Large-Scale State




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Differences in income


Income was distributed very unevenly throughout the country. People living in the northeast and far west enjoyed the highest per capita incomes:

Per capita incomes in 1929


Northeast $921

West $881

Southeast $365

South Carolina $412 (non-agricultural)

$129 (agricultural)

The gaps were widening.


Even in the industrial areas, many people were between jobs a lot. Sometimes people were unemployed for a month before finding another job. This was at a time when there were very little welfare or unemployment benefits and more relief was supplied by charitable organisations.

Women


Women did not, on the whole, enjoy improved career opportunities. They were still expected to be married homemakers. In 1930 there were only 150 female dentists and 100 female accountants in the whole USA. The number of women receiving a college education actually dropped by 5%. Women tended to be employed in low-paid menial jobs. Where a woman did the same work as a man, the woman would receive less money.

Ethnic minorities


Ethnic minorities were at the bottom of the pile where the distribution of income was concerned. Native Americans eked out a miserable existence on infertile reservations. The Black population – 10% of total US population tended to live in the south – itself the poorest region of the USA. Considerable migration north, particularly to large cities took place. There they faced discrimination when trying to find employment and housing.



  1. Agriculture

During the war agriculture had prospered as demand from Europe forced food prices and farmers’ profits up but as European agriculture recovered after 1918 American farmers started to suffer. Production was always greater than demand, not just in America, but also in the whole world, so surpluses could not easily be exported. Too much food meant that prices fell sharply. The fact that wartime prices were so high made their collapse after 1918 all the more shocking.
Farmers would not willingly cut production. They couldn’t trust that their neighbours would do the same. The farmers wanted the Government to guarantee prices. They would not do it. To survive, many farmers planted more crops instead of less, only worsening the problem of overproduction and falling prices.
Farmers generally had heavy debt payments – for land, for equipment and supplies. More and more farmers were forced to sell up as they saw their mortgages foreclose and the loss of their land. There were 1,000,000 less farms in 1930 than there had been in 1920. Some farms operated at a 66% loss. Those who remained were still unable to enjoy what were becoming ‘essential’ facilities: in the mid 1920s a mere 7% of farms had gas or electric light, and just 10% had piped water. Farmers became bitter.
Farmers wanted the Government to compensate them for their losses. However, the only real solution to the problem was a system of co-operation between farmers and the Government to end surpluses and bring production down to equal demand. This was bitterly opposed by most farmers who hated the thought of Government interference. Instead they sought higher tariffs, but these would have done nothing to help. The situation was complicated by the fact that American eating habits were changing. Consumption of barley for beer fell by 90% due to prohibition, and demand for wheat fell by 25% in the years 1900-1925, as an increasingly prosperous population preferred more luxurious foods. Yet, a new pattern was emerging in American agriculture. Large well-financed farms were accounting for more and more of the country’s agricultural output. This was known as agri-business. These farms did relatively well.
The census of 1920 showed that the majority of the US population lived in the towns and cities. Cheap food is good for the urban consumer in the short term, but in the long run industry suffered, because rural poverty meant that those in the countryside could not afford to buy the goods produced on such an enormous scale in the towns. At the bottom of the agricultural economy were farm labourers, particularly migrant workers. 75% were Mexican. Most of these labourers moved from region to region as different crops ripened. There was little opportunity for a social life or schooling.



  1. Get rich quick schemes

To get rich quick was the aim of many Americans in the 1920s. They invested in hugely speculative ventures and inevitably many lost money. This was a golden opportunity for confidence tricksters and crooks. Victims of such scams were often criticised for their greed. Large-scale speculations took place:
Florida land Boom

Before the 1920s Florida was a relatively undeveloped state with a small population. But a wealthy industrialist built hotels and with all-year sun and the advent of the car, Florida became accessible to the middle class for vacations and retirement. Large-scale coastal developments followed. Salesmen sold land from pictures in glossy brochures. People invested in such unseen developments to make a quick profit. Sometimes they paid on credit. It was said that someone who bought a parcel of land for $25 in 1900 and sold it for $150,000 25 years later. Such a boom was only sustained if there were more buyers than sellers. Demand was tailing off by 1926. The hurricanes of 1926 had killed 400 people and left 50,000 homeless. There were scandals of bad locations. The land boom collapsed.


