The Stock Market

The 1920s was a time of social and economic revolution in North America. More Canadians than ever before were able to afford the comforts of life. One of every two Canadian families owned a car in 1928. By 1929, over 60 percent of Canadians had electricity in the home. The rich were not the only people speculating on the stock market.

Many of the new companies of the 1920s were started with investment money raised on the stock market. To raise money, companies sell stocks, or shares, in their business to investors. In return, the investors are entitled to a share of any profits a company earns. Share prices were determined by supply and demand. If the stock was popular, its price rose. If more people wanted to sell shares than buy, the stock price fell.

Compared to the general population, the number of investors was small, but everyone bought in to the “get rich quick” philosophy of the time. To gain even greater returns, many investors started to buy on margin – borrowing money or paying the stockbroker only 10-15% of the price of the shares. As the value of the stocks rose, the shares would pay for themselves. Investors could sell, pay the broker what was owned and still make a profit.

Nobody knew on September 3, 1929 that the stock market had finally reached its peak. Prices began to slip but they had slipped before. Most investors expected a turnaround soon. None came. Cautious investors started selling off their stocks to cash in on their high values. Soon others followed their lead. Suddenly, the value of the stocks fell dramatically. The stock market had crashed. All investors were hurt, but margin buyers were wiped out. Many Canadians lost all they had worked for over the decade.

Questions:

1. Why might a company sell stocks or shares?

2. Explain why buying on margin was so risky.

3. Why would a margin buyer be wiped out after the stock market crashed?

The Great Depression

The panic that caused the stock market crash of 1929 began in the United States, but spread quickly to Canada and all other countries involved in trade. The stock market crash triggered the Great Depression of the 1930s. Canada suffered greatly while the whole world was in an economic slump. At first, many Canadians did not realize the seriousness of the problem. Mackenzie King’s Liberal government believed the economy would correct itself naturally. Many small investors though t they could survive the crash. After all, they still had jobs. Many more Canadians had never invested in the stock market at all. Why should its crash affect them all?

The Great Depression and the fall of the Canadian Economy

Countries raised their tariffs in the 1920’s to cut foreign sales.
More goods were produced than were sold in the 1920’s.
Most Canadians had low wages or incomes in the 1920’s and couldn’t buy all of the goods that had been produced.
Warehouses and grain elevators were filling up with unsold goods by 1929.
US and Canadian stock markets crashed in October 1929 and some banks closed in Europe.
Stock brokers and banks called in their loans.
Individuals and companies had less money.
Many companies laid off workers.
Workers had less money and bought fewer goods.
Drought in the West from 1929 meant farmers grew less grain and had less money to spend.
Companies’ sales fell and they laid off more workers.
More workers were unemployed, many were on relief, and they had little money to buy goods.
Stock prices continued to fall.
Some companies went broke while others laid off workers or cut wages.
Many people lost confidence in the economy.

Questions

How could foreign countries hurt Canadian companies or farmers?
How did Canadian companies and their workers in the towns and cities depend on Canadian farmers?
How could one company laying off its workers hurt another companies sales?
What happens when business people, workers, and farmers lose confidence in the economy?

How Canadians Lived in the 1930’s

Prairie farmers probably suffered more than any other group of Canadians during the Depression. The very low price of wheat, the drought, and locust and grasshopper plagues left farmers without crops to tend to. Many farmers went bankrupt because they could not sell their farms. Those who were not forced to abandon their farms often found themselves dependent on relief to stay alive. To qualify for “the dole” farmers had to declare in public that they had no money to support themselves and that they did not have a radio, telephone, or car. Once it was determined that they could not support themselves, they were given food or relief vouchers. The slang term for getting government vouchers for food, boots, clothing, coal, and shelter was “living on the pogey”. Relief payments were kept lower than the lowest paying job to discourage people from applying for relief.

New clothes were a luxury that few could afford; flour sacks, bed sheets, and old curtains were sewn into clothing for family members on relief. Many farmers were so poor that if a family member got sick they had to pay doctors with eggs, poultry, wood, and vegetables. People who could no afford gas often took their motors out of their cars to make them lighter and horses or oxen were hitched to them. Farmers called these “Bennett buggies” because they felt PM Bennett was not doing enough to help them.

Derisively named after prime minister R B Bennett, Bennett Buggies, automobiles pulled by horses, were used by farmers too impoverished to purchase gasoline.

Many young unemployed men traveled around the country looking for work. They were regarded with suspicion by some Canadians and politicians. These unemployed drifters often lived outside of towns and cities in cardboard and tar shacks. Communities usually had a rule that those who applied for relief had to have lived there for at least six months; this meant that drifters looking for work could not receive welfare.

In 1932, the federal government set up relief camps for young, unemployed men to provide them with work and room and board. These camps were under the control of the army and were usually established away from cities to isolate young men who might cause trouble. Long work days at 20 cents a day, doing monotonous physical labour building bridges and roads, gave the men little hope for the future as they could not save for the future.

On-To-Ottawa Trek

The economic situation for most Canadians did not improve; it got worse. In 1935 the relief camp workers in British Columbia went on strike, demanding better living and working conditions and higher wages; they wanted 50 cents an hour. In Vancouver over 1000 strikers commandeered freight trains and headed to Ottawa. Their plan was to present their demands to Prime Minister Bennett and pressure the federal government to improve conditions in the relief camps. As the train stopped in cities along the way, more marchers joined the trek until there were 2000 Trekkers.

Some Canadians feared this was the beginning of a Communist revolution. Prime Minister Bennett ordered the RCMP to stop the strikers at Regina, Saskatchewan. Only eight strike leaders were permitted to continue to Ottawa to present their complaints; PM Bennett refused to give into their demands.

The strike leaders returned to Regina and organized a peaceful demonstration with the strikers. A two-hour riot broke out when Regina constables and RCMP squads, armed with baseball bats, tried to forcefully break up the demonstration and arrest the leaders. Downtown Regina was in ruins and the strikers were no better off.

Questions:

What were “Bennett Buggies” and why were they given that name?

Why did the government set up relief camps in 1932?

What was the overall purpose of the “On-to-Ottawa Trek”? Was it a success?