An Economic Analysis of The Great Depression

JANUARY 10, 2017
The Great Depression

Chetanya Choudhary, Mit Kapadia, Eshaan Rao, Gurpreet Randhawa
CIA4UR-A
MR. SCORCIA
Table of Contents
Executive Summary _________________________________________________________1
Introduction _______________________________________________________________3
Fundamentals of Economics __________________________________________________3
Firms, Markets, and Economic Stakeholders _____________________________________8
Macroeconomics __________________________________________________________18
Global Interdependence and Inequalities _______________________________________22
Conclusion _______________________________________________________________24
Endnotes ________________________________________________________________25
Bibliography _____________________________________________________________ 36
Appendix _______________________________________________________________ 44
Executive Summary
The Great Depression was the largest recession in history, causing economies to collapse all
around the world. During this time, new challenges arose for stakeholders, including firms,
individuals and the government. Firms in their respective markets took the necessary tradeoffs
amidst new international government intervention. The ever-increasing influence of the individual
markets, scarcity, the business cycle, monetary and fiscal policies, and global interdependence
played a role in this issue through both microeconomic and macroeconomic mechanisms.
As part of the National Recovery Agency, initiated by President Franklin D. Roosevelt, the Wagner
Act mandated an increase in minimum wages in 1935. During this time, recovery from the Great
Depression stalled, yet the Roosevelt administration believed that increased spending power for
individuals would result in a greater money supply in the economy. In efforts to ensure the
stabilization of American industries, the Smoot-Hawley Tariff was introduced to provide firms
protection from lower-cost imports by placing large tariffs on all imports to the United States. As a
result of this, demand for domestic products rose as they offered more attractive prices than
imports. Keynes believed that government intervention could save a country from widespread
unemployment and the economic stagnation following it. Paul Ormerod agrees that the Great
Depression and future recessions were avoidable if there was government intervention through a
classical economic approach, rather than a Keynesian economic approach. Countries that were
severely affected include the United States, where the depression began, and countries that had
strong economic links to it such as Canada, Great Britain and Germany. The United States, a free
market economy, was facing a scarcity of American jobs. Canada, a democracy and a free market
economy, was hit the hardest by the Great Depression, especially because of its huge
dependence on raw material and farm exports at a time when the Prairies were experiencing
droughts. After the American economy collapsed, they withdrew all the loans that were made to
Germany, causing the German currency to have very little value. Great Britain relied heavily on
trade with the Unites States which is why Great Britain also felt a large impact from the Great
Depression.
The banking industry, which operated in a monopolistic competition market, fostered several
independent banks that issued credit without Federal Reserve backup, resulting in defaulted loans
and bankruptcies. The automotive industry was dominated by The Big Three large public
corporation conglomerates in an oligopolistic market: Ford Motor Company, General Motors, and
Chrysler Group. Farmers, as sole proprietors and cooperatives, operated and continue to operate
in a perfect competition market due to a perpetual lack of non-price competition, an elastic
demand and abundance of substitute goods. The major stakeholders in the Great Depression
included the government, investors, banks, the Federal Reserve System, firms, farmers and
fishermen. The American government enacted policies such as the Smoot-Hawley Act to increase
domestic goods production by raising import tariffs on goods to an average of 59%. Investors
invested all of their savings into the stock market and bought stocks on margin. The Federal
Reserve raised interest rates to limit speculation, which also led to a reduction in money supply.
The Canadian government, because of its faltering economy, made the decision to lay off one
third of its civil servants and reduced wages for the rest. The fishing and mining industries were
performing poorly so many took government assistance as the final option. Countries in North
America attempted to run a federal government budget surplus and balance the budget by
implementing a contractionary fiscal policy. Government in Canada and the United States applied
labor market policies to increase wages and keep employment costs high. The government also
intervened to keep prices high by limiting competition and dumping excess output. Fiscal policies
in most European countries such as Britain, France and Denmark, were neo-classical where
government spending was based on revenue. In Canada, the Bennett Conservative government
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legislated Dominion Unemployment Relief, opened unemployment relief camps and introduced
the first permanent law for housing assistance called the Dominion Housing Act. In the United
States, the Civilian Woks Administration (CWA) was designed to create jobs in public works such
as road repair and maintenance of local parks. In Europe, the new fascist states of Germany and
Italy implemented materialist welfare measures to rebuild their population.
The gross domestic product, the consumer price index and the unemployment rate indicated a
recessionary period in the U.S. economy during the 1930s. Decreasing production, increasing
unemployment and decreasing prices created contractionary behavior in individuals and firms.
With lost consumer purchasing power and a lower incentive for firms to produce, the aggregate
demand decreased and created a recessionary gap. However, the reported economic condition
was skewed due to missing considerations of indicators. Through the expenditure approach in
GDP, illegal activities, such as moonshining, were unreported and understated the real U.S. GDP
value. The U.S. consumer price index does not represent price conditions accurately in rural
environments as it solely measures a few goods available in urban environments. The U.S.
unemployment rate was overstated due to approximately 3.5 million paid relief camp workers
being classified as unemployed. Monetary and fiscal policy impacted several economic
stakeholders. The Agricultural Adjustment Act limited supply by U.S. farmers, negatively impacting
profitability with high prices and lowered aggregate demand. The 1932 Revenue Act increased
the top individual tax rate to 69% in the U.S., reducing consumer spending and incentive for
entrepreneurship. Alongside the Minister to the U.S., William Herridge, R.B. Bennett adopted the
New Deal from the U.S. specifically in Canadian context. One of the first policies included the
Canadian Wheat Board, which positively impacted farmers via guaranteeing a profitable price.
Between 1931 to 1934, a decrease of the interest rate by 9.5% increased the quantity of loans
supplied and aggregate demand in the Canadian economy. In 1934, the Bank of Canada Act
created the Canadian central bank, which reduced bond interest rates by 2.3% from 1934 to 1940
and liquidated bonds to increase the money supply. The removal of the gold standard in 1929
allowed the Bank of Canada to finance wartime contracts, increasing government spending and
growth without limitation from domestic gold reserves.
Emerging global interdependence created power imbalances and worsened or improved
inequalities amongst stakeholders. The Smoot-Hawley Tariff created domestic inequality for
farmers through impeding export viability and deteriorating socioeconomic standing. Globally,
countries with export-reliant economies faced unequal loss and risk compared to multi-industrious
nations. The Anglo-American Trade Agreement increased economic cooperation and equality
through a bilateral channel of U.S. and British trade. Key geopolitical events, such as the 1931
collapse of Austrian bank Kreditanstalt and the following bank run on the German Reichsbank
triggered large financial panic throughout Europe. The rise of the Nazi Party and Adolf Hitler
amidst a faltering German economy created prolific ideologies that led to the 1939 invasion of
Poland. As a result, Great Britain and the U.S. entered the war, creating an aggressive military
spending that significantly increased employment and real GDP. Keynesian policies, such as the
Federal Emergency Relief Administration, the Canadian Wheat Board and the Bretton Woods
Agreement led to sustained growth and inequality resolution that recovered the world from the
global depression. Individuals and labourers, such as minorities of women, children and blue-
collar males brought forth change through involvement in the workforce which led to more labour
rights enacted in the Fair Labour Standards Act of 1938, the National Labour Relations Act and
NIRA codes.
The Great Depression was a time of difficulty for individuals, firms and governments at both the
microeconomic and macroeconomic level. It is increasingly important to analyze the influence of
the individual markets, scarcity, the business cycle, monetary and fiscal policies, and global
interdependence to determine how effectively they were addressed.
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Introduction
The Great Depression was the largest recession in history, causing economies to collapse
worldwide. It was a difficult time for stakeholders, including firms, individuals and the government.
This report will explore the firms and markets involved, stakeholders and the necessary tradeoffs,
as well as international government intervention. It will lay conclusions on how the individual
markets, scarcity, the business cycle, monetary and fiscal policies, and global interdependence
played a role in this issue through a microeconomic and macroeconomic analysis.
Fundamentals of Economics
SUPPLY AND DEMAND MODELS
Policy 1: The Wagner Act
As part of the National Recovery Agency,
initiated by President Franklin D. Roosevelt, the
Wagner Act mandated an increase in minimum
wages in 1935.1 During this time, recovery from
the Great Depression stalled, yet the Roosevelt
administration believed that increased consumer Figure 1: Supply and demand graph highlighting surplus of
labour caused by a higher minimum wage
spending power would produce a greater money supply in the economy.2 A minimum wage set
above the equilibrium creates a price floor (see P2, Figure 1). This price floor creates a surplus,
with higher supply (represented by the large number of individuals willing to work, Q3) than
demand (represented by the low number of available jobs, Q2). In tandem with the elastic supply
tendency of labour, where a small increase in wages
results in a larger proportion of individuals willing to work
(see Figure 2), a high number of individuals were
unemployed. The mandate of a price floor above the
Figure 2: Supply curve demonstrating the elastic equilibrium of P1 meant that the number of available jobs
properties of labour supply
was lower than the supply of labour, which continually inhibited employment and did not allow the
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market to reach equilibrium. This unemployment reduced consumer purchasing power, which hurt
the economy and was a key factor that led to the Great Depression.3
Policy 2: The Smoot-Hawley Tariff