Stock Exchange speculation

Many Americans dreamed of becoming rich by making a big profit on the Wall Street stock market. Buying shares in a company would do this. If the company made money you would get a share in the profits. These shares – or stocks – would then be worth more, so you could sell them at a higher price on the stock market. Many people borrowed money to buy shares in the hope that share prices would carry on going up.





  1. Banking system

The banking system allowed the banks to regulate themselves without the Government interfering. The bankers would act in their own interests and in the interests of their institutions rather than in the interests of the nation as a whole.
There were 30,000 banks in the 1920s. Most were very small and therefore unable to withstand major setbacks. If they collapsed their depositors would lose virtually all their savings.



  1. Cycle of international debt

This was probably at the heart of the economic problem. The Americans wanted the European nations to repay the loans that they had taken out through the war but some countries had problems making the payments.



  1. Slow down

Was the boom slowing down? It was dependent upon continuing domestic consumption because high tariffs and the generally depressed conditions in Europe meant that American producers could sell comparatively little abroad.
There were three indicators that point to a slow down:

  • Problems in small business: small business often faced hard times. During the 1920s, for every 4 businesses that succeeded, 3 failed. The Government was no more prepared to help out failing industrial concerns than it was to help families in difficulty.

  • Slow down in the construction industry: economic historians agree that the state of construction is generally a good indicator of the overall health of the economy. The mid-1920s saw a great boom in construction but house, office and highway building tailed off after 1926. Higher unemployment in construction-related businesses was inevitable and had knock-on effects.

  • Falling domestic demand: it is generally agreed that the domestic market became flooded with goods that could not be sold. More and more people already had bought their major goods such as cars, and refrigerators and did not need to buy new ones. Others were in no position to spend money on non-essential items.

Although the American economy was booming, not everyone shared in the affluence. Six million families, 42% of the total, had an income of less than $1,000 a year and certainly could not afford the new cars and gadgets rolling off the production lines. Presidents Coolidge and Hoover advocated ‘rugged individualism’ that basically meant ‘every man for himself’, with no welfare support from the Government for the poor.




Prosperity was concentrated at the top. While from 1922 to 1929 real wages in manufacturing went up per capita 1.4% a year, the holders of common stocks gained 16.4% per year…One-tenth of 1% of the families at the top received as much as 42% of the families at the bottom. Every year in the 1920s, about 25,000 workers were killed on the job and 100,000 permanently disabled. Two million people in New York City lived in tenements condemned as firetraps.
Howard Zinn, A People’s History of the United States, 1980



The Day Wall Street Crashed

The Wall Street Crash and its impact

A


Buying shares
Many Americans dreamed of becoming rich by making a big profit on the Wall Street stock market. Buying shares in a company would do this. If the company made money you would get a share in the profits. These shares – or stocks – would then be worth more, so you could sell them at a higher price on the stock market. Many people borrowed money to buy shares in the hope that share prices would carry on going up.
merica went on a spending spree in the Roaring Twenties. Throughout the 1920s Americans had been on a reckless spending binge, both on goods and on shares. The speculation in shares was financed largely by loans (credit) from brokers, everyone being confident that ever-rising values would secure their investments.
October 24 1929 – the day’s business on the New York Stock Exchange on Wall Street, the largest money market in the world, began as much as usual. But brokers were nervous. The past few weeks had seen violent swings – both in prices and between optimism and fear. On this, Black Thursday, the stock market fell. The party was over. Prices fell so dramatically that thousands of shareholders – whose ‘fortunes’ existed only on paper – were forced to sell their investments. This in turn fuelled a further downward spiral in prices.


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