five years With interest payments, it ended up costing far more than it was worth (many purchases ready for junk pile when paid off) If sickness or layoff occurred, making payments could be difficult Repossession of homes, cars, appliances would occur when payments could not be met

4. Dependency on Primary Industries The Canadian economy relied heavily on primary products known as staples ( wheat, fish, minerals, pulp & paper) As our biggest exports, Canadian industries prospered as long as world demand for our staple products stayed strong But trouble would begin if a surplus of these products developed or if foreign countries stopped buying from Canada

4. Dependence on Primary Industries Canada’s Dependence on a Few Primary Products ▫ All the apples in one basket ▫ Staples in Canada included wheat, fish, minerals, pulp and paper ▫ Canada relied on world demand for these products ▫ When world demand slowed because of the global depression, Canada’s exports weakened

4. Dependence on Primary Industries ▫ Terrible drought of 1921, 1931, reduced production of wheat ▫ Farmers can’t afford their mortgages, railways and flour mills slow down. ▫ Chain reaction to all parts of the economy

5. Dependence on the U.S.A. Like today, Canada had close economic ties with the U.S.A. in the 1920s replacing Great Britain as our largest trading partner In the 1920s, the USA was responsible for over 40% of our exports & 65% of our imports American investors also supplied much of the money used to finance Canada’s economic development during the 1920s A downturn (recession) in the US economy would therefore affect the economy of Canada

6. High Tariffs / Protectionism – Tariffs are taxes on foreign goods – Using high tariffs to keep out foreign goods is called protectionism – Every country tried to save its own industries by trying to ensure that they did not face tough competition from foreign industries – So industries in other countries suddenly found their usual overseas markets closed off

6. High Tariffs / Protectionism – Countries with high tariffs that practiced protectionism strangled international trade as country after country shut its doors to goods from abroad – For an exporting country like Canada, when the foreign demand for our wheat, pulp & paper, & minerals decreased, many large Canadian businesses began to collapse

Impact on Canada

The Dust Bowl of the 1930s Some farmers growing wheat drained the soil of nutrients and caused it to dry up. There was a series of summer droughts combined with high winds. Soil literally blew away.

The Dust Bowl of the 1930s Swarms of grasshoppers appeared, destroying what crops there were. Many farmers had to declare bankruptcy.

Unemployment in the 1930s As more and more businesses closed, more and more people were out of work. They had little money to spend, so businesses that relied on them (restaurants, stores) closed also. This vicious cycle continued all over the country in all types of businesses.

Unemployment in the 1930s Many rural workers came to the cities looking for work and found little or none. Some just worked for food. – Shanty towns (hobo jungles) were built in or near cities, full of unemployed people called 'hobos'.

Unemployment in the 1930s People travelled across the country looking for work. Sometimes they (illegally) 'rode the rails'; few people could afford cars. Some just did it for something to do when they realized there was no work anywhere.

Tolerance and Intolerance Many Canadians helped one another during the Depression: – extended families supported one another – neighbours shared – families provided meals to travellers

Tolerance and Intolerance Not everyone was treated equally: – only men got relief assistance; women were denied – Jews were discriminated against – Aboriginal peoples were ignored it was assumed they could live off the land. Some could, but many had left that way of life.

Tolerance and Intolerance Immigration: – Declined by 90% in the Depression – Non-farmer immigrants, especially Jews, Chinese, Blacks and Japanese, were blocked from entering Canada

‘Escaping’ the Depression Movies – Portrayed exciting adventures in faraway places…with sound! – Holywood’s Golden Age

Newspapers & Magazines – Newspapers cost 5 cents and were re-read by many people, then used as insulation or toilet paper. – Glossy magazines gave glimpses of life in the rest of the world

‘Escaping’ the Depression Radio – People gathered around the radio for news, music, drama, comedy, sports and mysteries, much like we watch TV today. – Hockey Night in Canada began on radio in the 1930s with Foster Hewitt, who coined the phrase, “He shoots! He scores!”.

‘Escaping’ the Depression The DIONNE QUINTUPLETS: 5 identical girls born in Ontario in Annette, Emilie, Yvonne, Cecile, Marie They were the 1st quintuplets to ever survive. They became a major tourist attraction and millions came to see them.

‘Escaping’ the Depression Fairs, Exhibitions and Revival Meetings – Canadians went to any kind of public event that was available: – travelling preachers, – agricultural fairs – large exhibitions like the Canadian National Exhibition (CNE) in Toronto.

Canadian Identity The shared hard times brought Canadians closer together. All of the travelling for work allowed people to gain a greater appreciation of Canada. The CBC aired Canadian radio shows in the 1930s. Prior to this, it was mostly American entertainment.