The Economy in the late 1920s

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The Economy in the late 1920s

• Angela Brown
• Chapter 22 Section 1

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• Mood of U.S. optimistic.
• Medical advances reduced deaths from whooping
  cough, diphtheria, and other serious diseases.
• 1900 the of infant deaths declined.
• Life expectancy up 10 years
• (59 years Men/63 women)

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Economy Appears Healthy

• Hoover self-made millionaire widely admired
• Organized food relief in Europe during WWI.
• Sec. of Commerce under Harding-Coolidge

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Wonderful Prosperity

• 1925 market value of all stocks 27 billion
• 1928 alone stock values rose 11.4 billion
• weathervane of nations economy
• Oct. 1929, stock values hit 87 billion
• Value of workers wages risen 40
• Unemployment below 4

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Everybody Ought to be Rich

• Business success became almost a religion for
  some.
• 1929 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

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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.

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• People wildly buying stocks and borrowing money.
• Hoover administration did nothing to discourage
  borrowing.

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Welfare Capitalism

• Economy stabilized organized labor lost members
  
• Companies launched strategies to meet workers
  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

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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

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

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Buying on Credit - 2

• Increase in personal debt was another sign.
• Bought things they couldnt afford.

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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.

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• 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.

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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

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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

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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