Unit 4

Great Depression

1929-1939

Canadian History 1201

Overview of main points

• World-wide economic downturn 1929-1939

• Began with the stock market crash on

October 29, 1929 (Black Tuesday)

• Dirty Thirties

• Breadlines, Relief Camps, Unemployment

• Emergence of the Welfare State (social safety

net)

• Emergence of new political parties (left wing)

• Eventually WWII helped economic growth

After the boom years of the 1920s, an

economic shift in 1929 changed

Canadian economy & society

The good times of the 1920s ended in

most industrialized countries

To understand the Great Depression, we

must look at the business cycle & the

stock market

The Business Cycle

Economic conditions always change - there are

good times & bad times, economists call these

upswings and down swings the business cycle.

There are four stages to the cycle:

• Recovery (Expansion)

• Prosperity (Boom)

• Recession

• Trough (Depression)

The Business Cycle

The Business Cycle – 1920s-30s

How the Stock Market Works

The boomtime of the 1920s created such

confidence in the economy that many

people bought stocks in businesses

Stocks: shares in a company that can be

bought & sold

Stock market: a place where businesses

raise money by selling stocks, or shares,

in their business

How The Stock Market Works – see p.139

The owners of Nova Co. want to expand

To get money they sell stocks in the company

People who buy the stocks will get a part of the

profits depending on the number of shares they

own (dividend)

If Nova Co is profitable, the stock value will rise

Then the stockholder may choose to sell shares

at a profit or hold on to them, hoping the value

will increase even more

How The Stock Market Works

The Stock Market

During the 1920s, a stock market boom

developed as stocks increased in value

It was a quick, easy way to become wealthy

In1929 Canadian investors were very confident

that stocks would stay high

By September, American stock market shares

began to drop & Canadian stock values

followed

The Stock Market

Worried investors began to lose confidence

in the companies whose shares they had

purchased & wanted to sell their stocks

quickly before prices decreased any further

As investors began selling large volumes of

stock, people panicked & tried to sell their

stocks, the values of which fell dramatically

By Tuesday October 29th, stock exchanges

in New York, Toronto, & Montreal “crashed”

The Stock Market

Impacts of the “Crash”

Many Canadian investors were financially

ruined

Many had bought stocks on margin (10%

down payment) or with borrowed money &

were unable to sell their stocks to pay their

debts

Great Depression: Underlying Causes

While the 1929 stock market crash was a

catalyst, there were underlying causes:

1. Over-production

2. Purchasing stock/buying on margin

3. Purchasing on credit/high consumer debt

4. Overdependence on primary industries

5. Dependence on the U.S.A. for trade

6. High tariffs/limited trading partners/

protectionism

1. Over Production

During the prosperous

1920s, agriculture &

industry reached high levels

of production

Most industries were

expanding with huge

supplies of food, newsprint,

minerals, & manufactured

goods were produced &

simply stockpiled

1. Over Production

There was an over-

supply while

demand was low

• Example: 1930

over 400 000

cars produced

while 260 000

was the most

cars sold in a

year

1. Over Production

Industrialists seemed to forget a basic lesson in

economics: produce only as many items as

you can sell

So warehouses became full of unsold goods,

and factory owners had to lay off workers

Laid off workers & their families had even less

money to spend on goods which slowed sales

even more.

2. Purchasing Stocks/Buying on Margin

In the 1920s, the stock market seemed an easy

way to get rich quickly

You could buy stocks on credit just as you

could a car

For only 10% down, a stock

broker loaned you the rest of the money

at a high rate of interest

To buy $1000 worth of stock you

needed only $100

2. Purchasing Stocks/Buying on Margin

As soon as your stocks went up in value, you

could sell them, pay back your broker, & pocket

the profit

This risky process was called “buying on

margin”

What if the stocks didn’t go up? Or, worse still,

what if they went down?

You would have to sell your stocks at a loss and

face financial ruin

2. Purchasing Stocks/ Buying on Margin

• This is exactly what happened in October 1929

• When stock prices started to fall, people freaked, decided to sell and get out of the market

• Prices fell even lower as more and more stocks were dumped

• On Black Tuesday, Oct 29, 1929stocks decreased by 50%

• Shareholders lost millions & many investors were wiped out in a few hours

3. Credit Buying/ High Consumer Debt

Throughout the 1920s,

Canadians were encouraged by

ads to “buy now, pay later”

Why wait to buy a car when you

could have it immediately with a

small down-payment?

Many families got themselves

hopelessly into debt with credit

buying

3. Credit Buying/ High Consumer Debt

The piano that cost $445 was purchased with

$15 down & $12 a month for the next five years

With interest payments, it ended up costing far

more than it was worth (many purchases ready

for junk pile when paid off)

Repossession of homes, cars, appliances would

occur when payments could not be met

4. Dependency on Primary Industries

The Canadian economy relied heavily on

primary products known as staples (wheat,

fish, minerals, pulp & paper)

So Canada prospered as long as world

demand for staples was strong

But if a surplus of staples developed or if

foreign countries stopped buying from

Canada… trouble!

