I would like someone to explain to me what happened here during the Great Depression, please!
Thank you ! :)
Explanation from Alloprof
This Explanation was submitted by a member of the Alloprof team.
Thank you for your question! :)
The period of the Great Depression began on Thursday, October 24 1929 “Black Thursday” following a stock market crash. This period of economic depression affected almost the entire planet, since trade was already carried out between several countries and some countries could no longer repay their war debts to other countries, leading both to this Great Depression.
The stock market crash: In the United States, after the First World War, was the period known as the “Roaring Twenties”. People were enjoying life and buying stocks on the stock exchange. Strong demand caused the price of stocks to rise and their market value became much higher than their real value. Realizing the risk involved in this situation, people wanted to sell their stocks at the same time. The opposite effect then occurred, meaning that the market value of the shares dropped drastically, because the supply of the shares (the sale) was greater than the demand (the purchase). People were making great economic losses on these stocks and were not consuming anymore. The factories ended up with an overproduction and then had to store it because they could not liquidate it. Several businesses had to close their doors because people could no longer afford to buy. These closures led to many job losses. So there were even fewer people who could consume, which negatively affected the businesses that were still in operation. It was a vicious circle !
Impacts of the Depression in Quebec and Canada: Even though the stock market crash was occurring in the United States, it had a direct impact on the Canadian economy, which was (and still is) heavily dependent on its exports to the United States. The drop in American consumption therefore affected Canadian businesses in the same way it did in the United States. Thus, the unemployment rate rose rapidly in Quebec in the 1930s and the average per capita income fell sharply.
State interventions: The Canadian government and those of the various provinces were adopting the interventionist approach in order to get the economy out of the crisis. This policy advocates state intervention in the country's economic affairs, unlike economic liberalism (market self-regulation, laissez-faire, non-state intervention) which had been applied until then. The government was therefore investing money in the economy to stabilize the effects of the crisis. In 1935, the Bank of Canada was created to centralize control over the Canadian currency (to prevent it from losing or taking too much value on world prices).
The economic crisis was creating social tensions and the working-class neighborhoods were filled with unemployed people. Soup kitchens were opened to feed the population, but it was far too little. Religious groups were also trying to help the poor, but the crisis was far too strong and too widespread. The government had then to find solutions to avoid riots : public works, colonization, direct relief and aid to farmers.
This Great Depression lasted 10 years in Canada and Quebec. It has affected several countries in the world and has greatly contributed to the sources of conflicts leading to the Second World War. Ironically, it was the Second World War that enabled Quebec and Canada to get out of this Great Depression by creating new jobs for the army and for the military production sectors. The various interventions needed by the state to support the economy during the Great Depression challenged the capitalist economic system for many people.
Do not hesitate to write to us again if you have any other questions! :)