Causes of the Great Depression

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Background Information: Causes of the Great Depression

(This article is an excerpt from the Social Studies Eleven: Student Workbook written by Yvette Plante and Jorda Miller, and edited by Jerry Falk)

On October 29th 1929, the economic boom of the twenties abruptly came to an end. The stock exchanges of New York, Toronto, and Montreal “crashed,” and North Americans were plunged into the Great Depression. By the time the Depression was over, Canadians had suffered through massive unemployment, thousands of bankruptcies, climactic disasters, and widespread poverty. As a result of these troubles, attitudes towards the poor began to change, and Canadians saw the development of our modern-day social safety net. New political parties were born, along with new ideas about how to deal with economic problems.

Before we examine the causes and consequences of the Great Depression, students should be aware that the Depression was a “made in America” depression (i.e. It started there). The main causes of the Great Depression in Canada were:

a) Overproduction
During the 1920s, many industries were expanding, and profits were spent on adding to factories or building new ones. Huge supplies of manufactured goods were simply stockpiled (overproduction). Eventually, all of these unsold goods caused factory owners to panic, so they slowed down their production and laid off workers. Now these workers had even less money to spend on buying goods; so sales slowed down even more. Basically the industrial capacity of both the U.S.A. and Canada had expanded beyond the ability of the consumer to consume.

b) Canada’s Reliance on Exporting Staple Products
Canada’s economy depended heavily on a few basic products known as staples (like crops, timber and minerals). These staples were Canada’s most important exports—as long as other countries kept buying them, Canada’s economy would be strong. From 1925 to the end of the decade, Canadian...
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