Chapter 14 powerpoint

WHATDUNIT? The Great Depression Mystery

• THE AMERICAN ECONOMY WENT FROM UNPRECENTED PROSPERITY IN THE 1920s TO UNPRECIDENTED MISERY IN THE 1930s

• WHY?

THE BUSINESS CYCLE: THE UP’s & DOWN’s OF THE ECONOMY

Laissez Faire Economic Policy

• Prior to the Great Depression the US. Government ignored the business cycles of the US economy. The Government until FDR believed that the American Economy could fix itself.

The Great Depression is a

Turning Point in US History!

Government Today is in charge of the US Economy!

• Presidents win or lose elections based on economic performance! Government control over one third of our $10 trillion economy!!

THE BUSINESS CYCLE

• BOOM/PROSPERITY/PEAK • HIGH DEMAND DESIRE FOR MORE PROFITS =

GREATER INVESTMENT = MORE PRODUCTION = HIGHER EMPLOYMENT = MORE DEMAND = HIGHER PRICES (INFLATION)

THE BUSINESS CYLCLE

• CONTRACTION/SLOWDOWN • INFLATION/OVERPRODUCTION LESS

PRODUCTION = LAY OFFS = LESS SPENDING = LOWER CONFIDENCE = LESS INVESTMENT = HIGHER UNEMPLOYMENT

• UNTIL SURPLUSES ARE USED UP

BUSINESS CYCLE TROUGHS

• RECESSION = TWO SUCCESSIVE 1/4’s (3 MONTH PERIODS) OF DECLINING GDP ($ OF GOVT, CONSUMER AND BUSINESS SPENDING)

• DEPRESSION = UNEMPLOYMENT GREATER THAN 12%

http://www.bls.gov/news.release/empsit.nr0.htm

THE BUSINESS CYCLE

• EXPANSION/RECOVERY • HIGHER DEMAND SURPLUS REDUCTION =

MORE PRODUCTION = RECALL OF WORKERS = MORE PURCHASING= INCREASED INVESTMENTS = ECONOMIC GROWTH

THE GREAT DEPRESSION

1931-1941

A DIFFICULT LEARNING EXPERIENCE FOR THE U.S.!!

CAUSES OF THE GREAT DEPRESSION

• AGRICULTURAL OVERPRODUCTION – POOR ENVIRONMENTAL POLICIES & PRACTICE

• INDUSTRIAL OVERPRODUCTION

• UNEVEN DISTRIBUTION OF WEALTH

• OVERSPECULATION +MARGIN BUYING

• EASY MONEY (CREDIT)

AGRICULTURAL OVERPRODUCTION

• INCREASED TECHNOLOGY • GOOD GROWING CONDITIONS • SUPPLY GREATER THAN DEMAND

• Drop in price• Farmers couldn’t pay

debts

The Great Dust Bowl

• Over use & Over grazing – No crop rotation

• No soil conservation • No wind breaks • Loss of natural grasses and animals • Climatic change – the drought of the 30’s •

EASY MONEY (CREDIT)

• INTEREST RATES ON LOANS WERE TOO LOW = TOO MUCH BORROWING INTEREST RATES ON SAVINGS WERE TOO LOW = TOO MUCH SPENDING (INFLATION) EXCESSIVE REAL ESTATE CONSTRUCTION = OVERSUPPLY

• Increasing debt + stagnant wages +

Rising prices = decreased buying

INDUSTRIAL OVERPRODUCTION

• WAGES NOT KEEPING UP WITH INFLATION • SUPPLY GREATER THAN DEMAND• Declining demand after WWI• Key industries barley making profit

UNEVEN DISTIBUTION OF WEALTH

• Many Poor and Very Few Rich! • Workers earn so little they can’t buy

the products they produce! • Wages were as little as 20 – 25 cents per hour!

• Even the best employer Ford Motor Company paid only $5.00/Day for a 6AM-6PM shift!

Almost ½ of America earned less than the min amountNeeded for a a decent standard of living

Prices in the 1920’s & 1930’s

• Hamburger 20-30 cents a pound

• Butter 28 cents a pound

• Potatoes 2 cents a pound • Bedroom set $50

• Blanket $1

• Gas 20 cents/gallon • Vacuum cleaner $18

• Women’s Coat $6 • Shoes $2

• Men’s Suit $11 • Baseball Glove $1.19

• BB Gun $2

• Chrysler 4 door $1000

• Chevy 2 Door $540 • 6 Room House $3000

Prices in the 1920’s & 1930’s

• Hamburger 1 pound for 1 hours work

• Butter 1 pound for 1 hours work

• Potatoes 10 minutes work/pound

• Bedroom set - 200 hrs. • Blanket - 4 hours

• Gas - 45 minutes• Vacuum cleaner - 72 hours

• Women’s Coat - 24 hours

• Shoes - 8 hours • Men’s Suit - 44 hours

• Baseball Glove – 5 hours • BB Gun – 8 hours

• Chrysler 4 door – 4000 hrs.

• Chevy 2 Door – 2160 hrs.

• 6 Room House – 12,000 hrs.

Salaries 1920’s and 1930’s

• Bus driver: no power steering or brakes? • $1300 or $0.43/hr

• Teacher?

