Causes of The Great Depression

Wall Street Crash

Crashed originally on the 24th of October 1929.

There was a massive amount of selling --> led to worthless stock. e.g. US Steel fell from 205.5 points to 193.5

Although 6 bankers put up $40 million each and calm was restored for a few days, the CRASH occurred on Tuesday 29th October . Dow jones Industrial Index ( index showing how shares in the top 30 companies have traded) fell by 11.73%. --> Prices continued to fall and over a few weeks $30 billion had been lost.

Uneven Distribution of Wealth

Income: North East and Far west had the highest per capita incomes --> in 1929 these were $921 and $881 respectively. In the south however it was $365 and the non agricultural sectors of the economy $412 whilst the farmers only got $129.

Women: By 1930 only 150 female dentists, less than 100 accountants in the whole country. There were more jobs for women as clerical workers and sales people but they were in low paid and menial jobs as 700,000 were domestic servants. Women receiving a college education fell by 5%.

Native Americans: Assimilation and Allotment (they should adopt American lifestyles and values and each family being given a plot of 160 acres to farm, going against tradition of common land ownership) broke up tribal units, surplus land was sold off. Much of the land given to them was unsuitable for productive farming, They were swindled out of their land with 90 million acres out of the 138 million allotted fell out of their hands by 1932.

African Americans: 10% of total population but 85% lived in the south, the poorest region. Faced discrimination in housing and employment. Ghetto areas in Harlem populations grew from 50K in 1914 to 165K in 1930. They did not share in the prosperity, and 14% of African Americans were farmers.

Rural Poverty

Farmers: After the war falling demand led to fall in prices. e.g wheat fell from $2.50 per bushel to $1 per bushel.
- Prohibition: cut demand for grain and higher standard of living meant americans now ate meat over cereal

- Technological advances meant more crops could be produced so farm population fell by 5% but production increased by 9%

-They produced too much so 66% of farms operated at a loss therefore they fared badly.

Overproduction: Too much food=Low prices, they were reluctant to voluntarily underproduce. Tried to sell abroad for whatever prices they could get.

'Agricultural Businesses': large scale well financed cereal cultivation using the techniques of mass production.

Role of the government: Agricultural credits act of 1923 funded 12 intermediate credit banks to offer loans to co-operatives. Act did not really benefit small farmers. In 1921 the Emergency Tariff Act and 1922 Fordney-McCumber Act placed high tariffs on food imports. Foreigners retaliated by putting similar tariffs on American food stuff so then farmers couldn't export.

Stability of employment: unstable due to fluctuating demand for goods. In 1924 out of 165 families surveyed for 9 months, 72% of the workers had been unemployed at some stage in their working lives, of these 43% had been jobless for over a month.

- Labour unions: the government did nothing to protect them.

Instability of 'get-rich-quick' schemes

Florida land boom: It was the building of hotels for the rich, the all year long sunshine and the increase in motor cars leading to an influx of people, hence the boom. Between 1920 and 25, the population of the state grew from 968K to 1.2 million. Parcels of land began o be sold to wealthy northerners. People invested in unseen developments hoping to see profits. Often paid for on credit. Hurricanes in 1926 killing 400 people and leaving 50K homeless. --> Thousands bankrupted

Stock market speculation: Easy credit meant that it was easy for people to buy shares. If the price rose, shares were sold --> quick profit. E.g Radio Corporation of America rose from 85 points to 420 in the course of 1928.

Problems with the banking system

Allowed banks to regulate themselves without government intervention. In the 1920s there were almost 30K banks in the USA mostly small and unable to cope with financial problems ( these held most peoples money) and if they collapsed depositors would lose everything.

A slow down in the economy

Problems in small businesses: due to the growth of huge corporations smaller businesses often faced hard times. for every 4 businesses that succeeded three failed. e.g number of motor vehicle companies fell from 108 in 1920 to 44 by the end of the decade.

The construction industry: The mid 1920s saw a great boom in construction however after 1926 demand began to fall. Domino effect on materials in construction -> increase in unemployment

Falling domestic demand: By late 1920s production was higher than demand. Domestic market was saturated. People could not spend on items they didn't need or they already had them.

Downward spiral : Slow down in growth --> laying off workers --> increase in unemployment --> fall in demand --> fall in production --> increasing unemployment

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Paper 3- The Great Depression

Causes of The Great Depression