22.1: The Nation’s Sick Economy

OBJECTIVES: Understand the causes of the Great Depression

Economic Troubles Brewing• Big industries (steel, textiles,

railroads) not making profits

• Diminishing demand for new products and new construction

• Agricultural business withering

• Congress passes price supports for farmers

• Pres. Coolidge vetoes price supports twice, 1927 & 1928

HOW ARE THESE BUSINESS CHANGES RELATED TO WWI?

“Farmers have never made money. I don’t believe we can do much about it.”

Innovation EX: Ford’s

Assembly Line

Increased Production

AdvertisingIncreased Consumption

Increased Credit

Increased Profits

THE MASS-CONSUMPTION ECONOMY

=BAD HABITS

CONSUMER’S BAD HABITS•Americans are buying less. Why?

•Business are producing more. Why?

•Americans use credit more. Why?

OUTCOME: The gap between rich and poor was rapidly spreading.

FACT: In 1929 5% of US controlled nearly a third of its wealth, while 40% of US only has 10% of its wealth.

ELECTION OF 1928

CANDIDATES:Al Smith runs for DemocratsHerbert Hoover runs for Republicans

ISSUES:Smith’s Catholicism, opposition to prohibition, and connections to NYC

VERSUS the apparent prosperity under

Republicans

OUTCOME: Hoover wins handily.

http://fisher.lib.virginia.edu/collections/stats/elections/maps/1928.gif

STOCK MARKET CRASH

CAUSES

• Buying on margin

• Speculation

• Why did these things contribute to the stock market crash?

STOCK MARKET CRASHEFFECTS

• Black Tuesday (10/29/29)

• Run on banks

• Great Depression

http://www.ambrosevideo.com/resources/docs/56.JPG

BEGINNING OF THE GREAT DEPRESSION

CAUSES EFFECTS• Old and decaying

industrial base

• A crisis in the farm sector

• The availability of instant credit

• An unequal distribution of income

• Hawley –Smoot Tariff

• Buying on margin

• Falling demand for consumer goods

• Dow Jones Industrial Average drops from 38181

• Gross Nat. Product cut in half!!!

• Unemployment rises to 25%!!!

• Interests rates fall, people borrow $ and fall into deeper debt

• Collapse of investment and banks

• Global Depression

TERMS• Price support

• Credit

• Alfred E. Smith

• Speculation

• Buying on margin

• Black Tuesday

• Great Depression

• Dow Jones Industrial Average

• Hawley-Smoot Tariff Act

• Summarize some of the problems threatening the American economy in the late 1920s

• Describe the causes of the stock market crash and of the Great Depression

• Explain how the Great Depression affected the economy in the United States and throughout the world