In efforts to ensure the stabilization of American industries, the Smoot-Hawley Tariff was
introduced to provide firms protection from
lower-cost imports by placing large tariffs on all
imports to the United States.4 As a result of this,
demand for domestic products rose due to more
attractive prices than imports (see Figure 3). Figure 3: Supply and demand graph highlighting the shifts resulting
from increased demand of domestic wheat
Specifically, products with relatively inelastic demand, such as wheat, underwent a decrease in
supply as well. This was due to a mandated price ceiling at that of P3 resulting from the shifted
demand of wheat-consuming businesses (from Q1 to Q3) and decreased supply (from Q2 to Q3).
This newly created equilibrium is located at a higher price point. However, due to the relatively
inelastic demand for wheat (see Figure 4), the higher
prices stemming from decreased supply only resulted
in slightly lower demand. The price ceiling ultimately
helped the market reach equilibrium creating more
Figure 4: Demand Graph showing inelastic properties money for farmers in the Midwest.5 The increase in
of wheat demand
money supply to one of the most economically crippled regions started recovery from the Great
Depression.6
American governmental policies addressed microeconomic issues by creating price floors for
wages through the Wagner Act and price ceilings for wheat prices through the Smoot-Hawley
Tariff that either deteriorated or improved the finding of equilibrium in the market, respectively.
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ECONOMIC THOUGHT AND DECISION MAKING
John Maynard Keynes (1883-1946)
In 1936, John Maynard Keynes published The General Theory of
Employment, Interest, and Money. Keynes believed that government
intervention could save a country from widespread unemployment and Figure 5: John Maynard Keynes
the subsequent economic stagnation.7 He also believed that aggregate demand was highly
influential in the economy, citing that low aggregate demand will lead to recession and high levels
of unemployment.8 Keynes plan to combat the Great Depression involved government
intervention and control over interest rates and public spending. Ultimately, this would lead to
higher consumer spending, increased aggregate demand, and decreasing unemployment
through a prosperity cycle between consumers, labourers and firms. Keynes believed the Great
Depression was a problem of inadequate investment, which hindered the economy from
recovering, thus requiring government intervention for economic recovery.9
Contemporary Perspectives Paul Ormerod (born 1969)

Paul Ormerod states that the main cause of the Great Depression
was the failure of governments, citing the need for a classical, rather
than Keynesian, government intervention.10 He claims that
European central banks should follow the advice of Milton Friedman
just print money.11 He states that the decision by the Federal

Figure 6: Paul Ormerod
Reserve to cut money supply by one-third between 1929 and 1933 led to a massive recession,
arguing that the Federal Reserve should have expanded it.12 His conclusion is that governments
should focus less on inflation and expand the money supply to reduce the risk of a recession.13
Although John Maynard Keynes and Paul Ormerod had different theories regarding causes of the
Great Depression, they are deeply unified as both aim to find sustainable solutions to recessions.
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Contemporary Perspectives Abhijit Banerjee (born 1981)
Abhijit Banerjee agrees with Milton Friedman, believing that the Great Depression occurred due
to a contraction of the money supply, and the vicious effect this produces in an interdependent
economy.14 For example, Ram does not have enough money to pay Rahim. This means that
Rahim cannot pay Ruth, who in turn cannot pay her banker, eventually
rebounding on Ram as he cannot borrow as much money from the
bank.15 It is a cascading effect of transactions, with GDP falling
rapidly.16 However, Mr. Banerjee believes that with a shortage of

Figure 7: Abhijit Banerjee
money supply, corruption can be reduced, especially with the removal of the 1000 and 500 rupee
notes in India.17 He says that the 2000-rupee note will be beneficial, unless the government
continues enacting surprise monetary policies that cause severe economic shocks.18 Overall, Mr.
Banerjee believes that the money supply needs to be regulated to ensure that deflation does not
occur, which could plummet economies back into a state of recession like the Great Depression.
SCARCITY AND CHOICE

The Great Depression was a global catastrophe affecting almost every part of the world. However,
countries that were severely affected include the United States, where the depression began, and
countries that had strong economic links to it such as Canada, Great Britain and Germany.
United States
The United States, a free market economy, was facing a scarcity of American jobs. Furthermore,
the Smoot-Hawley Tariff Act was passed in 1930, which raised taxes on imported goods to
approximately 40%.19 Its purpose was to reduce international trade and increase employment for
American workers. Yet, it backfired because other countries retaliated by taking the same step,
causing American exports to decrease drastically from $7 billion in 1929 to $2.4 billion in 1932.20
Herbert Hoover, the president at the time, was against the act himself. Since America was a
democracy, he did not have full control over decision making and was pressurized to sign it by his
own party and the business community.21 When Franklin Roosevelt was elected as president in
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1933, he launched a group of federal programs, called the New Deal, to bring back economic
relief. The New Deal included emergency relief programs, agricultural programs, banking reform
laws, and the Social Security Act.22 As a result, unemployment fell steadily from 14 million in 1933
to 8 million in 1937, a 43% drop.23
Canada
Canada, a democracy and a free market economy, was hit the hardest by the Great Depression,
especially because of its huge dependence on scarce raw material and farm exports in a time
when the Prairies were experiencing droughts. The small and dependent economy exported most
of its goods to Britain and the United States.24 Being the largest trading partner of the U.S., the
laws and policies created by the Americans significantly impacted Canada. Because of the Smoot-
Hawley Tariff Act, major Canadian pulp and paper companies had to file for bankruptcy and
automaker exports fell from 102,000 in 1929 to 13,000 in 1931, creating scarcity in the U.S. for
these natural resources. Unemployment reached 32% in Canadian cities and 50% in Windsor
specifically, which was dependent on its automotive industry. Canadians had much less
government intervention than the United States. Although Prime Minister Richard Bennett
attempted to replicate the New Deal and its effective economic action for scarce economic
resources, it was disapproved by the British Judicial Committee of the Privy Council. 25
Germany
After the American economy collapsed, America withdrew all the loans that were made to
Germany, causing the German currency to have very little value. In 1932, 6 million, or 25% of the
German workforce, were unemployed.26 Yet, Germany came out of the depression much quicker
than other countries because the Nazis, a fascist government, ruled Germany from 1933.
Alleviating the profound scarcity of currency, any bill needed only the signature of Hitler for it to
become a law within 24 hours in Germany.27 Hitler started many projects which involved the large
scale borrowing of money for railroads, canals, and the Autobahn.28 In turn, this effectively
reduced the unemployment rate of Germany far more than any other industrial country.
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Compulsory military service was also required for young men if they wanted to attend university,
solving the issue of labour resource scarcity as well.29 Many harsh laws were easily passed
because there was no opposition to the Nazis and they only required the approval of Hitler.
Germany also started mass producing munitions for war much earlier than other countries. The
percentage of their GDP spent on military increased from 3% in 1933 to 32% by 1939. Altogether,
these laws and the huge government spending effectively brought the unemployment rate down
to 1.6 million in 1936 a massive 73% drop from 1932 in the labour resource scarcity.30
Great Britain
Great Britain relied heavily on trade with the United States, which affected Britain through the
enactment of the Smoot-Hawley Tariff. By the end of 1930, unemployment levels reached 20%.31
To compensate for this labour resource scarcity, the British government left the gold standard and
devalued the pound by 28% between 1930 and 1932.32 This meant that goods were cheaper
abroad, leading to more exports, lower interest rates and a resulting increase in private ownership
amongst the capitalist market. As a result, the unemployment rate fell to 8% in 1936.33
Firms, Markets, and Economic Stakeholders

