Canada in the Thirties…

Canada in the Thirties… • World economy post 1919… • The 19th Century was regarded as being laissez faire in regards to economic matters • Translation = let do. • So basically, governments let the economy do what it wanted, they did not interfere. • Post WWI, this laissez faire style was clearly not going to work, this system would not be restored • Governments needed to exercise more control over economic matters which had not been the case before the great war… • The amount and scale of this control has been growing ever since

Hub of World Finances • Post WWI, the world’s financial centre moved across the Atlantic from London to New York. Why? • The United States had become the world’s financial capital heading into the post war era. • Industrialized nations, with the exception of Britain, experienced an economic boom in the twenties. • The 1920s are sometimes referred to as the ‘roaring twenties’, but for the UK economy it was a period of depression, deflation and a steady decline in the UK’s former economic pre-eminence. In the US, the economy boomed on the back of mass production techniques and growing efficiency… • Expanding markets (trade partners), an increased demand for consumer goods, i.e. automobile and electric appliances, caused markets and economies to grow up until 1929…

Economic Vocabulary • You’re on your own for this… • Using the handout given, you need to provide a definition and then it’s significance/details (when spot allotted). • See pages 77 & 78… • i.e. Revenue • Definition: Money taken in by the government • Significance/Details: the most usual sources are taxes and customs duties

Causes of the Great Depression • Oct. 20, 1929 the economic “boom” of the 1920s came to an abrupt end… • Stock markets in New York, Toronto, and Montreal crashed, plunging North Americans into the Great Depression • By the time that the depression was over (late 1930s-early 1940s) Canadians had suffered through massive unemployment, thousands of bankruptcies, climatic disasters (drought), and widespread poverty…

Changes in Attitude: Canada • As a result of the Great Depression, and the troubles brought along with it, attitudes began to change towards the poor • Development of our modern day social security safety net • New political parties were born, and a new set of ideas was born as to how Canada could deal with the financial crisis…

Causes of the Great Depression • Be aware: the Great Depression was a “made in America” depression, this is where it started. • The causes of the Great Depression in Canada were: • Overproduction: Due to mass production in large industrial settings during the war, most manufactured goods were simply stockpiled • Factory owners panicked, slowed down production and laid off workers. • Workers had even less money than they had before, this was less money to spend/support local community. • The industrial capitals of both CAN and the US had expanded beyond the ability of the consumer to consume…

Causes of Great Depression II • Canada’s Reliance on Exporting Staple Products • Economy only depended on a few basic products known as staples • i.e. crops, timber, & minerals • These were Canada’s most important export, as long as they were sold to other countries, Canada’s future looked bright. • Canada’s economy 1925-1930, strong wheat farms and farmers, sold crops to United States at record price

Causes of Great Depression III • As long as consumers kept buying Canadian based products, the Canadian economy would stay strong… • 1925-1929, Canadian economy was strong • Wheat farmers grew record quantities of crops and sold them at a record price. • 1929, this all fell apart…

Causes III: Other wheat suppliers… • 1929, United States, Australia, Argentina had quite the record amount of crops, so they to were creating competition on the grand scale. • Canadian farmers were left with large quantities of unsold wheat, prices dropped dramatically… • Couple with the fact that there were terrible droughts over several summers in a row, known as the “dust bowl of the 1930s”, wheat sales dropped even further. • Trickle down effects: • No grain to be shipped, no flour to be ground, railways and flour mills lost money • Chain reaction occurred throughout numerous parts of the Canadian economy

Causes IV: Dependency on USA • As mentioned, Canada’s economy depended on the export of staple products, decline in foreign economies affected these transactions • Most important economy for Canada was the United States: • 40% of exports went there • US economy dropped, soon too did ours…

Stock Market Crash, 1929 • Black Tuesday October 29, 1929 • Did not causethe depression, merely a signthat something was wrong with the system • Stock Market 101: • Company wants to expand, they sells stocks (aka shares), stocks generate money • Investors get part of a company’s profits based on number of stocks they bought • Company does well, so does the investor. Company tanks, so to does the investor • Strategy is to sell before drop too much, or hold on hoping for a rebound = could equal more money down the road

1920s & stock market practices • Investors bought stock shares on margin. • Buying on margin meant that they were buying stocks with borrowed money hoping stock would rise substantially in a quick time period • Make money then sell, and harvest a large profit. This is known as speculation • spec·u·la·tion: • engagement in business transactions involving considerable risk but offering the chance of large gains, especially trading in commodities, stocks, etc., in the hope of profit from changes in the market price.

Canadian on goings… • In Canada, all persons financial believed that the Canadian economy depended on international trade. • Despite the warning signs, investors and speculators continued to pour money into wheat stocks • Stocks continued to drop, some investors wanted out, large numbers of stocks were sold off. • As more panic ensued, and stock sold off, prices dropped dramatically – stocks became worthless • Oct 29/29 value of several key stocks at TSE dropped by as much as $1,000,000 per minute. • Very few Canadians owned stocks, however millions were affected – job losses & falling prices of their products

Causes V: Economic Protectionism & Tariffs • Through 1920s there was an emphasis on protective tariffs • Tariffs are duties (money) collected on goods coming into a country • i.e. softwood lumber today • The USA was very protectionist, they wanted to protect national companies from international imports, they instituted tariffs on certain goods • Caused foreign countries to lose their export markets, made them also introduce tariffs to protect their home grown commodities… double back fire, trade restrictions killed business

Causes VI: International WWI Debt • USA was a money lender during WWI • Following the war countries depended on the sale of their goods to the United States to raise the money to help pay back their debts • The American lead protectionist movement reduced international trade, which consequently lowered their ability to receive loan payments from foreign countries…

Canada in the Thirties…