American Economy Problems

Submitted By bub1012
Words: 2075
Pages: 9

Problems in the Economy

Although the American economy was booming, not everybody shared in the growing 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 a policy of ‘rugged individualism’ that meant ‘every man for himself’, with no welfare support from the Government for the poor. The growth of mass production, mass consumption and mass culture, as impressive as they were, excluded a very large segment of the population. Economic growth, rather than diminishing the gap between the rich and poor, increased it.

Prosperity was concentrated at the top. From 1922 to 1929: • Real wages in manufacturing went up per capita 1.4 % • Wages rose on average by 40% but in 1929 36,000 of the wealthiest families received as much income as the 12 million poorest • Some workers experienced falling wages and massive unemployment.

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.

There are six identified problems that existed within the economy in the 1920s that would affect the stability of the boom. 1. Uneven distribution of income 2. Agriculture 3. ‘Get rich quick’ schemes 4. Banking system 5. Cycle if international debt 6. Slow down.

Uneven distribution of income

Prosperity in the 1920s was very uneven. The rich got richer, average workers’ incomes rose slowly. Some workers experienced falling wages and massive unemployment. Many farmers suffered through most of the decade. Blacks fared worse than Whites. The unequal distribution of wealth, though generally ignored by political and business leaders, was a central feature of the 1920s.


The traditional industrial areas of the USA were the northeast and the mid-west – Illinois, Michigan and Pennsylvania. These areas also attracted the new motor and electrical goods industries because: • There was coal • Good, well-established transport networks • Mobile, often immigrant labour force • Close to large centres of population

As a result, other regions in the USA, notably the west and south had only sparse industrial development with comparatively small towns. In such areas, the major employer was agriculture.

However, even in the industrial heartland, the situation was not always rosy. The traditional industries faced increasing competition from those that were developing. Coal suffered at the hands of the oil industry, the cotton industry was hit by the demand for cheaper synthetic fibres. The passenger railway services were hit by the growth of the motorcar.

So some groups lay outside the general prosperity. They were areas of more or less permanent slump: • Textile towns of New England and Southern Piedmont • Coal mining regions of Kentucky and Illinois • Agriculture. Most farmers were debt-ridden and depressed although there was some recovery in dairy, fruit and vegetable farming.

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 did not, on the whole, enjoy improved career opportunities. They were still expected to be married