THE FIRM AND MARKET STRUCTURES
Firms established prior to the Great Depression were directly involved in the economic activity of
the 1930s. Firms in well-established industries, such as the financial services, automobile, food,
advertising and electrical goods maintained a large, direct role in the Great Depression.
The banking industry in the U.S. created policies that provided easy capital for investors in a
bullish market. Major U.S. public corporations, such as Citibank and JPMorgan & Co., as well as
rural cooperative banks and credit unions, issued credit quite leniently, which led to individuals
accruing significant debt following the 1929 stock market crash.34 During the time, there were over
8,000 banks which belonged to the Federal Reserve System, and nearly 16,000 did not.35 With
one bank for every 1,000 people in the 1920s, it is evident that the banking industry operated in
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a monopolistic competition market.36 Of all the existing banks in the United States, 9,000 of them
failed during the 1930s.37 Furthermore, a system of holding companies by banks and several
corporations led to production manipulation for both profit-maximization and faltering stock market
prices.38 The United States banking industry continues to operate in a monopolistic competition
market today. As of June 2014, there were 94,725 bank branches in the United States, of which
24.5% are branches of the largest banks in the U.S. (Wells Fargo, JPMorgan Chase, Bank of
America, U.S Bancorp, and the PNC Financial Service Group) and 75.5% are independent banks,
truly demonstrating the minuscule conglomerate control over the market.39 The monopolistic
competition market in the financial industry played a role in causing the Great Depression
because the majority of independent banks issued credit without Federal Reserve backup. In
tandem with lenient credit policies, individuals and firms often defaulted on loans, leading to many
banks declaring bankruptcies. Internationally, the financial industry was directly involved in the
Great Depression due to the setbacks faced in repaying loans.40 The central bank and a crown
corporation of Germany, Reichsbank, defaulted on U.S. reparation loans after being withdrawn
from financial and trade support by the Americas (through the Young Plan) and surrounding
Europe.41 In turn, it was unable to provide credit to spur economic activity, leading to an
unprecedented retraction of capital. This, in tandem with lenient U.S. domestic credit policies and
monopolistic market fragility, created a strong depression nationally and internationally.42
Despite an expansion of suburban living in the 1920s, the Great Depression brought upon limited
consumer spending power that reduced demands in the automobile industry, with sales dropping
nearly 75% between 1929 to 1932.43 The automotive industry was dominated by The Big Three
large public corporation conglomerates: Ford Motor Company, General Motors, and Chrysler
Group.44 With a faltering industry, the small carmaker market share dropped from 25% in 1929
to just 10% in 1939, which allowed for the Big Three to control an oligopoly in the automotive
market.45 The U.S. automotive market continues to be an oligopoly today as there are significant
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barriers to entry for a small business and market penetration by GM, Ford and Chrysler Group
demote a viable competition environment, with the Big Three market share increasing by 50% in
2016 alongside Toyota.46 The nature of this market created great power for these oligopolies
which allowed for direct involvement in implementing successful strategies that increased
automobile affordability, profits, and consumer spending power during the Great Depression.47
Automobile corporations cut costs through laying off workers, scaling back production of high-end
brands, cutting prices, promoting aggressive advertising and embracing vertical integration with
firms, especially through branch-plant manufacturing in Canada.48 Private Canadian
manufacturing corporations, such as Walkersville Wagon Works, saw large booms of mass
production and export to the United States and United Kingdom.49 In turn, the Windsor-Detroit
belt spurred tremendous Canadian economic growth through rapidly increasing employment.50
Ultimately, the unique Canadian market proposition offered to an oligopoly of U.S. automobile
manufacturers influenced both U.S. and Canadian economic growth from the Great Depression.
The food industry, prior to the 1930s, encompassed the individual farmers in the Midwest that
produced a majority of the food products for the U.S.51 However, both sole proprietors and farming
cooperatives accrued debt and a lack of productive resources following the lenient credit policies
of Midwestern rural banks, agricultural overproduction, and unfavourable climatic conditions of
the Dust Bowl.52 Farmers operated and continue to operate in a perfect competition market due
to a perpetual lack of non-price competition, an elastic demand and abundance of substitute
goods. However, the ease of entry into a perfectly competitive market brought inexperienced
farmers who were unable to cope with aforementioned production-limiting factors. This created a
shortage of basic food products, such as wheat, barley and corn for many other food-related
industries and in tandem with influence in several bank insolvencies, the farmers in the perfect
competition market escalated a regional level depression directly to a nationwide depression. 53
Yet, despite the faltering food industry in the U.S., the Canadian wheat industry introduced a
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unique, economically prospering environment through the Canadian Wheat Board.54 This crown
corporation guaranteed minimum prices for farmers by directly influencing supply in a global
marketplace such that a sustainable and profit-maximizing price was existent.55 Although the
Canadian strategy to sustain its food industry ensured economic security, U.S. farmer influence
in bank insolvencies and food-related industries furthered the Great Depression.56
Public corporations which demonstrated the most growth were those that advertised heavily to
maximize their profits, leading to the direct influence of the mass media industry in the Great
Depression.57 Aggregate demand in the economy was quite low and the advertising industry had
a solution that explicitly aided other industries.58 Privately incorporated radio stations, such as
National Broadcasting Corporation (NBC) and Columbia Broadcasting System (CBS), assisted
Procter and Gamble to advertise their Crisco soap product using lifestyle-focused promotion
creating the cultural attribute known as the soap opera.59 Radio companies were the mass
media industry during the Great Depression, and with no other radio companies, the industry
operated in an oligopolistic market.60 However, with the introduction of technology, the mass
media industry is now a monopolistic competition market because of diversification into various
platforms, such as radio (over 15,000 U.S. stations with diverse programming in 2016), internet,
television and telephone.61 In Canada, the CBC (Canadian Broadcasting Corporation), a crown
corporation, was the primary media company fuelling Canadian P&G promotion and sales.
Through the oligopolistic market, intense non-price competition, and marketing experience by
these firms, sales increased by 25% from 1933 to 1935 for P&G soap products, through soap
operas like ONiells for their Ivory Soap merchandise.62 P&G, in particular, doubled their radio
and print advertising budget every two years during the 1930s, fuelling the growth and direct
involvement of established private and crown media corporations in a beneficial oligopolistic
market that increased aggregate demand during the Great Depression.63
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General Electric (GE) and similar electrical industry corporations were embracing the rapidly
growing access to electricity during the 1930s.64 In fact, between 1930 and 1940, the Rural
Electrification Administration increased access to electricity from 10 percent to 90 percent of rural
households, driving demand for GE and Westinghouse products and creating an oligopolistic
market between solely these two competitors.65 Yet, to maximize firm profits, the two major
electrical industry corporations encouraged progress in government programs, using their
influential power in an oligopolistic market. Through direct involvement in expansionary policies
during the Great Depression, the CEO of GE in particular, Gerard Swope, became an active public
campaigner for Keynesian government-spending policies.66 Utilizing the power of an oligopoly,
new policies for public procurement were directly influenced by General Electric and similar
electrical industry corporations, increasing government spending on public goods through the
construction of dams, transmission lines and appliances.67 In turn, this lead to a unique corporate
influence in politics that directly accelerated the recovery from the Great Depression. In the United
States today, the electrical utility industry operates in a monopolistic competition market. There
are approximately 3,306 U.S. electricity providers, none of which have substantial control over
the market.68 Despite recovery in the U.S., British electrical goods saw a large decrease in
demand for mining, shipbuilding and steel production.69 Through contractionary trade policies
from surrounding European countries and the U.S., Britain also embraced contractionary
manufacturing policies to cope with the reduced revenues.70 This led to several public
corporations reducing their scale of operation, which furthered the Great Depression in Britain.
ECONOMIC TRADE-OFFS AND DECISIONS