• $1227 • Waitress

• $520 or $0.20/hr • Farmhand

• $216 or $0.07/hr

• First minimum wage under FDR? • $0.25/hr

• Highest paid production workers in the 1920’s – Ford Motor Company? • $5.00/day or $0.48/hr.

• Farm Prices: Potatoes, Cotton, Pork?

• $0.01/pound potatoes • $0.05/pound cotton • $0.05/pound pork

The first B-9 refrigerator built in Dayton, Ohio, October 10, 1921, is shown here as it came off the assembly line at the old Delco Light plant. Delco-Light, a subsidiary of General Motors, specialized in home light-generating systems. Corporate officials thought that the household refrigerator could compliment home lighting sales. They were to realize the Frigidaire potential later in the decade. Frigidaire was to grow into a division in its own right with products in one out of every four homes in the United States. This old unit sold for over $700.

The refrigerator cots $700 but wages for the worker on the left were $2.50 per day. Henry Ford paid an unprecedented $5/day for a 6AM-6PM days work!

OVERSPECULATION

• “GET RICH QUICK SYNDROME”

• MARGIN BUYING • LACK OF GOVT. REGULATION • PANIC SELLING

• ‘29 MARKET CRASH •

The New York Stock Exchange

Black Friday, October 24, 1929

Chapter 14 sec 1 in your WBs

“Cycle of Disaster” – many businesses went bankrupt

Businesses cut production

Workers sufferedfrom wage cutsand lay offs.

People had little or no money to spend.

Demand forgoods fell.

CAUSES OF THE GREAT DEPRESSION

• AGRICULTURAL OVERPRODUCTION – POOR ENVIRONMENTAL POLICIES & PRACTICE

• INDUSTRIAL OVERPRODUCTION • UNEVEN DISTRIBUTION OF WEALTH

• OVERSPECULATION +MARGIN BUYING

• EASY MONEY (CREDIT)

• POOR MONETARY POLICY

• POOR FISCAL POLICY

• HIGH TARIFFS

EASY MONEY (CREDIT)

• INTEREST RATES ON LOANS WERE TOO LOW = TOO MUCH BORROWING INTEREST RATES ON SAVINGS WERE TOO LOW = TOO MUCH SPENDING (INFLATION) EXCESSIVE REAL ESTATE CONSTRUCTION = OVERSUPPLY

POOR FISCAL POLICY

• HOOVER ADMIN. & CONGRESS CUT SPENDING & RAISED TAXES TO BALANCE THE BUDGET INSTEAD OF INCREASING SPENDING & CUTTIN G TAXES TO “JUMP START” THE ECONOMY

• EX. TEMPORARILY DEFICIT SPENDING

HIGH TARIFFS

• WE TAXED FOREIGN IMPORTS TO PROTECT OUR PRODUCTS UNDER HOOVER THE HAWLEY SMOOT TARIFF IS PASSED – THE HIGHEST PROTECTIVE TARIFF IN US. HISTORY!!! FOREIGN NATIONS TAXED IMPORTS FROM THE U.S. IN RETALIATION

• HIGHER PRICES FED UNDERCONSUMPTION • NATIONS STOPPED PAYING WWI DEBTS TO

THE U.S.

How Bad Was the Great Depression?

• Unemployment – wanting to work and not being able to find a job

• Underemployment – working but not getting to work full time

• 56% of African Americans and 40% of White Americans

Unemployment Statistics for 1932 The Depressions Cruelest Year

• 16,000,000 to 25,000,000 in 1932

• 25% of the workforce

• In 2003 that would mean: 32,500,000 unemployed!

• For our workforce today in the 2000’s

– 5.8% in 2003 – 7,200,000

Layoffs

• Willys – Jeep

- 28,000 workers 1929 - 4,000 workers 1932

• Ford

– 128,000 workers 1929 – 37,000 workers 1932

Underemployment

• 21% of the workers who

kept their jobs saw hours cut

• 20% of workers who

kept their jobs took pay cuts

• Some worked only for food or a place to sleep – No pay jobs!

Child Labor!

• Some businesses fired the adults and hired kids as replacement workers Child laborers were paid $0.06/hr.

Business Failures & Bank Runs

• 85,000 businesses failed!

• 25% of the Banks

in the US closed

• Bank Runs led to people

losing their life savings

Job Posting

• Rumor of a job opening led to near• riots as • 1000’s • showed up hoping to work

• Snow shoveling jobs in Chicago • led to fist fights for shovels as• over 5,000 showed up for 10 jobs.

Depression Era Survival

• Lose your home or apartment: sleep in the park

• Move to a Hooverville

• Ride the subway all night in New York

• Sleep in the Library or Museum during the day walk the street at night

Depression Era Survival

• Wash in the bus depot• or train station

• Make your own soap: • Pork-fat + ashes + salt + sun

• Hole in your shoe?

• Put a roof shingle in the bottom

Depression Era Survival

• Rent a hot bed for $0.05

• Hot because it was rented out for 8 hours and it never cooled off

• Eat in a soup kitchen or stand in a breadline.

Depression Era Survival

• Prison had 3 hots and a cot

• Even the chain gangs of the South had 3 meals and a place to stay

• Prison over starvation?

Depression Era Survival

• Hobos and bums • 250,000 children under age 18

• Need a blanket use newspapers

• Need a house use cardboard

• Riding the Rails