Long term causes of the Great Depression Flashcards
what were the non-repub causes of the GD
International Economic Problems, Failures of the Agrarian industry, Overproduction and Underconsumption
what were the repub causes of the GD
Unresponsive government, Wealth and wealth distribution, Weak corporate and banking structure, Tariffs + block on international trade, Overstimulated stock market,
Wecter quote on the GD
“The nation was ill not from a single malady but from a mixed infection”
what was wrong w the international debt structure (non-repub)
USA unable to sell its surplus products to other countries (particularly Europe)
European countries could not afford American goods as;
Owed USA huge amounts of money in war loans & put high tariffs on imported goods
Financial burden of loans created economic instability
All European states (except Britain) placed tariffs on imported goods = cutting demand (especially for US goods)
= US economy couldn’t expand its foreign markets
‘In economic terms, society was digging its own grave’
Cashman
‘American prosperity in the 1920s stood on brittle glass’
cashman
what happened to the agrarian industry after WW1
After WW1 there was a surplus of agricultural products on the world market. A decreased European population, overproduction and the mechanisation of agriculture led to a drop in agricultural prices.
why was the farming sector already in a terrible condition before GD
already in a depressed state prior to 1929 as it never recovered from post-war recession
Prices for primary products fell continually in the farming sector. what is the % & when.
what happened to farmers’ incomes as a result
75% between 1920 & 1932
farm incomes dropped dramatically from $15 billion to $5 billion. = unable to make repayments on loans and participate in the consumer economy.
what was the 1924 McNary-Haugen Act & why did it fail to assist the agricultural sector
An attempt to deal w surplus production
was vetoed by Coolidge = Republican economic policies thus contributed to the decline in the agricultural sector
how did prohibition contribute to the problems in the agrarian industry
Prohibition reduced the demand for grain,and technological advancements enabled farmers to produce more but made prices fall
3 Factors that influenced overproduction
- Car industry influenced mass production → paved the way
- mass advertising
- “Easy credit”
what is a prominent example of car brand that influenced mass production
Henry Ford’s use of mass-production & assembly line copied in other industries
how much did General Motors produce a day by 1925
more than 9,000 Ford Model T’s a day
why did mass advertising contribute to overproduction & easy credit
Helped growth of entertainment & encouraged consumer spending thru persuasive advertising techniques that pushed a creation of needs incentive to the public
mass advertising persuaded this consumerist mentality & ‘buy now, pay later’ purchasing
what is the famous saying for easy credit policy
“Buy now, pay later”
how did easy credit impact overproduction & how much $ of goods were bought w credit
“Buy now, pay later” helped stimulate industrial production. By 1929, over $7 billion worth of goods were bought with credit
?% bought cars on credit
?% bought radios on credit
60% bought cars on credit, 80% on radios
what was the main issue w overproduction
While there was mass production there was no mass consumption to meet this, = imbalance of supply demand
what does Joshua Freeman say ab underconsumption
underconsumption was the major cause of the great depression
what is impact of greater credit availability/easy credit (judgement)
Greater credit availability makes the economy more sensitive to any shocks - meant that the widespread use of easy credit, + the brewing economic instabilities, were imminently leading to economic disaster.
why was ‘Unparalleled prosperity’ a problem
The deep-seated underlying issues of the American economy were concealed by this superficial prosperity.
what is the overall impact of repub policies on the causes of GD
Republican economic policy allowed for the development of vast holding companies. This inverted pyramidal structure was immensely unbalanced and aided in an overall collapse.
how did repbub beliefs & an unresponsive gov contribute to GD
One of the key factors that influenced all the other factors in the 1920s was the lack of national economic planning or any other substantial form of government oversight in the economy. The Republican administration’s embracing of the laissez-faire philosophy meant presidents didn’t plan, or attempt to regulate, banking stocks, bonds or other aspects of the economy that became unstable.
From this they also failed to identify the growing problems in stock market investing, agriculture, International finance & overproduction