The major stakeholders in the Great Depression include the government, investors, banks, the
Federal Reserve System, firms, farmers and fishermen. However, almost everyone throughout
the world was affected in one way or another by this economic crisis.
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The Great Depression originated in the U.S. and the American government created many policies
that prevented its economy from recovering. The Revenue Act of 1932 increased income tax for
everyone and on top incomes, the income tax rate rose from 25% to 63%.71 It was an attempt to
balance the federal budget and maintain national credit. The estate tax doubled and the corporate
tax increased by approximately 15%.72 Altogether, these tax hikes reduced the incentive to work,
invest and start a business, although they were definitely needed at that time for economic
recovery.73 To increase employment in the U.S., the government wanted more domestic goods
production and a lower ratio of imports. The Smoot-Hawley Tariff was enacted to do this by raising
import tariffs to an average of 59% for over 25,000 goods.74 However, over 60 countries retaliated
by imposing higher tariffs on U.S. goods causing trade and production to plummet globally.75 The
government of Canada was also a stakeholder in the Great Depression. Because of Canadas
faltering economy, the government laid off approximately one third of its civil servants and reduced
wages for the rest.76 Due to high unemployment, they introduced government relief programs.
However, the payments they made were only enough to cover some portion of the daily
recommended nutritional requirements.77 Even though the government maximized savings
through lay-offs, they were exhausted through increased government relief payments. The
Weimar government in Germany was another stakeholder, faced with the decision to either
reduce inflation or reduce unemployment. Choosing the path of reducing inflation by decreasing
public spending, aggregate demand decreased in the German economy.78 Taxes were also
increased to reduce the budget deficit.79 However, this led to mass unemployment, declining
productivity, many business failures and lower incentive to work.80
Investors were also stakeholders during the Great Depression. The stock market was perceived
as a place to make money easily and risk-free by many, leading to impulsive behavior that
consumed peoples valuable life savings, which could have been spent elsewhere.81 After
investors started losing capital, they started to buy stocks on margin, being fueled by greed.82 In
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1929, a bear market developed and panic selling occurred on a large scale as investors realized
that the stock boom was over-inflated and wanted to recollect their savings and profits.83 By
investing at the peak of a bullish market, many investors became bankrupt and had massive
amounts of debt that limited consumer spending power and decision-making.
The money supply decreased during the Great Depression and this was mainly due to another
stakeholder, banks. The high demand for deposits liquidation left the banks short of reserves.84
To fulfill this demand, banks tried to borrow extra reserves from other banks and the Federal
Reserve, yet it was almost impossible because all American banks demanded money as well.85
Consequently, due to the lack of reserves, banks had to decide if they should continue issuing as
many loans or not. Banks chose to contract their loans and deposits, which reduced the nations
money stock, leading to the collapse of the economy and business production possibilities.86
Unpredictable speculation in the securities market during the 1920s required the Federal Reserve
to limit this through raising interest rates in 1928 and 1929.87 Faced with a declining money supply
by a third from 1929 to 1933, bank failures drastically increased.88 The Federal Reserve could
have adopted expansionary policies, such as increasing money supply to boost the economy.
Because of the reduced money supply and increased borrowing costs, it reduced consumer
spending on goods and services, ultimately impacting firms and their revenue.89 They reacted to
this by decreasing production and laying off workers. By 1933, about 15 million people from the
American workforce were unemployed.90 However, as firms laid off more people to profit-
maximize, they lost more consumers, causing over 32,000 businesses to go bankrupt.91
The agricultural sector was faltering because of falling crop prices, causing farmers to find a way
to profit-maximize. The Agricultural Adjustment Act of 1933 helped farmers by making crop prices
higher through artificial scarcity.92 The government offered payments to farmers in return for
producing less crops, so that supply could be reduced and prices could increase.93 Farmers had
to decide if they wanted to accept these payments or not, however, due to unstable financial
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conditions, several farmers approved this program and benefited from it as wheat and corn prices
doubled in three years.94 This affected all other citizens negatively because there was less
employment and higher food prices. Millions were unable to buy food at ever increasing prices.95
Fishermen and miners were also suffering in Canada. Cod prices were declining and there were
wage cuts and layoffs for the mining industry as world trade declined. The iron ore exports
dropped 88% from 1930 to 1933.96 Fish exports fell 55% from $16 million in Newfoundland and
Labrador.97 Some fishermen decided to get food and other supplies as a loan from merchants
and then gave fishes as payment.98 However, many fishermen overleveraged this credit and
lacked credibility, leading to the merchants refusing to give any more supplies, hence turning to
the government for assistance. They were paid $1.80 per month worth of food rations.99 By
choosing to accept government assistance, these fishermen and miners lost the opportunity to
choose whatever food they wanted, as they had to pick from a government list.100 They also lost
incentive to find work as employment would cut off government relief completely.101
THE ROLE OF GOVERNMENT IN READRESSING IMBALANCE

