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Long and Short-Term Causes of the Great Depression. What was the Great Depression?. The worst economic crisis of the century Lasted for ten terrible years.
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What was the Great Depression? • The worst economic crisis of the century • Lasted for ten terrible years. • In 1929, the stock market collapsed, businesses went bankrupt, workers lost their jobs and trade between provinces and countries collapsed. • Great unemployed • “Dust bowl” as a result of drought in Canada’s west. This destroyed farms, crops and liveliehoods. • Many lost their homes
1. Dependence on Natural Resources • Canada’s economy depended on a few basic products (staples) such as wheat, fish, minerals, and pulp and paper. • As long as world demand for these remained high, Canada would prosper. • When the depression hit countries around the world, demand for Canada’s products fell. Fish in the Maritimes and wheat in the West were especially hard hit. • Argentina and Australia were producing wheat in large quantities the resulting surplus drove prices down. At the same time terrible droughts on the prairies destroyed crops. Farmers could not pay mortgages. Industries such as flour mills, railways, also slowed down without the production of wheat.
2. Buying on Credit • Throughout the 1920's credit buying became more and more popular. With added interest payments many families got themselves hopelessly into debt. If the wage owner became sick or was laid off it was impossible to keep up payments. • Many people gambled on the stock market in the 1920's. People began "buying onmargin". This meant that you only needed 10% of the money you invested, the broker loaned you the rest at a high interest rate. The idea was that as soon as your stocks went up in value, you could sell them then pay back your broker and keep the profits. Unfortunately, stocks do not always go up, in fact they sometimes go down, this is what happened in October 1929. • When stock prices dropped, people panicked and sold their shares as a result prices fell even lower. Most stocks nosedived more than 50%. Many people were wiped out.
3. Overproduction of Goods • During the 1920's almost every industry was expanding. • Large amounts of profits and investments resulted in the expansion of existing factories or construction of new ones. As a result huge supplies of food, minerals, radios, cars. ... remained stock piled. • Soon factory owners panicked and slowed down production by laying off workers. Workers and their families had even less money to spend therefore sales slowed down even more. • Industrialists forgot the basic economic rule: only make as many items as you can sell. Wages simply were not high enough to buy all the products made.
4. Raising Tariffs • In the 1920's many European countries recovering from W.W. I. needed our goods however because of their war dept. They often could not afford our goods. • At the same time many other countries put high tariffs on goods coming into their country to protect home industries. Thus trade between nations began to slow down.
5. A Low Standard of Living • The boom and prosperity of the 1920s was not shared by all Canadians. Some workers remained in poor paying jobs and their standard of living remained low. • These people could not afford to buy as many goods and services as other Canadians. Wheat farmers received high prices for their grain up to 1928, but those who produced other crops were not as fortunate. Also, most Maritimers in Eastern Canada di not share in the economic boom of the 1920s. The fact that these Canadians could not “buy” their way into the economy further weakened the Canadian economy.
Stock Market Crash • Many stocks purchased • Stock prices fell • Huge sums of money lost Thursday, October 24, 1929
The Results • Bank Failure
Loss of homes • “Hoovervilles” Here were all these people living in old rusted-out car bodies. ... One family ... [was] living in a piano box. This wasn't just a little section, this was maybe 10 miles wide and 10 miles long. People living in whatever they could junk together. ..."
Dustbowls A traveler noticed a nice new hat by the side of the road, and he stopped to pick it up. Under the hat was a man, buried up to his neck in the dust! As he dug the poor fellow out, the traveler asked if he wanted a ride into town. "No, I'll get there myself," the man replied, "I'm on a horse." (Excerpt from THE DUST BOWL by Tricia Andryszewski, p. 33.)
