Modern History · Year 11 · The Inter-War Years and the Rise of Totalitarianism · Term 3

Economic Instability and the Wall Street Crash

Investigate the underlying economic weaknesses of the 1920s and the causes of the 1929 stock market crash.

• ACARA Content Descriptions
• AC9HI503

About This Topic

The Great Depression examines the catastrophic global economic collapse that began with the 1929 Wall Street Crash. For Year 11 students, this topic is a study in the fragility of the global economy and the profound political consequences of economic failure. They will investigate how a crisis in the US financial system spread across the world, leading to mass unemployment, poverty, and the rise of extremist politics.

This unit aligns with ACARA standards regarding the inter-war years and the causes of WWII. A key focus is the impact of the Depression on Australia, which was one of the hardest-hit countries due to its reliance on exports. Students will analyze how different governments responded to the crisis, from the 'New Deal' in the US to the austerity measures in Australia. This topic comes alive when students can physically model the economic 'domino effect' through simulations and collaborative investigations.

Key Questions

1. Analyze the speculative nature of the stock market and its role in the crash.
2. Explain the concept of 'buying on margin' and its contribution to financial instability.
3. Evaluate the impact of uneven wealth distribution on the economic health of the 1920s.

Learning Objectives

• Analyze the speculative practices within the 1920s stock market that contributed to the Wall Street Crash.
• Explain the mechanism of 'buying on margin' and its role in amplifying financial risk.
• Evaluate the impact of unequal wealth distribution on the economic stability of the United States in the 1920s.
• Identify the key underlying economic weaknesses that preceded the 1929 stock market crash.

Before You Start

Introduction to Capitalism and Markets

Why: Students need a foundational understanding of how free markets operate, including basic concepts of supply, demand, and investment, to grasp the complexities of the stock market.

The Roaring Twenties: Society and Culture

Why: Understanding the social and cultural context of the 1920s, including consumerism and optimism, helps explain the environment in which speculation thrived.

Key Vocabulary

Stock Market Speculation	The practice of buying stocks with the expectation that prices will rise rapidly, often without regard for the company's underlying value.
Buying on Margin	A method of purchasing stocks by borrowing money from a broker, using the purchased stocks as collateral. This magnifies both potential profits and losses.
Economic Bubble	A situation where asset prices rise to unsustainable levels, driven by speculation, before collapsing suddenly.
Wealth Inequality	The uneven distribution of financial assets and income among a population, where a small percentage holds a disproportionately large share.
Credit Expansion	An increase in the availability of loans and borrowing, often fueling consumer spending and investment, but potentially leading to debt crises.

Watch Out for These Misconceptions

Common Misconception

The stock market crash was the only cause of the Great Depression.

What to Teach Instead

The crash was a trigger, but the underlying causes included overproduction in farming, high tariffs, and a weak banking system. Using a 'multi-causal' diagram helps students see the crash as the 'last straw' rather than the only cause.

Common Misconception

The Depression ended quickly once the government started spending money.

What to Teach Instead

The Depression lasted for a decade, and in many countries, it only truly ended with the massive increase in government spending for WWII. Peer discussion of the 'long-term' nature of the crisis helps students understand the depth of the economic damage.

Active Learning Ideas

Simulation Game: The Economic Domino Effect

Students represent different sectors of the economy (banks, factories, farmers, workers). As the 'crash' happens, they must see how a problem in one sector (banks) quickly leads to layoffs and business failures in all the others.

50 min·Whole Class

Think-Pair-Share: The Impact on Australia

Pairs analyze photos and stories of 'susso' (sustenance) camps and the 'dole' in 1930s Australia. They discuss how the Depression changed the Australian government's role in the lives of its citizens and share their thoughts.

30 min·Pairs

Inquiry Circle: The Rise of Extremism

Groups research how the Depression helped extremist parties (like the Nazis in Germany or the New Guard in Australia) gain support. They create a 'propaganda pitch' that these groups might have used to attract desperate people.

45 min·Small Groups

Real-World Connections

• Financial analysts at investment firms like Macquarie Group in Sydney regularly assess market volatility and advise clients on managing risks associated with stock market fluctuations, drawing lessons from historical events like the 1929 crash.
• Economists studying global financial systems analyze patterns of consumer debt and credit availability, similar to how the widespread use of installment plans and margin buying in the 1920s contributed to economic fragility.
• Historians researching the causes of the Great Depression examine primary source documents, such as stockbroker ledgers and personal financial records from the era, to understand the lived experience of economic instability.

Assessment Ideas

Discussion Prompt

Pose the question: 'Imagine you are a newspaper editor in October 1929. What headline would you choose to capture the essence of the economic situation leading up to the crash, and why?' Students should justify their headline choice by referencing at least two economic factors discussed in the lesson.

Quick Check

Provide students with a short, decontextualized scenario describing a financial transaction. Ask them to identify whether the transaction involves 'buying on margin' or 'speculation' and briefly explain their reasoning. For example: 'Sarah bought 100 shares of XYZ Corp. using $1000 of her own money and borrowing $4000 from her broker to complete the purchase.'

Exit Ticket

On an index card, ask students to list one underlying economic weakness of the 1920s and one specific cause of the 1929 Wall Street Crash. They should then write one sentence explaining how these two factors are connected.

Frequently Asked Questions

What caused the Great Depression?

While the 1929 Wall Street Crash was the trigger, the underlying causes included a massive gap between rich and poor, farmers producing too much food (which drove prices down), and people buying too much on credit. When the crash happened, it caused a 'panic' that led to bank failures and a total collapse in spending.

How did the Depression affect Australia?

Australia was hit very hard because it relied on selling wool and wheat to the rest of the world. When global trade collapsed, unemployment in Australia reached nearly 30%. This led to widespread poverty, the growth of 'shanty towns,' and intense political conflict over how to fix the economy.

How can active learning help students understand the Depression?

Economic concepts like 'deflation' or 'the gold standard' can be very difficult to grasp. By using simulations where students have to 'manage' a family budget or a business during a downturn, they experience the real-world impact of these abstract terms, making the history much more relatable and understandable.

What was the 'New Deal'?

The New Deal was a series of programs and laws introduced by US President Franklin D. Roosevelt to provide 'Relief, Recovery, and Reform'. It involved massive government spending on public works projects to create jobs and new regulations to prevent another stock market crash.