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.”
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 Democrats Herbert 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.
STOCK MARKET CRASH CAUSES • Buying on margin • Speculation • Why did these things contribute to the stock market crash?
STOCK MARKET CRASH EFFECTS • Black Tuesday (10/29/29) • Run on banks • Great Depression
BEGINNING OF THE GREAT DEPRESSIONCAUSESEFFECTS • 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