����tv

Whilst the American economy had undoubtedly grown during the 1920s, there was a huge gap between rich and poor.

Additionally, much of the wealth was concentrated at the top of society.

A third of all income was earned by just 5 per cent of people.

At the same time, more than 60 per cent of Americans lived just below the poverty line.

All of this meant that there was an unequal distribution of wealth.

The wages of many workers only rose slowly and the weakness of the trade unions meant that they could not campaign effectively for better pay and conditions.

In the construction industry, there was only a 4 per cent increase in pay during the decade.

Whist many Americans had taken part in the consumer boom, they had done so using cheap credit.

This left many of them with debts.

60 per cent of cars and 80 per cent of radios were bought on credit.

Whilst the overall economy had grown, the unequal distribution of wealth had hit specific groups.

Black Americans who had moved to the Northern states were often said to be the ‘last to be hired and the first to be fired’.

They found it difficult to get skilled jobs and most remained in cheap manual labour.

The situation in the Southern states was even worse because of the impact of segregation.

Overproduction and underconsumption was a key problem in the American economy by the end of the 1920s.

When this had happened in the past, American companies could sell their goods overseas.

However, European countries had put tariffs on American goods in retaliation for protectionism which made it incredibly difficult to export goods.

This left the companies with only the American market to sell in.

However, if an American family bought a car once only every number of years, it was difficult to sell them another.

This meant there were too many products on the market and so prices dropped, which meant less profits for the companies.

In turn, their share prices, an indication of the health of a business, dropped.

Many ordinary Americans had their savings invested in these shares, so they had even less money to buy goods.

It was a vicious circle.

Farmers had prospered during World War One, but were among those who suffered most during the boom.

The income of a farmer was around $275 per year and the national average was $750. By 1928, half of farmers were living in poverty.

This was due to several factors:

• They were producing more crops than needed, so prices fell.
• They could not sell their products overseas because of tariffs and a surplus of food in other countries.
• Prohibition led to a 90 per cent fall in demand for barley which had been used to make alcohol.
• Changing tastes in food in America meant there was a 25 per cent decline in demand for wheat. There was also competition from Canadian wheat growers.

Overproduction and underconsumption of agricultural products meant that farm income fell from $22 billion in 1919 to $13 billion in 1929. Three million rural families earned less than the national average.

Farmers borrowed money from the banks to be able to survive.

They got into crippling debts which reached $2 billion in 1929 and many had to sell up.

Roughly 600,000 farmers lost their farms in 1924 alone.

Many became travelling vagrants - known as hobos - who wandered around America looking for any type of work.

Others tried to survive by using more mechanisation and expanding the acreage they farmed, but this only made the overproduction worse.

• Many black American farm labourers were sharecroppers.
• Sharecroppers rented land owned by white landlords and had to pay for this from a ‘share’ of their crop.
• When the price of crops fell or the boll weevil devastated cotton crops, they were either sacked or did not receive the share of the crop to which they were entitled.
• The problems in agriculture left the sharecroppers destitute.

The traditional industries (coalmining, textiles, shipbuilding, etc.) declined and many people were made unemployed.

Those workers who managed to keep their jobs received very low wages.

The coal industry was producing too much coal and not enough people and countries wanted to buy it.

Oil was becoming a more popular source of energy for industry.

By 1929, there were a third less coal miners than there had been 20 years previously, as mine owners increasingly turned to mechanisation.

Shipbuilding was another major industry that made thousands redundant due to a reduction in the demand for new ships.

The textile industry began to use new synthetic fibres.

Rayon became a very popular substitute for cotton, but fewer workers were needed to produce rayon than cotton.

Those who kept their jobs earned an average of only $9 per week in 1926.

Whilst the policies of the Republican presidents had helped contribute to the boom, they also caused problems in the long term.

Protectionism: this had introduced tariffs on foreign products to keep American-made goods cheaper for consumers. However, European countries retaliated by placing tariffs on American products. This meant that when they overproduced, they could not export their surplus.

Laissez-faire: The US Congress tried a number of times to pass laws to help the farmers, but this action was vetoed by President Coolidge who thought that government should not interfere in the economy and refused to budge from his laissez-faire policy.

Weakening unions: Trade unions found it difficult to campaign for better wages. This meant that many ordinary Americans could not keep up with rising prices.

Lack of regulation of banks and finance: There were very few rules for banks and this enabled them to lend money recklessly to businesses that could not pay the loans back.

People who benefited from the boom:

• Owners of consumer goods factories.
• Assembly line workers.
• White people in the cities.
• Speculators on the stock market (until 1929).
• Builders.
• Middle class women.

People who did not benefit from the boom:

• Workers in traditional industries (for example, coal miners, textile workers, ship builders).
• Farmers (with the exception of fruit growers in California and large grain farmers in the Mid-West).
• Black Americans (especially sharecroppers).
• Immigrants.