The economy of the late 1920s appeared prosperous on the surface, as unemployment was low and basic needs were being met for many Americans. However, there were signs of underlying trouble. Wealth was very unevenly distributed, with the richest 0.1% of families owning 24% of the country's wealth. Most families had little to no savings and relied heavily on debt and speculative investing to maintain their standard of living. Additionally, overproduction had led to too many goods and too little demand, and sectors like farming and mining were struggling. These factors created an unstable foundation for continued economic growth that would be exposed by the upcoming Great Depression.

1. The Economy of the late 1920’s

2. 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

3. 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!!

5. 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

6. 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

7. 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!

8. 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!

9. 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

10. 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

12. 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

13. 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

14. 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!