The government many fiscal and monetary policies in order to help address the social needs and
economic imbalances caused by the Great Depression. Countries in North America attempted to
run a federal government budget surplus and balance the budget by implementing a
contractionary fiscal policy.102 President Hoover introduced the Revenue Act of 1932, which was
the largest peacetime tax increase in U.S history, increasing the top individual tax rate from 25 to
63 percent.103 Furthermore, President Roosevelt imposed further individual and corporate tax
increases, with the highest individual rate at 79 percent.104 Provincial governments in Canada
also increased taxes during the 1930s, with many provinces imposing income and corporate
taxes. Fiscal policies in most European countries such as Britain, France and Denmark were neo-
classical where government spending was based on revenue.105 These taxes helped address the
wealth inequalities between corporations and the wealthy as well as the common man.
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Another significant intervention included the restriction of international trade. In 1930, import tariffs
were raised to an average of 59 percent more on 25,000 products due to the Smoot-Hawley trade
act.106 More than 60 other countries replied by implementing new restrictions on U.S imports. 107
This worsened trade inequalities globally, as by 1933, world trade was at 33% of 1929 levels.108
The governments in Canada and the United States applied labour market policies to increase
wages and keep employment costs high.109 Roosevelt and Bennett believed that higher wages
would increase consumer spending power, causing the economy to improve. Most labour
intervention in Canada was conducted by provincial governments, setting minimum wage laws
according to industry.110 However, U.S. policy increased wages and decreased the hours worked
as well.111 Many New Deal policies backfired as they raised employer costs, decreased
productivity and consequently contributed to the extraordinarily high unemployment of the 1930s.
Some policies that created resource and wealth inequalities are NIRA industry codes, the Social
Security tax and the Davis Bacon Act.112 Due to all of this, public and private inequalities were
increasing as jobs were created in the government yet total private sector employment decreased.
The government also intervened to keep prices high by limiting competition and dumping excess
output. The 1933 National Industry Recovery Act forced companies to adopt fair competition that
effectively fixed wages and prices, established production quotas, and placed restrictions on the
entry of companies into alliances.113 The 1933 Agricultural Adjustment Act similarly restricted
production through destroying excess output or dumping it abroad.114 In contrast, competition in
Canada was less restrained by government policy. However, these policies restored equality
between firms through a more regulated market that provided equal opportunities.
Fiscal policies in most European countries such as Britain, France and Denmark were neo-
classical where government spending was based on revenue.115 However, certain countries such
as Sweden and the Netherlands demonstrated evidence of slightly expansionary fiscal policies.
For instance, Sweden increased government expenditure during the Great Depression.116 The
Page 16
Netherlands also adopted an expansionary fiscal policy that positively contributed to economic
growth and equality.117 Countries also followed the Keynes counter-cyclical fiscal policies which
acted against the direction of the business cycle.118 In addition to fiscal policies, monetary policies
played a role in recovery. European countries, such as Sweden and Denmark, abandoned the
gold standard, restoring equality in the effectiveness of state monetary policies.119
The Great Depression forced policies that improved the social needs of displaced individuals in a
changing economy. In Canada, the Bennett Conservative government legislated Dominion
Unemployment Relief, which provided provinces with grants to help distribute welfare payments
and keep consumer spending power consistent.120 Furthermore, the government opened
unemployment relief camps run by the Department of National Defence primarily for single
unemployed men.121 The New Deal by Bennett also introduced the first permanent law for housing
assistance called the Dominion Housing Act.122 Provinces were also given $20 million for pogey.123
In the U.S., the Roosevelt Administration established many agencies and programs such as the
Federal Emergency Relief Administration (FERA).124 FERA was given primary responsibility for
distributing federal relief funds to individual states.125 The relief funds were given to unemployed
families.126 The Civilian Woks Administration (CWA) created jobs in public works such as road
repair and maintenance of local parks.127 The Public Works Administration (PWA) was designed
to focus on complex public works such as airports and dams.128 Another program introduced was
the Civilian Conservation Corps (CCC), which targeted the unemployed youth.129 Emergency food
programs were also set up to restore social equality. The National Housing Act also established
the Federal Home Administration (FHA). This program allowed the federal government to insure
home mortgages and home improvement loans, allowing varying banks to equally refinance the
loans of needy families at lower interest rates.130
In Europe, the new fascist states of Germany and Italy implemented maternalist welfare measures
to equitably rebuild their population.131 Sweden implemented programs such as subsidized loans
Page 17
to newlyweds, maternity benefits for approximately 90 percent of all mothers (including free
childbirth services), state subsidies to voluntary unemployment benefit societies and low-interest
housing loans for large families.132 Soviet Union citizens were now entitled to full employment,
daycare centers and free medical care.133 In Western Europe, Great Britain and the Scandinavian
states replaced contributory funding with a combination of flat-rate benefits, which guaranteed
basic services to all citizens, regardless of need, through various programs.134
Macroeconomics
MACROECONOMIC MODELS AND MEASURES
During the Great Depression, the major economic indicators were the gross domestic product,
the consumer price index and the unemployment rate. These indicators showed a downturn in
the economy throughout the early and mid 1930s. The U.S. GDP dropped by 45% in 1933 from
$103.6 billion in 1929.135 The U.S. consumer price index indicated decreasing prices by 0.5% or
more each month since 1930.136 The U.S. unemployment rate increased from the full employment
figure of 3.2% in 1929 to its highest at 24.9% in 1933.137 The decreasing production and prices
alongside increasing unemployment indicated a strong recessionary period in the early 1930s.
These recessionary characteristics played a role in evolving the Great Depression through
instilling contractionary behaviour in individuals and firms. With persistently low incomes and low
labour demand, individuals lost significant purchasing power which also led to firms limiting
production and increasing layoffs. Ultimately, this contractionary behaviour reduced the aggregate
demand further away from full employment, creating a persistent recessionary gap (refer to
Appendix A for a graphical model of this economic movement). This prolonged shift in aggregate
demand, influenced by the business cycle, evolved the recession into the Great Depression.
Although the U.S. GDP, CPI, and the unemployment rate indicated a recession, missing
considerations overstated or understated the magnitude of this period. With the GDP being
calculated through the expenditure approach, any unreported illegal activities are disregarded,
Page 18
despite being a major source of economic activity during the Great Depression.138 The U.S.
alcohol prohibition created significant unreported moonshine production which understated the
real GDP value.139 Similarly, volunteer work during the Great Depression was unreported in the
GDP figure.140 Soup kitchens had unpaid volunteers who provided services and were not subject
to wage expenditures, thus understating the real GDP value.141 Real GDP also does not indicate
wealth distribution or inequalities during economic movement like that of the Depression.142
The consumer price index falls short in representing price conditions in rural environments as it
only measures a few goods that are widely purchased in urban environments.143 Farmers in the
rural Midwestern U.S. were major stakeholders, yet their economic region was misrepresented in
the urban-centric CPI. A typical consumer practice of seeking better and cheaper products is not
considered in the CPI, where price index drops for a certain product indicates deflation instead of
shifting consumer demands.144 During the Great Depression, the demand for expensive coal to
heat homes decreased, shifting consumer demand to cheaper charcoal. Yet, this shift indicated
an overall index price drop because coal (not charcoal) was a measured CPI good.145
During the 1930s, the Bureau of Labour Statistics measured 3.5 million individuals paid and
employed by government programs as unemployed, thus overstating the true unemployment
rate.146 Furthermore, the exclusion of discouraged workers from unemployment definitions
created inaccuracies of this economic indicator in the Great Depression.147
FISCAL POLICY
The contractionary 1930 U.S. Smoot-Hawley Tariff impacted individuals (primarily farmers) and
organizations (primarily manufacturers) by lowering export viability, demand, and incentive for
production. This tariff introduced import taxes that raised the price of over 25,000 imports by
59%.148 In retaliation, 60 countries placed high import tariffs on U.S. products.149 Canadian
dependence on U.S. raw materials and farm exports impacted pulp and paper companies,
farmers and automobile manufacturers which led to several bankrupt firms.150 This economic
leakage decreased international aggregate demand for U.S. exports.
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The faltering economic condition of farmers and citizens in the Midwestern U.S. and mass
unemployment collectively influenced the enactment of alternative government policies that
aimed to bring stability. The Agricultural Adjustment Act limited supply through destroying over ten
million acres of crops and creating unreasonable prices that negatively impacted U.S. farmers
with no viable demand or profits.151 Through the forced limitation of supply and increasing prices,
the aggregate demand decreased and created a recessionary gap.152
As the U.S. minister, William Herridge influenced Prime Minister Bennett to adopt the U.S. New
Deal specifically for Canada.153 In turn, the Canadian Wheat Board was formed and positively
impacted Canadian wheat farmers through global supply control such that a profitable price was
existent.154 Through stable global markets, the aggregate demand shifted toward full employment
(refer to Appendix B for the graphical representation of this expansionary movement).155
The increase of the top individual tax rate from 25% to 69% through the Revenue Act of 1932
negatively impacted individuals through limiting consumer purchasing power amongst the
wealthy.156 This lowered affordability, in addition to decreasing incentives to work or invest for
individuals.157 Increases in the corporate tax rate also decreased the incentive for
entrepreneurship, creating a recessionary gap in aggregate demand.158
The rising government spending ideologies of John Keynes influenced policies of the New Deal
indirectly.159 Dr. Francis Townsend (creator of the Townsend Plan) rallied over 25 million
Americans for encouraging government supported youth employment and spending by seniors,
eventually convincing U.S. President Roosevelt to adopt a majority of the Townsend Plan.160 In
addition, the power of oligopolies allowed the CEO of General Electric, Gerard Swope, to
advocate for Keynesian government intervention leading to the enactment of public procurement
policies.161 A reflection of these individual influences is evident in the creation of the Federal
Emergency Relief Administration (FERA). FERA distributed relief funds state-wide to sustain
unemployed families during the Great Depression, providing states with monetary resources to
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support youth employment initiatives such as the Civilian Works Administration, the Public Works
Administration and the Civilian Conservation Corps.162 Altogether, these administrations provided
jobs that positively impacted individuals and injected money in the economy. Similarly, Dominion
Unemployment Relief in Canada provided provinces with grants to open relief camps and created
a similar positive impact as FERA.163 Through government expenditure and increased consumer
spending power, the aggregate demand increased toward full employment.
MONETARY POLICY
Prior to the mid-1930s, the Canadian Department of Finance enacted policies indirectly
dependent with the U.S., evident in mirrored declines of M1 money supply between Canada and
the U.S.164 These tight money policies created recessionary aggregate demand shifts that played
a role in the Great Depression. However, the Canadian branch banking system kept the money
multiplier consistent and secured a majority of domestic money supply.165 Between 1931 and
1934, the interest rate in Canada dropped by 9.5%, increasing the quantity supplied of loanable
funds through higher savings by individuals and firms (refer to Appendix C for a graphical
representation of this monetary movement).166 As a result, attractive loans fuelled expansion by
individuals, firms, and the government which altogether increased the aggregate demand.
In 1934, the Bank of Canada Act was a monetary policy that created the national central bank.167
Following this, the Bank of Canada utilized the bond market to stimulate the economy. During the
1920s, high bond return rates encouraged individuals to invest in bonds, contracting the money
supply in the peaking economy.168 However, during the Depression, the Bank of Canada reduced
the bond interest rate by 2.3% from 1934 to 1940 and liquidated bonds to consumers,
discouraging bond investment and increasing the money supply as well as aggregate demand.169
Through abandoning the gold standard in 1929, the Bank of Canada financed, without limitation
from gold reserves, wartime contracts that led to significant government and public spending
which increased the aggregate demand toward full employment.170
Page 21
Global Interdependence and Inequalities
THEORIES AND MODELS OF INTERNATIONAL TRADE
The Smoot-Hawley Tariff impacted individuals and organizations by implementing high import
tariffs between countries that decreased global trade and the incentive for production. This also
developed global and domestic inequalities.171 Globally, nations with more export-reliant
economies faced higher losses and risk compared to larger, industrially diverse nations. This was
evident in Canadian dependence on raw materials and farm exports with the U.S., which caused
pulp and paper companies as well as automobile manufacturers to file for bankruptcy. 172
Domestically, individuals reliant on global trade, such as major wheat farmers in North America,
were subject to a restricted marketplace which led to inequality in socioeconomic standing across
the continent.173 Following the 1933 World Economic Conference in London, the United States
and Britain enacted the Anglo-American Trade Agreement in 1938 which increased economic
cooperation between these nations.174 Through creating equally accessible foreign markets, the
U.S. and Britain stabilized imports and exports specifically to resolve respective trade imbalances,
ultimately creating a positive impact on the GDP and aggregate demand.175
INTERNATIONAL ECONOMIC DEVELOPMENTS

The 1931 collapse of Austrias largest commercial bank, Kreditanstalt, triggered financial panic
throughout Europe.176 Several stakeholders were affected by this bankruptcy and a series of bank
runs across Europe occurred. Following this, another major bank, the German Reichsbank, lost
$2 billion in gold and foreign currency in withdrawals.177 This event created a very bearish market
that influenced contractionary economic behaviour. In 1934, the U.S. stressed the obligation of
Britain and France to pay back reparation loans through the enactment of the Johnson Act.
Through this act, Britain and France were compelled to pay larger payments on shorter schedules,
and without further American loans, were deemed as defaulters.178 This event severed economic
cooperation and created difficulty in forming expansionary policies globally, advancing the U.S.
further in a Depression. The rise of the Nazi Party and Adolf Hitler amidst a faltering German
Page 22
economy fostered anti-Semitism and ruthless ideologies that created detrimental effects globally.
Nazi Germany invaded Austria in 1938, creating panic around Eastern Europe that led to several
forceful policies to end the German Depression.179 In 1939, Germany invaded Poland and Great
Britain declared war, with the U.S. entering in 1941 and supplying Allied Forces with artillery,
machinery and military transport, hence creating government spending that significantly
increased employment and GDP during the Great Depression.180
INTERNATIONAL ECONOMIC POWER AND INEQUALITY

