Presentation on theme: "Chapter 14 powerpoint WHATDUNIT? The Great Depression Mystery THE AMERICAN ECONOMY WENT FROM UNPRECENTED PROSPERITY IN THE 1920s TO UNPRECIDENTED MISERY."— Presentation transcript:
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 $10 trillion economy!!
THE BUSINESS CYCLE BOOM/PROSPERITY/PEAK HIGH DEMANDDESIRE FOR MORE PROFITS = GREATER INVESTMENT = MORE PRODUCTION = HIGHER EMPLOYMENT = MORE DEMAND = HIGHER PRICES (INFLATION)
THE BUSINESS CYLCLE CONTRACTION/SLOWDOWN INFLATION/OVERPRODUCTION LESS PRODUCTION = LAY OFFS = LESS SPENDING = LOWER CONFIDENCE = LESS INVESTMENT = HIGHER UNEMPLOYMENT UNTIL SURPLUSES ARE USED UP
BUSINESS CYCLE TROUGHS RECESSION = TWO SUCCESSIVE 1/4’s (3 MONTH PERIODS) OF DECLINING GDP ($ OF GOVT, CONSUMER AND BUSINESS SPENDING) DEPRESSION = UNEMPLOYMENT GREATER THAN 12% tm
THE BUSINESS CYCLE EXPANSION/RECOVERY HIGHER DEMAND SURPLUS REDUCTION = MORE PRODUCTION = RECALL OF WORKERS = MORE PURCHASING= INCREASED INVESTMENTS = ECONOMIC GROWTH
THE GREAT DEPRESSION 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 GHS Rules
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!
Prices in the 1920’s & 1930’s Hamburger 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 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!
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 suffered from wage cuts and lay offs. People had little or no money to spend. Demand for goods 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 GHS Rules
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 % 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
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