1920s & 1930S

GROWTH IN ECONOMY

ECON Definitions

  • LAISSEZ FAIRE: French for "let do"; governments allow the economy to operate without interference.

  • REVENUE: Money received, primarily from taxes and customs duties.

  • EXPENDITURES: Money spent by the government.

  • BUDGET: A government’s spending plan, indicating expenditure priorities.

  • BALANCED BUDGET: When revenues equal expenditures; expected pre-Great Depression.

  • DEFICIT FINANCING: Intentionally going into debt to stimulate long-term economic growth.

  • CURRENCY: The money used in a country.

  • CAPITALISM: The rich get richer, and the poor get poorer; involves finite or infinite supply.

  • MARKET ECONOMY: Prices determined by the agreement between suppliers and buyers.

  • SUPPLY AND DEMAND: Pricing structure based on product availability and consumer desire; high supply = low demand and vice versa.

  • THE BUSINESS CYCLE: Cycles of prosperity and recession in market economies every five to six years.

1930s 6 CAUSES OF THE GREAT DEPRESSION

  1. OVERPRODUCTION: Industrial capacity exceeded consumer demand.

  2. RELIANCE ON EXPORTING STAPLES: Dependence on a few products; drought impacted the economy.

  3. DEPENDENCE ON U.S.: 40% of Canadian exports to the U.S. meant reliance on their markets.

  4. STOCK MARKET CRASH: A rush to sell stocks led to rapid decline in prices.

  5. ECONOMIC PROTECTIONISM: Increased protective tariffs in the 1920s led to a loss of Canadian export markets.

  6. INT’L DEBT AFTER WW1: U.S. loans to foreign nations went unpaid when they turned protectionist.

John Maynard Keynes: Suggested government should spend to recover from the Depression through deficit financing; many ignored these ideas.

Franklin Roosevelt: Called Keynes a “fool”; introduced the New Deal, which included many of Keynes’s ideas.

R.B. Bennett: Introduced a Canadian version of the New Deal including progressive taxation, minimum wage, and unemployment insurance, but was seen as too late.

The King-Byng Crisis (1926): King, supported by the Progressive Party, faced a loss of support and refused Byng's request to resign. This was the first time a Governor General denied a Prime Minister's request to dissolve Parliament.