2. Causes of the Great Depression US History: Spiconardi

3. Underlying Causes Declining Demand Industries like coaling, the railroads, and textiles (clothing) saw steady declines in demand Economy didn’t suffer at first, as the automobile and construction industries carried the economy By 1926,construction spending dips $2 billion dollars How many homes does one need? How many plants does a company need? By 1929, automobile industry experiences a 33% drop in sales How long does a car last? How many did consumers need to own in the 1920s?

4. Underlying Causes Why the decline in demand? – Distribution of Income In the 1920s, the rich grew richer. Middle – and lower-income America experienced a slight growth in wages. – The average American saw a 9% increase in disposable income – The wealthiest 1% of Americans saw a 75% increase in disposable income. » Wealthy Americans invested their income in the stock market » The majority of Americans didn’t have enough disposable income to continue purchasing radios, cars, etc.

5. Underlying Causes – Overproduction Despite most Americans not buying consumer goods, factories kept producing more than there was a demand for. Due to underconsumption – No funds to build new plants or hire new workers. – In order to cut monetary losses, companies had to lay off workers – Do you see why centering your economy around consumerism is risky?

6. Underlying Causes “The Era of Excess” – During the Roaring Twenties, Americans developed new habits Consumerism Leisure and Entertainment Reliance on the automobile Flapper lifestyle – When the roar the 1920s was silenced, and the bubble of prosperity popped, Americans found it difficult to modify the lifestyle they had grown accustomed Americans were ill-equipped to handle life with the inability to afford excess, not to mention the stock market crash & bank failures

7. Summary What are three underlying causes of the Great Depression? Based on these causes, do you think the current economic climate in America could turn into a depression? Tomorrow: The Stock Market Crash & Banking Crisis