1. 5 essays to learn BUT only 1 to write in the exam
3. USA,

2. An Evaluation Of The Reasons For The Economic Crisis 1929-33:
Issue 3
An Evaluation Of The Reasons For The Economic Crisis :
Factor 1: Republican Governments Policies
Factor 2: Overproduction & Under-consumption
Factor 3: Weaknesses Of The Banking System
Factor 4: International Economic Problems
Factor 5: Wall Street Crash
AIMS OF ESSAY:
To Be Able To Discuss the factors which contributed to the economic (financial) crisis in American between 1929 & 1933

3. Aims Paragraph 1:
To Understand What Is Meant By The Overproduction & Under-consumption Of Goods
To Explain How Republican Policies (Lack Of Regulation & Lack Of Taxation) Ensured The Boom Of The 1920s Would Never Last
Have The Background Knowledge & Argument To Write Your Second Paragraph For Essay 3 on the Factors Which Contributed To The Economic Crisis

4. PLAN FOR PARAGRAPH Over Production & Under Consumption
1. Start with an Opening Argument e.g. state there is a link between the isolated factor & the question
2. Put in Knowledge – Details of mass production with example e.g. Ford
3. Put in Analysis – Explain why the boom would never last
4. Knowledge – Give details of the other reason why the boom couldn’t last
5. Analysis – Explain what this resulted in & the effect it had
6. Evaluation – make an evaluation, how important was this factor?
Read Through Paragraph 2 On Handout

5. 1. OVERPRODUCTION OF GOODS

6. Changing Times
The American economy was changing during the 1920s and output increased by a staggering 50%! The “New Era” used mass-production methods (moving assembly line) to produce huge amounts of goods could be made at a fraction of the cost because they were made by unskilled labour & costs were cut through bulk buying This meant many good for the first time were accessible to the whole nation not only the wealthy!
Many Americans thought they had entered a new era of prosperity due to the availability of work that they accepted new offers of CREDIT in order to buy what they could not afford out of their pocket… uh oh

7. New Goods New electrical goods & cars were sold in their millions:
Henry Ford’s reliable Model T (“tin Lizzie”) appeared in 1908 & by 1929 more than 23 million were produced!
The car industry stimulated other industries as well such as steel, rubber & petrol
It also resulted in the expansion of roads creating jobs – 10,000 miles worth per year!
By 1923 there were over 500 stations and 3 million radios in action
Other goods such as hand cameras, wristwatches, cigarette lighters, vacuum cleaners, refrigerators and washing machines were other examples of mass-produced goods which flooded the market

8. Overproduction
However by 1929 mass production had peaked and the market for these goods was saturated (there was not the need for them):
Those who could afford the goods had already bought them so the market was flooded with items which could not be sold
The poor, many of whom who were not earning enough to buy item out right and had bought the items on credit, were unwilling to take out more of a loan to buy goods they didn’t really need
Thousands of goods were being stock-piled in warehouses as nobody wanted them - businesses went bust as people were not buying their goods!
This meant there was a surplus of goods which led to a fall in prices and a fall in companies profits
Companies had to cut costs and did this by letting workers go which resulted in huge unemployment

9. 2. Under Consumption
Also Known As The ‘Saturation Of Market’

10. Wealth Inequality
The wealthy were favored throughout the 1920s by the tax policies of the republican administrations These cuts had no impact on the poor as they weren't earning enough to be paying tax in the first place Prosperity not being fairly shared across the USA as the top 5% of the population owned 33% of the nation’s wealth This which meant that the bottom 40% of the population received only 12.5% of the nation's wealth 71% of the population were earning less than a decent comfort wage of $2,500 annually - the minimum thought necessary for decent comfort but definitely not enough to be buying the latest models

11. Under Consumption
This also meant that a large percentage of the population could not afford the goods that were being produced throughout the 1920s The problem here is that there are only so many hoovers rich families could own Therefore domestic demand did not keep up with production This resulted in a fall of prices and a fall in company profits. To cut costs, companies let workers go resulting in high unemployment and a Depression in the 1930s

12. SUM UP: Overproduction & Under-consumption
New mass-production methods and mechanisation meant that production of consumer goods had expanded enormously
Cars, radios and other electrical goods had flooded the market and more was being made than people could buy
By 1929 those who could afford consumer goods had already bought them
Evaluation
Throughout the 1920’s business had benefited from low tax policies. The result of this was that the bottom 40% of the population received only 12.5% of the nation’s wealth
In contrast, the top 5% owned 33% of the nation’s wealth Therefore, domestic demand never kept up with production

13. Background Questions
Q1. How much (%) did economic output increase in the 1920s?
Q2. What is an example of mass production methods?
Q3. Why does mass production cut costs?
Q4. What did mass production mean for the average American?
Q5. What offers were the poor given to buy these goods that they could not afford?
Q6. Which other industries were stimulated from the motor industry?
Q7. Which other goods became available cheaper due to mass production
Q8. What does it mean if a market is ‘saturated’?
Q9. What were the 2 reasons for the saturated market?
Q10. What result occurred from goods not being sold?
Q11. Why were the poor not taxed like the rich?
Q12. What evidence is there that prosperity was not evenly shared?
Q13. How can over-production/under consumption be explained in its most simple form?
Evaluation

14. PLAN FOR PARAGRAPH Over Production & Under Consumption
1. Start with an Opening Argument e.g. state there is a link between the isolated factor & the question
2. Put in Knowledge – details of mass production, with example
3. Put in Analysis – explain why the boom would never last
4. Knowledge – give details of the other reason why the boom couldn’t last
5. Analysis – explain what this resulted in & the effect it had
6. Evaluation – make an evaluation, how important was this factor?

15. OPENING ARGUMENT
It can be argued that the economic crisis was caused by overproduction and under consumption (also known as the saturation of the market)

16. Over Production & Under Consumption
KNOWLEDGE 1
Explain mass production made goods more accessible to Americans (cheaper)
Example - Henry Ford’s car; vacuum cleaners
ARGUMENT 1
It can be argued that the economic crisis was caused by too many goods flooding the market…
…which eventually became saturated as those who could afford them already had them

17. Over Production & Under Consumption
KNOWLEDGE 2
(as we already know…)
Tax policies of the Republican governments favoured the wealthy
Example of inequality
This resulted in surplus goods as the poor couldn’t afford them
ARGUMENT 2
It can be argued that the economic crisis was caused by the prosperity of the 1920s not being equally shared across society…
… which led to under consumption & eventually losses in jobs

18. EVALUATION:
Therefore, although the Republicans lack of regulation did result in a great deal of wealth in the short term, the unstable job market; over-production of goods & the lack of tax to redistribute the wealth meant that the American economy was never going to continue to boom and risking the stability of economy