1. Canada in the Interwar Years Canada in the Thirties: Causes of the Great Depression

2. The World Economy after 1919 19th century (1800’s) was referred to as “laissez faire” - which translates to ‘let do’ Government did not interfere with the economy. After WW1 this changed and government became more controlling over the economy.

3. The World Economy after 1919 After WW1 the world’s financial centre moved from London to New York. USA became the financial capital of the world. Most industrialized countries experienced an economic boom in the 1920’s –Because of the demand for consumer goods like automobiles, and electronic appliances. –This boom ended in 1929

4. Inflation Inflation is a rise in the general level of prices of goods and services in an economy over a period of time during inflation everything gets more valuable except money each unit of currency buys fewer goods and services = is worth less

5. Economic Vocabulary Revenue –Money taken in by government (mostly taxes and customs duties) Expenditures –Any money spent by the government Budget –Spending plan made by gov’t. Revenues are totaled and expenditures for the coming year are announced.

6. Economic Vocabulary Balanced Budget –Budget where expenditures and revenues are equal. Before the Great Depression, governments always balanced (except during wartime) Deficit –When government spending exceeds its revenue. The difference between the expenditure and revenue is known as the deficit. Also, the amount borrowed by the government is also called a deficit.

7. Economic Vocabulary Currency –The actual money used in a country. Many factors effect the value of a currency. Capitalism –Economic system in which private individuals produce and exchange goods and services through markets.

8. Economic Vocabulary Market Economy –Countries that have a capitalist economic system are said to have a market economy. –The most basic part of the market economy is the market itself - which is anyplace where goods (things) and services (mechanic) are bought and sold –Markets allow buyers and sellers to come together, so goods and services can be exchanged for a profit

9. Economic Vocabulary Market Economy –Example the stock market Investors meet to buy and sell stocks Supply and Demand –Explains pricing in the market economy –Supply is availability of a particular product –Demand is how badly people want that product –Great supply equals lower prices –Low supply equals higher prices. –Great demand equals higher prices –Low demand equals lower prices

10. Economic Vocabulary Business Cycle –It is normal for market economies to go through cycles of prosperity and recession (when economic activity is in decline) every 5 or 6 years. –Sometimes market economies have a boom (extreme growth and prosperity) followed by a serious downturn (bust) and a prolonged recession (depression).

11. Causes of the Great Depression On October 29, 1929 the economic boom of the 1920’s came to an abrupt end. The stock exchanges of New York, Toronto, and Montreal ‘crashed’ and North Americans were now in the Great Depression. –Massive unemployment –Thousands of bankruptcies –Widespread poverty

12. Causes of the Great Depression The Great Depression –Canadian’s attitudes towards the poor began to change and Canadians developed a safety net for people who needed money. –New political parties began and new ideas for dealing with economic problems were created.

13. 1. Overproduction Overproduction –During the 1920’s, industries spent profits on building bigger and newer factories. –Huge supplies were stockpiled (overproduction) –Factory owners panicked, since there was so much extra goods. Slowed down production of goods and laid off workers

14. Overproduction –These workers now had less to spend on buying goods, and the economy slowed down even more. –North American industrial economy expanded beyond how much the consumer would consume. 1. Overproduction

15. –Canada’s economy relied heavily on a few products known as staples (crops, timber, minerals) –These were Canada’s most important exports As long as other countries bought these staples Canada’s economy would be strong 2. Canada’s reliance on exporting staple products

16. –From 1925 to the end of the decade, Canadian wheat farmers grew record quantities of crops and sold them at record prices. –In 1929, USA, Australia, and Argentina also grew record numbers of crops and sale competition grew. –Canadian farmers – left with large quantities of unsold wheat and prices dropped dramatically (recall: Great supply = lower prices) 2. Canada’s reliance on exporting staple products

17. –To add to the problem prairie farmers faced drought over several summers –This time referred to as the “Dust Bowl of the 1930’s” –Without enough rain, crops died. No wheat or flower could be shipped and money began to be lost.

18. The Dust Bowl

19. 3. Canada’s Dependence on the US –Because Canada relied so much on staples, and exports to other countries, any decline in foreign economies hurt Canada –Canada relied the most on the US When US economy fell, the Canadian economy was soon to follow 40% of Canadian exports were sold to USA

20. 4. The Stock Market Crash –The day the stock market crashed was called Black Tuesday –This was not the only cause of the depression

21. Stock Market Explanation Stock Market works by companies selling stocks / shares in their company to investors (people with $$$) to get money to run their companies In return, investors get a share of the profits of the company (how much depends on the amount of shares they own) –If the company does well = stock values rise –Stockholders may choose to sell shares at a profit, or hold on to them in the hopes that they will continue to increase in value, and make even more money in the future

22. 4. The Stock Market Crash –In the 1920’s many investors bought stock shares on margin. –Buying on margin meant that investors were buying stocks with borrowed money. –They hoped that they would make quick money (their purchased stocks would rise) and pay off their loan, and still make a large profit. –This whole process was known as speculation

23. 4. The Stock Market Crash –In Canada, bank leaders and business men strongly believed the Canadian economy depended on international trade. Especially wheat crops. –Despite indicators that the price of wheat was falling, investors kept putting money into the stock market

24. 4. The Stock Market Crash The Stock Market Crash –As stocks began to drop, investors worried and wanted to sell the shares they had purchased. –Investors sold their stocks quickly before prices dropped even further. Sold off stocks in large volumes. –As more investors panicked, more and more stocks were sold and the market began to drop severely.

25. 4. The Stock Market Crash The Stock Market Crash –Many stocks became worthless. –On October 29, 1929 the value of some stocks in Toronto dropped 1 dollar a minute! –Although few Canadians owned stocks, millions were impacted through the loss of their jobs and falling prices for their products

26. 5. Economic Protectionism and Tariffs –Tariffs are duties (money) collected on goods coming into a country. –The US did not need other countries raw materials nearly as much as other great powers –US became protectionist Government protected home industries from foreign goods by using tariffs.

27. 5. Economic Protectionism and Tariffs –American protectionism caused other countries to lose their export markets –Example, Canada trying to sell the US wheat, but tariffs made Canadian wheat much more expensive for Americans by charging tariffs.

28. 5. Economic Protectionism and Tariffs –Other countries suffered because of this –Countries responded by also raising tariffs –This made the problem worse since trade was very restricted

29. 6. International Debt after WW1 –USA lent money to foreign nations after WW1 –These nations made money to pay back their loans by selling their products to the USA –Protectionist economy reduced international trade, and those countries could no longer repay their loans