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The Economy in the late 1920s Angela Brown Chapter 22 Section 1 1 • 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) 2 Economy Appears Healthy • Hoover self-made millionaire – widely admired • Organized food relief in Europe during WWI. • Sec. of Commerce under HardingCoolidge http://www.whitehousehistory.org/04/subs_pph / 3 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 http://cache.daylife.com/imageserve /09mn5D44ocfWU/610x.jpg 4% 4 “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” http://www.hagley.lib.de.us/raskob-t.jpg 5 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 antiRoosevelt organizations including the American Liberty League. • Raskob was also a leader in the Association against Prohibition. 6 • People wildly buying stocks and borrowing money. • Hoover administration did nothing to discourage borrowing. http://timeline.demesnes.net/wp-content/uploads/2008/11 /1929-stock-market-crash.jpg 7 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 8 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 9 • 71% families earned less than $2500 a year • 80% families had no savings • Many families still required even children to work for survival. 10 Buying on Credit - 2 • Increase in personal debt was another sign. • Bought things they couldn’t afford. http://www.edinphoto.org.uk/ 0_edin_t/0_edinburgh_transpor t_cars_vans_lorries_-_the_city_ cars.jpg 11 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. 12 • 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. 13 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 14 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 15 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 16