All Canada’s ‘apples were in one basket’

4. Dependence on Primary Industries

▫ Terrible drought of 1931, 1933-1937 reduced production of wheat

▫ Farmers can’t afford their mortgages, railways and flour mills slow down.

▫ Chain reaction to all parts of the economy

5. Dependence on the U.S.A.

Like today, Canada had close economic ties

with the U.S.A. our largest trading partner

In the 1920s, the USA was responsible for over

40% of our exports & 65% of our imports

American investors also supplied much of the

money used to finance Canada’s economic

development during the 1920s

A downturn (recession) in the US economy

would hurt the economy of Canada

6. High Tariffs / Protectionism

Tariffs are taxes on foreign goods

Using high tariffs to keep out foreign goods is

called protectionism

Every country tried to protect its own

industries by taxing incoming foreign goods

So industries in other countries suddenly found their usual overseas markets closed off

6. High Tariffs / Protectionism

High tariffs & protectionism strangled

international trade as country after country

shut its doors to goods from abroad

For an exporting country like Canada, when

the foreign demand for our wheat, pulp &

paper, & minerals decreased, many large

Canadian businesses began to collapse

Impact on Canada

The Dust Bowl of the 1930s

Some farmers growing

wheat drained the soil of

nutrients and caused it to

dry up.

Droughts combined with

high winds. Soil literally

blew away.

The Palliser Triangle in

the southern prairies was

particularly hard hit.

The Dust Bowl of the 1930s

Swarms of grasshoppers

appeared, destroying

what crops there were.

Many farmers had to

declare bankruptcy.

Unemployment in the 1930s

As more businesses closed, more people

were out of work. They had little money to

spend, so businesses that relied on them

(restaurants, stores) closed also.

This vicious cycle continued all over the

country in all types of businesses.

Unemployment in the 1930s

Many rural workers came to the cities looking for work and found little or none. Some just worked for food.

Shanty towns (hobo jungles) were built in or near cities, full of unemployed people called 'hobos'.

Unemployment in the 1930s

People travelled across the

country looking for work.

Sometimes they (illegally)

'rode the rails'; few people

could afford cars.

Tolerance and Intolerance

Many Canadians

helped one another

during the Depression:

extended families

supported one

another

neighbours shared

families provided

meals to travellers

Tolerance and Intolerance

Not everyone was treated equally:

only men got relief assistance; women

were denied

Jews were discriminated against

Aboriginal peoples were ignored

• it was assumed they could live off the land.

Some could, but many had left that way of life.

Tolerance and Intolerance

Immigration:

Declined by 90% in

the Depression

Non-farmer

immigrants,

especially Jews,

Chinese, Blacks and

Japanese, were

blocked from

entering Canada

‘Escaping’ the Depression

The DIONNE QUINTUPLETS:

5 identical girls born in

Ontario in 1934. Annette ,

Emilie, Yvonne , Cecile,

Marie

They were the 1st

quintuplets to ever survive.

They became a major

tourist attraction and

millions came to see them.

‘Escaping’ the Depression

Movies

Portrayed

exciting

adventures in

faraway

places…with

sound!

Holywood’s

Golden Age

Newspapers & Magazines

Newspapers cost 5 cents and were re-read by many people, then used as insulation or toilet paper.

Glossy magazines gave glimpses of life in the rest of the world

‘Escaping’ the Depression

Fairs, Exhibitions and

Revival Meetings

Canadians went to any

kind of public event

that was available:

travelling preachers,

agricultural fairs

large exhibitions like

the Canadian National

Exhibition (CNE) in

Toronto.

Canadian Identity

The shared hard times brought Canadians

closer together.

All of the travelling for work allowed

people to gain a greater appreciation of

Canada.

The CBC aired Canadian radio shows in

the 1930s. Prior to this, it was mostly

American entertainment.

Fighting the Depression

Before the 1930s Canada had not given any

support to people who were ill, poor or

unemployed.

Many believed if someone was poor it was

their own fault.

People in rural areas might be able to live

off the land.

But many in the cities were forced to go on

relief, as there was nothing else to do.

Fighting the Depression

At first, the federal government followed the

US Smoot-Hawley Act & increased import

tariffs, which made matters worse.

Most relief came from churches & charities

Soup kitchens were set up in cities

Milk was given to poor mothers

Food shipments were sent to the Prairies

Fighting the Depression

But the need was so great municipalities

soon began giving out relief

Called welfare or the dole, receiving it was

humiliating

In 1929,

Liberal

William

Lyon

Mackenzie

King

was PM.

The Depression is only

temporary!

Political Solutions

• The government in the 1930s

thought the best way to deal

with the Depression was to wait,

hoping things would get better

• They believed the capitalist

business cycle would eventually

fix itself.

Political Solutions

• In 1930, King made the biggest mistake of his career, he believed that aid was a provincial responsibility, so he would not give money to a any province that was Conservative.

• “I wouldn't give them a five-cent piece!” This quote went on to haunt him in the next election.

• During the 1930

election, King lost to

Richard (RB) Bennett

• He believed that

governments should

not intervene in

economic affairs.

• Bennett's policies were

not about to help the

economic crisis.