The Economy in the late 1920s Angela Brown Chapter 22 Section 1

Mood of U.S. optimistic. Medical advances reduced deaths from whooping cough, diphtheria, and other serious diseases the # of infant deaths declined. Life expectancy up 10 years (59 years Men/63 women)

Economy Appears Healthy H oover self-made millionaire – widely admired O rganized food relief in Europe during WWI. S ec. of Commerce under Harding- Coolidge / PresidentDetail.aspx?ID=31&imageID=22

“Wonderful Prosperity” 1925 market value of all stocks $27 billion 1928 alone stock values rose $11.4 billion weathervane of nation’s economy Oct. 1929, stock values hit $87 billion Value of worker’s wages risen 40% Unemployment below 4% /09mn5D44ocfWU/610x.jpg

“Everybody Ought to be Rich” Business success became almost a religion for some article stated saving $15 a week over 20 years could bring a $400 a month income from investment – John J. Raskob “Anyone can be rich, but ought to be rich”

John J. Raskob was a financial executive and businessman for DuPont and General Motors, and the builder of the Empire State Building. He was chairman of the Democratic National Committee from 1928 to 1932 and a key supporter of Alfred E. Smith's candidacy for President of the US. After Franklin D. Roosevelt became President, Raskob was a prominent opponent of the New Deal through his support of a number of anti- Roosevelt organizations including the American Liberty League. Raskob was also a leader in the Association against Prohibition.

People wildly buying stocks and borrowing money. Hoover administration did nothing to discourage borrowing. /1929-stock-market-crash.jpg

Welfare Capitalism Economy stabilized – organized labor lost members Companies launched strategies to meet worker’s needs w/o demands from unions New approach to labor relations = Welfare Capitalism Employers raised wages and provided benefits – pd. Vacations, health plans, English classes for immigrants

Economic Danger Signs Uneven Prosperity - 1 Rich got richer on stock market Huge corporations dominated industry 200 large companies controlled 49% of U.S. Industry 1929 – 24,000 families (0.1% of population) had incomes of more than $100,000 – held 34% of U.S. total savings

71% families earned less than $2500 a year 80% families had no savings Many families still required even children to work for survival.

Buying on Credit - 2 Increase in personal debt was another sign. Bought things they couldn’t afford. 0_edin_t/0_edinburgh_transpor t_cars_vans_lorries_-_the_city_ cars.jpg

Playing the Stock Market - 3 Climbing stock prices encouraged widespread speculation – the practice of making high-risk investments in hopes of getting high gains. Before WWI only wealthy played stock market. Press reported stories of ordinary people who made fortunes.

Small investors entered market with their life savings. Stock brokers encouraged buying on margin It allowed investors to purchase stock for a fraction of its price (10-50%) and borrow the rest. Brokers charged high interest and could demand payment at anytime. If stock went up could pay off loan and interest and still make money.

Too Many Goods, Too Little Demand - 4 People could not afford to buy goods as fast as assembly lines turned them out. Overproduction caused industries to slow down after 1925 – automobile (associated industries) – housing construction

Trouble for Farmers - 5 Farm prices plummeted after WWI Many farmers had bought machinery = more land while prosperous Could not pay = banks suffered (6,000 out of business) McNary-Hugen Farm Relief Bill – increase crop prices Congress passed in 1927 and 1928 – President Coolidge vetoed – not government job to provide assistance

Trouble for Workers - 6 Laborers still worked long hours for low wages. TN – women worked 56 hours a week – 16 to 18 cents an hour = $10 a week Factors = uneven wealth, rising debt, stock speculation, overproduction, hardships of farmers/laborers = clear signal of trouble in economy