The Great Depression: Economics of the 1920s

 

 

 

 

 

 

 

 

 

 

The Economy in the late 1920’s

OPTIMISM

  • 10 years added to the life expectancy (59 men / 63 women)
  • Republican Hoover (self made millionaire) wins presidency in ‘28
  • 1925 stocks valued at 27 billion – October 1929, 87 billion
    • since 1914 “real wages” had increased 40%
    • even the Socialists were optimistic, believing capitalism could provide for all
  • a book, The Man Nobody Knows, in 1925 portrayed Jesus’ life story in business terms
  • picked up 12 men from the bottom & conquered the world
  • 3 Republican Presidents tied nation’s interests with business interests
  • optimism led to buying stock with borrowed money
  • Welfare Capitalism” = companies raised wages, health plans, vacations, even English classes for immigrants (to counter union organization)

TROUBLE???

  • uneven riches (out of balance) – rich got richer – 200 large companies controlled 49% of industry
  • personal wealth concentrated tiny percentage of families
  • richest 24,000 families (.1 percent) held 34% of country’s total savings
  • 80% of families had no savings
  • buying on credit
  • people flocked to buy radios, vacuums, refrigerators, even if they could not afford them
  • installment buying
  • get rich quick through the market – with life savings – speculation – buy on margin
  • too many goods, less demand (supply & demand)
  • farmers did not share in the 1920’s prosperity
  • 6000 rural banks failed
  • factory workers = low wages & long hours (coal mines & textile mills, 56 hour weeks, $10 a week

***Today, the top 1% of U.S. households has more wealth than the bottom 95%. (data from 2001)

 

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