MMW 15 Lecture Notes - Lecture 10: Irrational Exuberance, Stock Market Crash, Gross National Income
12 Jun 2018
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Outline Lecture Ten—Mass Society and Democracy
Key Questions:
1) How did capitalist democracies try to survive a crisis such as the Great Depression?
2) How did they respond economically and politically to the global appeal of totalitarian
alternatives? How did they adapt?
I) The Economic Crisis for Capitalist Democracies
a) The Global Economic Depression
i) Late-1920s glut of raw materials world-wide
World experienced oversupply of raw materials
Europe was beginning to resume pre-war agricultural activity
Surplus in agricultural goods (ex. Wheat)
Lesser demand for rubber bc new recycling technology and cotton bc synthetic
materials and coal bc dependent on oil more
Sharp drops in raw goods bc surplus of it now (ex. Wheat)
ii) Volatility of commodities market contributed to global recession
Period of irrational exuberance
Inflamed belief that buying stocks could turn you into millionaire and make a quick
buck
Belief of making a fortune over night
Everyone wanted part of the stock market
Ppl bought stocks on credit and took out loans to buy stocks too
Time when there was great wealth disperity (top 1% held 70% of country’s wealth)
Ppl can’t afford luxury items
Lack of regulation in stock market
Volatility of pricing and so many ppl buying on credit = craziness
Everyone tried to sell at once (share of prices fell)
iii) Stock market crash of 1929—“Black Thursday”
Perfect storm led to Black Thursday
Industrial production fell 50%
Gross national income fell below 50%
Ppl lost jobs, retirement savings, foreclosures
Ppl used equity on land, retirement funds, and saved money to buy stocks
(1) “Irrational exuberance” of the “Roaring 20s”
(2) Panic selling led to precipitous fall of global stock values
iv) Economic aftermath
b) Balancing Social Stability with Economic Equality in the West
i) Keynes’s vision of a New Liberalism (1925)
(1) Distinctions between the 19th century and the 20th century
World cant afford to rely on same economic assumptions as 19th century
Economy and capitalism would become more susceptible to fascism
(2) Era of abundance vs. era of stabilization
19th century=era of abundance
could afford for maximum international liberty
so much wealth flowing around
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
How did they adapt: the economic crisis for capitalist democracies, the global economic depression, late-1920s glut of raw materials world-wide. Europe was beginning to resume pre-war agricultural activity. Lesser demand for rubber bc new recycling technology and cotton bc synthetic materials and coal bc dependent on oil more. Sharp drops in raw goods bc surplus of it now (ex. Wheat: volatility of commodities market contributed to global recession. Inflamed belief that buying stocks could turn you into millionaire and make a quick buck. Ppl bought stocks on credit and took out loans to buy stocks too. Time when there was great wealth disperity (top 1% held 70% of country"s wealth) Volatility of pricing and so many ppl buying on credit = craziness. Everyone tried to sell at once (share of prices fell: stock market crash of 1929 black thursday . World cant afford to rely on same economic assumptions as 19th century.
