Topic 5, Lesson 4: What caused the Great Depression?

Topic 5, Lesson 4: What caused the Great Depression?

Unequal distribution of wealth and those who never experienced the boom years

• Which groups of people did not benefit from the Boom Years?

• What percentage of Americans had an income less than $2,000? Why is this income used as a reference?

• What was the problem that manufacturers failed to see with mass production?

• When did the construction boom of the 1920s come to an end?

It was a myth that all of America was booming during the 1920s.

The construction boom of the 1920s came to an end by 1928.

By 1929, most Americans who could afford a car already had one.

Almost 50% of American families had an income of less than $2,000 a year: the minimum needed to survive.

Some manufacturers did not see that there was a limit to what could be bought, and so they continued to mass produce goods.

The US government had put high tariffs on foreign goods and consequently US businessmen found it very difficult to sell their goods abroad.

Groups who did not prosper during the 1920s:

Farmers

Low-paid immigrants

Old industry workers

Poor African Americans

Topic 5, Lesson 4: What caused the Great Depression?

Overproduction of agricultural goods

• After what world event did the price of wheat significantly drop? Give a statistic to support.

• How did prohibition impact the demand for grains?

• What other contributing factor led to the decrease in demand for American agricultural goods?

After WW1, falling demand for agricultural goods led to falling prices with wheat dropping from $2.50 to $1 a bushel.

Prohibition cut the demand for grains that were previously used in the manufacture of alcohol.

Competition from Canadian, Australian and Argentinian farmers who were supplying a vast amount of grain to the world market.

Topic 5, Lesson 4: What caused the Great Depression?

Urban Prosperity and Rural Poverty

• How did the living standards and poverty differ between the urban and rural parts of America?

• By 1928, what proportion of farmers were living in poverty?

• How did access to basic needs such as electricity, running water and wages of workers differ between the rural and urban communities in America?

In rural America…

• there were lower living standards

• increased poverty

• no electricity

• no running water

• lower wages

By 1928, half of all US farmers were living in poverty.

Topic 5, Lesson 4: What caused the Great Depression?

Get-rich-quick schemes (Ponzi scheme)

• Who was Charles Ponzi?

• What did he do?

• How did he do this?

People invested in hugely speculative schemes and inevitably people lost their money.

In the early 1920s, Charles Ponzi (a former vegetable seller) conned thousands of gullible people into investing in his ventures. He promised a 50% profit within 90 days. When sentencing him to prison, the judge criticised his victims for their greed.

Topic 5, Lesson 4: What caused the Great Depression?

Florida land boom

• Which infamous financial fraud was involved in the Florida Land Boom?

• By how much did Florida’s population increase between 1920 and 1925?

• Why did Florida’s population increase by this much during these years?

• What combination of events led to Florida’s Land Boom?

While on bail awaiting trial, Charles Ponzi found employment selling land in Florida.

Between 1920 and 1925, Florida’s population increased from 968,000 to 1.2 million.

Parcels of land began to be sold to wealthy Northerners on the basis of glossy brochures and salesman’s patter.

However, demand tailed off in 1926 as there were scandals of land advertised as within easy access of the sea that was really many miles inland or in the middle of swamps.

Combined with the numerous hurricanes of 1926 which killed 400 people and left 50,000 people homeless, Florida’s attraction was no more.

The Florida Land Boom collapsed leaving the coastline with half-finished and storm-battered developments.

Topic 5, Lesson 4: What caused the Great Depression?

Problems in older industries (coal and textiles)

• What type of decline were older industries experiencing?

• Which industries in particular?

• Why did the demand for coal decrease significantly during the 1920s?

• What did this decrease in demand lead to?

• Older industries were in long-term decline

• The coal mining and textile industries in particular were stagnating

• Demand for coal fell as it was replaced by gas and electricity

• This led to a closure of great numbers of mines and many miners were made redundant

Topic 5, Lesson 4: What caused the Great Depression?

The cycle of depression