7.9: The Great Depression

Question 1

CAUSES

Answer 1

• European demand aided farmers during war
• Post-war = lower demand = lower prices + overproduction
• Overfarming + drought = Dust Bowl
• High tariffs [e.g. Hoover’s Hawley-Smoot Tariff] crippled US ability to sell excess goods abroad and led to retaliatory tarrifs
• Farmers into debt
• Migration from Great Plains to Cali [“Oakies”]
• Factory system added to wealth gap
• Overproduction of consumer goods
• Overspeculation in stock market
• Stock market artificially inflated via. risky investment behaviour such as speculation and buying on the margin
• Assumption that prices would keep rises
• Fear of bank liquidity lead to bank runs
• CATALYST = Oct 29 1929 = Black Tuesday = Stock Market Crash

Question 2

EFFECT + RESPONSE

Answer 2

• 25% unemployment
• GNP fell 50%
• 20% of banks closed
• Poverty and homelessness
• Shantytowns dubbed “Hoovervilles”
• Hoover believed in minimal government intervention, self-correction and Laissez-Faire economics
• Bonus Army marched on Washington demanding action
• Federal Farm Board created to maintain stability of crop prices
• 1932: FDR won election on campaign promise of heavy gov intervention