The large increase in government intervention and Keynesian policies led to a sustained growth
in employment, GDP, and money supply that resolved inequalities. In the U.S., the creation of
government employment corps, such as FERA, solved inequality for displaced workers through
creating jobs and equal security for individuals of varying socioeconomic levels.181 The Canadian
Wheat Board solved inequality between farmers through representing all farmers from varying
regions of Canada collectively in the global wheat marketplace, ensuring a guaranteed fixed price
and profitability regardless of geographical factors.182 Internationally, the 1944 Bretton Woods
Agreement removed the gold standard, allowing for countries to increase money supply
respectively according to their economic conditions, regardless of domestic gold reserves.183 Most
government policies were focused upon the Caucasian young male during the Great Depression.
However, with the increasing financial demands, women and children entered the workforce in
large numbers. In 1930, 2.25 million boys and girls ages 1018 worked labour jobs. Eventually,
the increase of minority involvement amended labour standards with the 1938 Fair Labour
Standards Act, providing equal rights and opportunities for citizens across the United States.
Labour rights activism brought forth legislative change, particularly through aggressive
suspension of shipping operations with the 1934 Waterfront Strike and other protests as a way to
bring forth change. Ultimately, this led the U.S. Congress to pass the National Labour Relations
Act and NIRA codes which introduced minimum wage and working hours fuelling economic and
societal progress during the Depression.
Page 23
Conclusion
The Great Depression was a unique and momentous recessionary period that brought about new
economic thinking and approaches. Although a variety of perspectives on the Great Depression
exist today, the rise of Keynesian ideologies created new decision making and thought toward
government spending which aimed to improve microeconomic supply, demand and scarcity
conditions as well as assist in macroeconomic challenges faced by numerous stakeholders.
National and international firms in respective markets emerged with new strategies to choose
between trade-offs and tough economic decisions in order to profit-maximize. Governments
across the globe enacted newly-embraced monetary and fiscal policies that leveraged leakages
and injections to readdress imbalances towards prosperity in this recessionary stage of the
business cycle. Macroeconomic indicators (GDP, CPI and the unemployment rate), although
containing respective drawbacks, indicated an initial recession that was superseded by a shift in
aggregate demand towards full employment through expansionary government intervention.
Global interdependence highly impacted economic shifts within nations, with international trade
agreements and monetary practices assisting and hurting economies. Key geopolitical events
around WWII played a role in fuelling recessionary behaviour, yet government intervention
prevailed to alleviate inequalities that stopped nations from recovering according to respective
economic conditions. Examining various economic, political and social aspects of the Great
Depression provides immeasurable insight on the effective strategies that can be used to avert
similar disasters in an ever-growing globally interconnected economy.
Page 24
Endnotes
1Smiley, Gene. "Great Depression." The Concise Encyclopedia of Economics. 2008. Accessed
October 3, 2016. http://www.econlib.org/library/Enc/GreatDepression.html.
2 Ibid.
3 Ibid.
4 Ibid.
5 Ibid.
6
Ibid.
7Bolotta, Angelo, Charles Hawkes, Rick Mahoney, and John Piper. Economics Now: Analyzing
Current Issues. Don Mills, Ont.: Oxford University Press, 2002.
8 "John Maynard Keynes Publishes The General Theory of Employment : 1936." Gale Global
Issues in Context. 2014. Accessed October 8, 2016.
http://ic.galegroup.com/ic/gic/ReferenceDetailsPage/ReferenceDetailsWindow?disableHighlighti
ng=false&displayGroupName=Reference&currPage=&scanId=&query=&source=&prodId=GIC&
search_within_results=&p=GIC&mode=view&catId=&u=ko_k12hs_d48&limiter=&display-
query=&displayGroups=&contentModules=&action=e&sortBy=&documentId=GALE|IZSUGN415
771230&windowstate=normal&activityType=&failOverType=&commentary=.
9Bolotta, Angelo, Charles Hawkes, Rick Mahoney, and John Piper. Economics Now: Analyzing
10
Ormerod, Paul. "How to Stop a Great Depression." Canadian Periodicals Index Quarterly.
October 9, 1998. Accessed October 8, 2016.
http://go.galegroup.com/ps/retrieve.do?tabID=T003&resultListType=RESULT_LIST&searchRes
ultsType=SingleTab&searchType=BasicSearchFormtPosition=11&docId=GALE|A21238649&d
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649&searchId=R3&userGroupName=peel_dsb&inPS=true&u=peel_dsb&authCount=2.
11
Ibid.
12
Ibid.
13 Ormerod, Paul. "How to Stop a Great Depression." Canadian Periodicals Index Quarterly.
October 9, 1998. Accessed October 8, 2016.
http://go.galegroup.com/ps/retrieve.do?tabID=T003&resultListType=RESULT_LIST&searchRes
ultsType=SingleTab&searchType=BasicSearchFormtPosition=11&docId=GALE|A21238649&d
Page 25
ocType=Article&sort=RELEVANCE&contentSegment=&prodId=CPI&contentSet=GALE|A21238
649&searchId=R3&userGroupName=peel_dsb&inPS=true&u=peel_dsb&authCount=2.
14
Banerjee, Abhijit. "Bad economics can bite." Hindustan Times. December 22, 2016. Accessed
January 05, 2017.
15
Ibid.
16
Ibid.
17
Ibid.
18
Ibid.
19 "Smoot-Hawley Tariff Act." Encyclopedia Britannica. Accessed October 7, 2016.

https://www.britannica.com/topic/Smoot-Hawley-Tariff-Act.
20 Phalan, Theodore, Deema Yazigi, and Thomas Rustici. "The Smoot-Hawley Tariff and the
Great Depression." Foundation for Economic Education. February 29, 2012. Accessed October
5, 2016. https://fee.org/articles/the-smoot-hawley-tariff-and-the-great-depression/.
21"Hoover's Efforts at Recovery." Boundless U.S History. July 14, 2016. Accessed October 7,
2016. https://www.boundless.com/u-s-history/textbooks/boundless-u-s-history-textbook/the-
roaring-twenties-1920-1929-24/the-great-depression-190/hoover-s-efforts-at-recovery-1052-
3243/.
22 "Franklin Delano Roosevelt and the New Deal." Library of Congress. Accessed October 7,
2016.
http://www.loc.gov/teachers/classroommaterials/presentationsandactivities/presentations/timelin
e/depwwii/newdeal/.
23 "The New Deal." BBC. Accessed October 3, 2016.
http://www.bbc.co.uk/bitesize/higher/history/usa/newdeal/revision/3/.
24Tsonchev, T. S. "The Great Depression in Canada." The Montreal Review. February 2009.
Accessed October 5, 2016. http://www.themontrealreview.com/great_depression.php.
25Martin, Joe. "Great Depression Hit One Country Hardest of All." Bloomberg.com. March 26,
2013. Accessed October 7, 2016. https://www.bloomberg.com/view/articles/2013-03-26/great-
depression-hit-one-country-hardest-of-all.
26Nelson, Cary. "About the Great Depression." Modern American Poetry. Accessed October 6,
2016. http://www.english.illinois.edu/maps/depression/about.htm.
Page 26
27 "Nazi Germany - Dictatorship." History Learning Site. Accessed October 6, 2016.
http://www.historylearningsite.co.uk/nazi-germany/nazi-germany-dictatorship/.
28 Weber, Mark. "How Hitler Tackled Unemployment And Revived Germanys Economy."
Institute for Historical Review. February 2012. Accessed October 7, 2016.
http://www.ihr.org/other/economyhitler2011.html.
29 "Nazi Germany and the Economic Miracle." History Learning Site. Accessed October 6, 2016.
http://www.historylearningsite.co.uk/nazi-germany/nazi-germany-and-the-economic-miracle/.
30 Ibid.
31 "The Great Depression." British Library. Accessed October 6, 2016.
http://www.bl.uk/learning/timeline/item107595.html.
32Pettinger, Tejvan. "The UK Economy in the 1930s." Economics Help. May 13, 2013. Accessed
October 7, 2016. http://www.economicshelp.org/blog/7483/economics/the-uk-economy-in-the-
1930s/.
33 Ibid.
34
"Causes of the Great Depression." In Great Depression and the New Deal Reference Library,
edited by Allison McNeill, Richard C. Hanes, and Sharon M. Hanes, 1-20. Vol. 1, Almanac.
Detroit: UXL, 2003. U.S. History in Context (accessed November 12, 2016).
http://libraries.state.ma.us/login?gwurl=http://ic.galegroup.com/ic/uhic/ReferenceDetailsPage/Re
ferenceDetailsWindow?displayGroupName=Reference&zid=6d3bef0712b41d824dc3a746da70
ef24&action=2&documentId=GALE%7CCX3425600011&userGroupName=mlin_c_montytech&s
ource=Bookmark&u=mlin_c_montytech&jsid=356d6813b275a4da7774b946e6e78864.
35
Richardson, Gary. "Banking Panics of 1930 and 1931." Banking Panics of 1930 and 1931 - A
Detailed Essay on an Important Event in the History of the Federal Reserve. November 22,
2013. Accessed November 19, 2016. http://www.federalreservehistory.org/Events/DetailView/20.
36
Ganzel, Bill. "Bank Failures during the 1930s Great Depression." Living History Farm. 2003.
Accessed November 19, 2016. http://livinghistoryfarm.org/farminginthe30s/money_08.html.
37
Ibid.
38
Page 27
39
Hess, Alex E.M. "Banks with the Most Branches." USA Today. 2014. Accessed November 19,
2016. http://www.usatoday.com/story/money/business/2014/10/05/24-7-wall-st-banks-with-most-
branches/16648133/.
40
Llewellyn, Jennifer, Jim Southey, and Steve Thompson. "The Great Depression in Germany."
Weimar Republic. 2015. Accessed November 14, 2016.
http://alphahistory.com/weimarrepublic/great-depression/.
41
Trueman, C. N. "Weimar Republic and the Great Depression." Historylearningsite.co.uk. May
22, 2015. Accessed November 14, 2016. http://www.historylearningsite.co.uk/modern-world-
history-1918-to-1980/weimar-germany/weimar-republic-and-the-great-depression/.
42
43
Rhodes, David, and Daniel Stelter. "How Automakers Accelerated Out of the Great
Depression." Www.bcgperspectives.com. February 16, 2010. Accessed November 12, 2016.
https://www.bcgperspectives.com/content/articles/automotive_management_slow_growth_econ
omy_how_automakers_accelerated_out_of_the_great_depression/.
44
Wheels. "How the Big Three Survived Depression - WHEELS.ca." WHEELS.ca. May 09,
2009. Accessed November 19, 2016. http://www.wheels.ca/news/how-the-big-three-survived-
depression/.
45
Ibid.
"Market Share by Manufacturer | Edmunds.com." Edmunds. November 17, 2016. Accessed

