Economy Of The Late1920s

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Information about Economy Of The Late1920s

Published on March 5, 2014

Author: kbeacom


The Economy of the late 1920’s

Positives  Number of infant deaths down  Life expectancy increased to 59 for men, 63 for women  Economy appeared healthy  Many assumed the prosperity would continue

Economy  Coolidge, “I do not choose to run for President in 1928”  Hoover easily wins against his opponent, Al Smith; anti-Catholic sentiments aided Hoover’s win  Hoover promises to preserve “rugged individualism”  Hoover largely followed Coolidge’s economic policies  Public thought prosperity would continue under him  In 1925, all stocks were valued at $27 billion  In 1928 alone, value went up $11 billion  By early October 1929, stock values were at $87 billion!!

Other positives  Since 1914, workers’ wages rose by 40%  Unemployment was under 4%  Almost everyone’s basic needs: food, clothing, shelter: were being met  Investing lots of income was seen as normal  Buying on credit was popular; people were buying luxury items, things they didn’t necessarily need

Welfare Capitalism  Strategies by businesses to meet the needs of their workers  Could avoid union intervention, prevent strikes, keep productivity high  Paid vacations, health plans, recreation programs, and more  As a result, organized labor lost members in 1920’s

Signs of Trouble!  Most not seen until later…too late!  1. Uneven prosperity -rich got richer -big corporations, not small businesses controlled industry -200 companies controlled 49% of industry in US -the top 0.1% of families had 24% of wealth!

Uneven Prosperity  In addition, 71% of families earned less than $2,500 a year  80% of families had NO savings  Also, taxes were cut, which at the time only the rich paid, so they benefitted by big tax cuts!

2. Personal Debt  Credit, installment plans, whatever to buy new products  60% of automobiles & 70% of furniture bought this pay  No money to pay for them!  Most felt future income could pay for current debt  Prosperity led to frivolous spending

3. Playing the Stock Market  Speculation in the market was big, “Get Rich Quick” attitudes  Big risks in hopes of a huge return  All types of incomes were trying it  Buying on margin: less wealthy would buy 10-50% of a price of a stock, and borrow the rest  Brokers charged high interest rates and could demand payment at any time  Borrowers could sell anytime and make enough to pay off loan and broker, and still make $$!  Market was largely unregulated

4. Too many goods, too little demand  Warehouses overstocked in US  More goods than consumers could buy  Industries slowed in late 1920’s as a result  Auto industry slumped after 1925  Steel, rubber, glass also declined as a result  Housing construction fell 25% in 1928-1929

5. Trouble for Farmers and Workers  Farms were failing due to low prices for goods  Overproduction  Europe returned to growing its own crops  Rural banks would give farmers more time to pay loans, but if they didn’t, they could close  6,000 rural banks closed in late 1920’s: BEFORE the crash!  Coolidge vetoed a bill TWICE that would help farm prices increase: BAD MOVE

5. Continued  Laborers often still worked long hours for low wages  Bad conditions still in coal and textiles  Women in TN mills worked 56 hours a week at 16-18 cents an hour: $10 a week!

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