The document outlines several causes of the Great Depression in the United States, including an uneven distribution of income and wealth, overproduction coupled with underconsumption, widespread use of credit to purchase stocks, protectionist trade policies that reduced international commerce, and speculation on the stock market that led to the 1929 crash. The Depression had devastating impacts across the US economy in the 1930s, with high unemployment, thousands of bank and business failures, plummeting incomes, and increasing poverty, homelessness, and hunger.

1. Causes of the Great
Depression
“We in America are nearer to the
final triumph over poverty than
ever before.” –Herbert Hoover

2. Learning Goal
 NJCCCS: 6.1.12.D.9.a
 Explore the global context of the Great
Depression and the reasons for the
worldwide economic collapse.

4. How did we get here?

5. Great Depression: (1929-1939)
 Shocking after a decade of unprecedented
prosperity
 Impacted all areas of America life
 Damaged confidence in the future
 Rock bottom: 1932
 Median incomes plunged to ½ what they had
been in 1929
 ¼ out of work

6. False Advertising
 Prosperity of the 1920s were superficial
 Causes of the Great Depression were complex and
largely ignored throughout the decade

7. Causes of the Depression
 Uneven distribution of
income
 Uneven distribution of
corporate wealth
 Overproduction and under-
consumption
 Easy Credit
 Large Scale international
wealth distribution problems
 Speculation on the stock
market
 Shortsighted government
policies

8. I. Uneven Distribution of
income
 The wealthiest 5% took in nearly 1/3 of the
nation’s income
 Nearly ½ of the nation’s families earned less
than $1,500 a year
 Henry Ford made roughly $14 million/year in
the 1920s

9. Depressed Consumer
Purchasing Power
 Mellon’s Tax Cuts  Business increased
profits while holding
down wages.
 50% increase in
production during the
1920s
 No increase in wages
1.Cut the top income tax rate from 77
to 24 percent
 Workers couldn’t afford
2. Cut taxes on low incomes from 4 to goods/ relied on credit or
1/2 percent stopped spending
3. Reduce the Federal Estate tax
4. Efficiency in government
 Less money circulating

10. 2. Uneven distribution of
corporate wealth
 In1929, 200 Corporations controlled ½ of the
corporate wealth.
 Some industries thriving (automobile), while
others like agriculture declining steadily
 (Average income for a farmer: $273)
 The businesses that were thriving were
somehow connected to either radio or
automobile industries.

11. 3. Overproduction and
underconsumption
 For an economy to
function properly:
t(d)=t(s)
 In 1920s- there was an
oversupply of goods.
(Mech. of
industry/farming partly
responsible)

12. 4. Easy Credit
 Installment plans
 Borrowing on margin to
buy stocks
 Private banks loaned
out millions → rising
debt throughout the
1920s

13. 5. Large scale international
wealth distribution problems
 America prospered in the 1920s, while Euro. Nation struggled
to rebuild after the war.
 U.S. lent $7bil. To Euro. during war.
 Another $3bil by 1920.
 Dawes Plan of 1924 lent money to Germany [made them
dependent of foreign markets]

14. Protective Tariffs
 Fordney-McCumber  Hawley-Smoot 1930
1922  raised U.S. tariffs on
 raised American tariffs over 20,000 imported
in order to protect goods to record levels
factories and farms.  Led to a decrease in
 Countries injured by imports/exports by more
WWI- w/ Tariffs they than ½
would not be able to  Led to a rise in
make payments to unemployment
America on war loans
 Farmers blame Tariff for
Depression

15. 6. Speculation on the stock
market
 By 1929 about 4 mil. Americans/ 3% of the population owned stocks
 Stockbrokers willing to lend up to 75% of stocks purchasing price
 Americans wanted to take advantage of the “bull market” (rising
stock prices)
 Stock prices peaked in early Sept. 1929
 10/24/1929 (Thursday) huge plunge
 10/29/1929- “Black Tuesday” 16 mil. shares dumped

16. 7. Shortsighted government
policies
 Mellon’s Tax cuts
 Protective Tariffs
 Fed Reserve
Board fearing
inflation, tightened
credit [opposite
action was
needed to fight the
slow down in
purchasing)

17. The Role of Hoover in the
Great Depression*
 Passing Hawley-Smoot (1930) despite objections
from 1000 Economists
 Maintaining Federal Relief was not necessary
despite farm prices dropping to record lows and
4,340,000 Americans out of work, 32,000
businesses bankrupt and 5,000 banks failing
 Attempts made: creating road, public building and
airport construction programs; increasing credit
facilities, Reconstruction Finance Corporation
(RFC)- with $2 bil. To banks, r.r., factories and
farmers
*source: http://www.u-s-history.com/pages/h1569.html

18. Depression’s effects
 Widespread bank failures
 Bankrupt businesses
 High unemployment
 Decrease in worldwide trade
 Increasing numbers of homeless persons
 Widespread hunger and illness