46
November 19, 2016. http://www.edmunds.com/industry-center/data/market-share-by-

manufacturer.html.
47
Rhodes, David. "Winning Performances During the Great Depression."
Www.bcgperspectives.com. Accessed November 12, 2016.
https://www.bcgperspectives.com/content/articles/collateral_damage_part_7/?chapter=3#chapte
r
48
Ibid.
49
Anastakis, Dimitry, and James G. Dykes. "Automotive Industry." The Canadian Encyclopedia.
June 02, 2006. Accessed November 14, 2016.
http://www.thecanadianencyclopedia.ca/en/article/automotive-industry/.
50
Ibid.
51
Page 28
52
Moore, Sam. "U.S. Farmers During the Great Depression." Farm Collector. November 2011.
Accessed November 19, 2016. http://www.farmcollector.com/farm-life/u-s-farmers-during-great-
depression?pageid=2#PageContent2.
53
Ibid.
54
Morriss, W. E. 1987 and 2000. Chosen Instrument: A History of the Canadian Wheat
Board, Volumes 1 and 2. Winnipeg: Canadian Wheat Board.
55
Ibid.
56
Ibid.
57
Chase, Dave. "How Brands Thrived during the Great Depression." Strategic Growth
Concepts. Accessed November 12, 2016. http://www.imediaconnection.com/articles/ported-
articles/red-dot-articles/2008/oct/how-brands-thrived-during-the-great-depression/.
58
Oliver, Gail. "What Companies Survived the Great Depression & How They Did." Master's
thesis, 2003.
59
Ibid.
60
"Radio Broadcasting Parent Companies." RadioStationWorld - United States of America -
Radio Broadcasting Groups. Accessed November 19, 2016.
http://radiostationworld.com/Locations/United_States_of_America/default.asp?n=rdreg-g.
61
Houghton, Bruce. "There Are 15,330 U.S. Radio Stations, But How Many Matter?" Hypebot.
October 30, 2013. Accessed November 19, 2016.
http://www.hypebot.com/hypebot/2013/10/there-are-15330-us-radio-stations-how-many-of-the-
matter-to-you.html.
62
thesis, 2003.
63
Chase, Dave. "How Brands Thrived during the Great Depression." Strategic Growth
Concepts. Accessed November 12, 2016. http://www.imediaconnection.com/articles/ported-
articles/red-dot-articles/2008/oct/how-brands-thrived-during-the-great-depression/.
64
"Green Shoots, False Positives, and What Companies Can Learn from the Great
Depression." Bgc Perspectives. Accessed November 19, 2016.
https://www.bcgperspectives.com/content/articles/collateral_damage_part_7/?chapter=3.
65
r3.
66
Ibid.
67
Ibid.
Page 29
68
"U.S. Electric Utility Industry Statistics - Publicpower.org." Public Power. Accessed November
19, 2016. http://www.publicpower.org/files/PDFs/USElectricUtilityIndustryStatistics.pdf.
69
"The Depression of the 1930s." GCSE Bitesize. Accessed November 14, 2016.
http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/britain/depressionrev1.shtml.
70
Ibid.
71
Edwards, Chris. "The Government and the Great Depression." September 25, 2005.
Accessed November 14, 2016. https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-0508-
25.pdf.
72
Spiker, Doug. "What It Is When It Was." Accessed November 16, 2016.
http://www.taxsnafu.com/archive/2016/6/29/what-it-is-when-it-was.
73
25.pdf.
74
Ibid.
75
Ibid.
76
"Great Depression - Impacts on the Working Class." Newfoundland and Labrador Heritage.
Accessed November 15, 2016. http://www.heritage.nf.ca/articles/politics/depression-
impacts.php.
77
Ibid.
78
"The Great Depression." Alpha History. Accessed November 18, 2016.
http://alphahistory.com/nazigermany/the-great-depression/.
79
Ibid.
80
"The Great Depression in Europe." Accessed November 18, 2016.
http://www.dhr.history.vt.edu/modules/eu/mod04_depression/context.html.
81
Colombo, Jesse. "The Stock Market Crash of 1929." The Bubble Bubble. July 17, 2012.
Accessed November 13, 2016. http://www.thebubblebubble.com/1929-crash/.
82
Ibid.
83
Ibid.
84
Wheelock, David C. "The Great Depression: An Overview." Accessed November 12, 2016.
https://www.stlouisfed.org/~/media/Files/PDFs/Great-Depression/the-great-depression-
wheelock-overview.pdf.
Page 30
85
Ibid.
86
Ibid.
87
Ibid.
88
Smiley, Gene. "Great Depression." Library Economics Liberty. Accessed November 15, 2016.
http://www.econlib.org/library/Enc/GreatDepression.html.
89
90
"The Great Depression." History.com. 2009. Accessed November 12, 2016.
http://www.history.com/topics/great-depression.
91
"The Great Depression." Accessed November 11, 2016. http://www.u-s-
history.com/pages/h1569.html.
92
25.pdf.
93
"Agricultural Adjustment Act." Accessed November 15, 2016. http://www.u-s-
94
"Agriculture Adjustment Act." Accessed November 15, 2016.
http://grouuup8.weebly.com/agriculture-adjustment-act.html.
95
25.pdf.
96
Ibid.
97
Ibid.
98
Ibid.
99
Ibid.
100
Ibid.
101
Ibid.
102
"The Government and the Great Depression - Cato Institute." Accessed November 17, 2016.
https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-0508-25.pdf.
Page 31
103
Ibid.
104
Ibid.
105
"Fiscal Policies in Europe and the United States during the." Accessed November 17, 2016.
https://www.bancaditalia.it/pubblicazioni/altri-atti-seminari/2010/Kavonius_fiscal_italia.pdf.
106
"The Government and the Great Depression - Cato Institute." Accessed November 17, 2016.
https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb-0508-25.pdf.
107
Ibid.
108
Ibid.
"The Great Depression in Canada and the United States: A ..." Accessed November 17,
109
2016. http://publish.uwo.ca/~jmacgee/RED_depresion.pdf.
110
Ibid.
111
Ibid.
112
Ibid.
113
Ibid.
114
Ibid.
115
116
Ibid.
117
Ibid.
118
Ibid.
119
Ibid.
Moscovitch, Allan. "Welfare State." The Canadian Encyclopedia. Accessed November 18,
120
2016. http://www.thecanadianencyclopedia.ca/en/article/welfare-state/.
121
Ibid.
122
Ibid.
123
Ibid.
Page 32
124
Ibid.
125
"Great Depression: American Social Policy - Social Welfare History Project." Social Welfare
History Project. 2016. Accessed November 18, 2016.
http://socialwelfare.library.vcu.edu/eras/great-depression/american-social-policy-in-the-great-
depression-and-wwii/.
126
Ibid.
127
Ibid.
128
Ibid.
129
Ibid.
130
Ibid.
"Country Case Studies and Links." European Welfare States - Information and Resources.
131
Accessed November 20, 2016. http://www.pitt.edu/~heinisch/ca_us.html.

132
Ibid.
133
Ibid.
134
Ibid
Shmoop Editorial Team, "The Great Depression Statistics," Shmoop University, Inc., Last
135
modified November 11, 2008, http://www.shmoop.com/great-depression/statistics.html.

