Economic Causes
International
The New York stock exchange crash pushed the world into economic turmoil causing depression in many countries.
On October 24th 1929 the ‘Wall Street Crash’ plummeted the world economy into a Great Depression. The New York Stock exchange crashed which impacted politics, society and the economy on an international scale. On the day of the Wall Street Crash also known as 'Black Thursday', twelve million shares were sold creating a substantial loss. In the latter three years, greater than 75 billion dollars was wiped away from the value of shares in numerous companies. Countries that were less affected by the Depression were the poorer, third world countries with subsistence economies. These countries were self-sufficient, they grew their own food and tried to meet their own needs so they depended less on overseas trades. Whereas United Sates, Australia, Britain and New Zealand alongside many other westernized countries received a massive shock in the downfall of the economy. Perhaps these countries were highly affected because they were prosperous and it was unusual for them to see food rotting, factories being shut down and a surge of unemployed roaming the streets in need of money.
Domestic
The New Zealand economy was vulnerable and was highly dependent on exporting goods to Britain. Therefore when the British marketplace crashed it collapsed the New Zealand economy.
The international downfall of the economy impacted New Zealand significantly causing lower trade prices, the reduction of production and income, substantial unemployment and poverty. New Zealand did not immediately feel the effects of the stock market crash in 1929. However by the early 1930s New Zealand was starting to be overwhelmed by the crashes negative effects. New Zealand’s domestic economy was significantly dependent on the exportation of goods to the United Kingdom. At the time of World War 1, 1914-1918 there was a mass demand from Britain. They wanted farm products and manufactured goods to be supplied to the vast majority of the British army serving in Europe. Prices were inflated due to the time period of war until its termination. This created an economic boom within the New Zealand economy but was shortly cut off in the 1920s. W.H. Oliver stated in his book The Story of New Zealand that “New Zealand has accepted a perpetually precarious position, one of dependence on overseas markets, creditors and shipping” this means that New Zealand struggles with their economy because they are not the ones who control it, instead it is the countries surrounding New Zealand who do. The demand for wool and meat came to a sudden end. By March 1921 saw the end of quotas for butter and milk. The British marketplace crashed triggering New Zealand’s economic downturn. Farmers whom bought land to create products due to the demand were subjected to losing their land. To obtain the farming lands, farmers had to take out loans and mortgages with the positive mindset that they would be able to pay the debt back. The farmers were in this frame of mind due to the high demand of exportation of goods to Britain. After World War 1, 22,000 soldiers returned and decided to borrow money at a sum of 22 million dollars to buy farms, however now they incurred debt. Business men in the city were also suffering from a decline in activity. While the demand for goods began to decrease the productivity was increasing. The productivity increase caused a mass oversupply of goods such as meat, butter and wool, which generated prices to fall. New Zealand began to export their goods less and less to Britain, between the years of 1928 and 1932, export returns had fallen by 40%. The price of wool had fallen by an astounding 60%. By 1933 the income of New Zealand had decreased by 40% from its 1929 economic state. The number of unemployed people increased. Other countries started to introduce what was called a tariff or tax on goods that were imported from different countries. The intention of creating a tariff was to reduce the rate in which people import from different countries and to encourage home grown products to save costs. This impacted New Zealand because Britain did not want to pay the tariff on imported goods from New Zealand, which helped contribute to the reducing economy and the unemployment rate. This ensued with a horrible cycle of goods being produced and people not buying these goods, the fall in prices and the unemployment then further reduced people’s ability to buy items. ‘Poverty in a land of plenty’ was the New Zealand civilian’s label for the Great Depression.