Tim McMahon, "Inflation and CPI Consumer Price Index 1930-1939," InflationData.com, ,
136
accessed December 1, 2016, http://inflationdata.com/articles/inflation-cpi-consumer-price-index-

1930-1939/.
Shmoop Editorial Team, "The Great Depression Statistics," Shmoop University, Inc., Last
137
modified November 11, 2008, http://www.shmoop.com/great-depression/statistics.html.

138
"Disadvantages of Gross Domestic Product - Essay Wow!," Essay Wow!, November 04,
2014, , accessed December 1, 2016, http://www.essaywow.com/economics/disadvantages-
gross-domestic-product.html.
139
Ibid.
140
Ibid.
141
Ibid.
142
Ibid.
143
J.B. Maverick, "What Are Some Limitations of the Consumer Price Index (CPI)?,"
Investopedia, January 29, 2015, , accessed December 1, 2016,
Page 33
http://www.investopedia.com/ask/answers/012915/what-are-some-limitations-consumer-price-
index-cpi.asp.
144
Ibid.
145
Ibid.
146
John Buck, "Limitations of Unemployment Data," Limitations of Unemployment Data,
September 08, 2008, , accessed December 2, 2016,
http://econperspectives.blogspot.ca/2008/09/limitations-of-unemployment-data.html.
147
Ibid.
Chris Edwards, "The Government and the Great Depression," CATO Institute Tax and
148
Budget Bulletin, September 2005.

149
Ibid.
Judith A. Mcdonald, Anthony Patrick O'brien, and Colleen M. Callahan, "Trade Wars:
150
Canada's Reaction to the Smoot-Hawley Tariff," The Journal of Economic History 57, no. 04
(December 1997): , doi:10.1017/s0022050700019549.
151

152
Ibid.
Norman Hillmer, "William Duncan Herridge," The Canadian Encyclopedia, November 29,
153
2007, , accessed December 2, 2016, http://www.thecanadianencyclopedia.ca/en/article/william-

duncan-herridge/.
Allan Moscovitch, "Welfare State," The Canadian Encyclopedia, February 07, 2006, ,
154
accessed December 2, 2016, http://www.thecanadianencyclopedia.ca/en/article/welfare-state/.

155
Ibid.
156

157
Ibid.
158
Ibid.
Melissa Kos, "Important People: The Great Depression," Important People: The Great
159
Depression, , accessed December 2, 2016, http://www.uni.edu/icss/timeline/9people.html.

160
Shmoop Editorial Team, "Francis Townsend in The Great Depression," Shmoop University,
Inc., Last modified November 11, 2008, http://www.shmoop.com/great-depression/francis-
townsend.html.
Melissa Kos, "Important People: The Great Depression," Important People: The Great
161
Depression, , accessed December 2, 2016, http://www.uni.edu/icss/timeline/9people.html.

J. D. Marx, "Great Depression: American Social Policy - Social Welfare History Project,"
162
Social Welfare History Project, 2011, , accessed December 2, 2016,
Page 34
Allan Moscovitch, "Welfare State," The Canadian Encyclopedia, February 07, 2006, ,
163
accessed December 2, 2016, http://www.thecanadianencyclopedia.ca/en/article/welfare-state/.

164
"Topic 2. Past Mistakes Big and Small," Past Mistakes Big and Small, , accessed December
3, 2016, https://www.economics.utoronto.ca/jfloyd/modules/pmbs.html.
165
Ibid.
166
David C. Wheelock, Monetary Policy in the Great Depression: What the Fed Did, and Why,
report, Economics, University of Texas-Austin.
"Great Depression of Canada," The Great Depression of Canada, , accessed December 3,
167
2016, http://www.yesnet.yk.ca/schools/projects/canadianhistory/depression/depression.html.
168
Chris Farrell, "Investing during a Great Depression," Marketplace, September 30, 2008, ,
accessed December 3, 2016, https://www.marketplace.org/2008/09/30/your-money/ask-
money/investing-during-great-depression.
169
Ibid.
170
Edward Whitcomb, "Rethinking the Great Depression," Literary Review of Canada, June
2014, , accessed December 3, 2016, http://reviewcanada.ca/magazine/2014/06/rethinking-the-
great-depression/.
171

Judith A. Mcdonald, Anthony Patrick O'brien, and Colleen M. Callahan, "Trade Wars:
172
Canada's Reaction to the Smoot-Hawley Tariff," The Journal of Economic History 57, no. 04
(December 1997): , doi:10.1017/s0022050700019549.
173
Ibid.
"Global Impact 1929-1939." Historic Events for Students: The Great
174
Depression. . Encyclopedia.com.(December 8,
2016). http://www.encyclopedia.com/education/news-and-education-magazines/global-impact-
1929-1939
175
Ibid.
176
Ibid.
177
Ibid.
178
Ibid.
179
Ibid.
180
Ibid.
J. D. Marx, "Great Depression: American Social Policy - Social Welfare History Project,"
181
Social Welfare History Project, 2011, , accessed December 2, 2016,
Page 35
182
Ibid.
"Global Impact 1929-1939." Historic Events for Students: The Great
183
Depression. . Encyclopedia.com.(December 8,
2016). http://www.encyclopedia.com/education/news-and-education-magazines/global-impact-
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Appendix
Appendix A: Aggregate Demand and Supply Graph with Recessionary Shifts in GDP and CPI
Appendix B: Shift in Aggregate Demand and Indicators Due to Expansionary Behaviour
Appendix C: Decrease in Interest Rate Increasing Money Supply Through Loans Available
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JANUARY 10, 2017

The Great Depression

Fundamentals of Economics __________________________________________________3

Firms, Markets, and Economic Stakeholders _____________________________________8

Global Interdependence and Inequalities _______________________________________22

played a role in this issue through a microeconomic and macroeconomic analysis.

initiated by President Franklin D. Roosevelt, the

Wagner Act mandated an increase in minimum

wages in 1935.1 During this time, recovery from

the Great Depression stalled, yet the Roosevelt

tendency of labour, where a small increase in wages

results in a larger proportion of individuals willing to work

(see Figure 2), a high number of individuals were

unemployed. The mandate of a price floor above the

Policy 2: The Smoot-Hawley Tariff

introduced to provide firms protection from

lower-cost imports by placing large tariffs on all

imports to the United States.4 As a result of this,

demand for domestic products rose due to more

inelastic demand for wheat (see Figure 4), the higher

prices stemming from decreased supply only resulted

in slightly lower demand. The price ceiling ultimately

helped the market reach equilibrium creating more

Employment, Interest, and Money. Keynes believed that government

of unemployment.8 Keynes plan to combat the Great Depression involved government

higher consumer spending, increased aggregate demand, and decreasing unemployment

recovering, thus requiring government intervention for economic recovery.9

Contemporary Perspectives Paul Ormerod (born 1969)

than Keynesian, government intervention.10 He claims that

European central banks should follow the advice of Milton Friedman

just print money.11 He states that the decision by the Federal

rebounding on Ram as he cannot borrow as much money from the

bank.15 It is a cascading effect of transactions, with GDP falling

rapidly.16 However, Mr. Banerjee believes that with a shortage of

SCARCITY AND CHOICE

to 8 million in 1937, a 43% drop.23

Firms, Markets, and Economic Stakeholders

monopolistic market fragility, created a strong depression nationally and internationally.42

firms, especially through branch-plant manufacturing in Canada.48 Private Canadian

of Midwestern rural banks, agricultural overproduction, and unfavourable climatic conditions of

to a perpetual lack of non-price competition, an elastic demand and abundance of substitute

competition market escalated a regional level depression directly to a nationwide depression. 53

in bank insolvencies and food-related industries furthered the Great Depression.56

involvement of established private and crown media corporations in a beneficial oligopolistic

market that increased aggregate demand during the Great Depression.63

Electrification Administration increased access to electricity from 10 percent to 90 percent of rural

electrical industry corporations encouraged progress in government programs, using their

influential power in an oligopolistic market. Through direct involvement in expansionary policies

campaigner for Keynesian government-spending policies.66 Utilizing the power of an oligopoly,

ECONOMIC TRADE-OFFS AND DECISIONS

recommended nutritional requirements.77 Even though the government maximized savings

productivity, many business failures and lower incentive to work.80

amounts of debt that limited consumer spending power and decision-making.

THE ROLE OF GOVERNMENT IN READRESSING IMBALANCE

production through destroying excess output or dumping it abroad.114 In contrast, competition in

gold standard, restoring equality in the effectiveness of state monetary policies.119

changing economy. In Canada, the Bennett Conservative government legislated Dominion

loans of needy families at lower interest rates.130

basic services to all citizens, regardless of need, through various programs.134

employed by government programs as unemployed, thus overstating the true unemployment

rate.146 Furthermore, the exclusion of discouraged workers from unemployment definitions

created inaccuracies of this economic indicator in the Great Depression.147

leakage decreased international aggregate demand for U.S. exports.