The 1920s and the Great Depression

I. Conservative SupremacyII. Economic Growth and AffluenzaIII. Stock Market CrashIV. Onset of Depression

I. Conservative Supremacy

Progressives became disaffected after of World War One

Organized labor resented the administration's reaction to the strikes in 1919.

Americans are “tired of issues, sick at heart of ideals, and weary of being noble.”

- A Progressive Editor in 1920

Woodrow Wilson

“It is only once in a generation that a people can be lifted above material things. That is why conservative government is in the saddle two-thirds of the time.”

Warren G. Harding wanted a return to “Normalcy.”

Election of 1920

Chief Justice William Howard Taft, who announced he had been “appointed to reverse a few decisions.”

Taft Court, 1920s

Adkins v. Children’s Hospital (1923)

“The government is just a business and can and should be run on business principles.”

Andrew Mellon

Andrew Mellon on Taxation“One of the foundations of our American civilization is equality of opportunity, which presupposes the right of each man to enjoy the fruits of his labor after contributing his fair share to the support of the government which protects him and his property. But that is a very different matter from confiscating part of his wealth, not because the country requires it for the prosecution of a war or some other purpose, but because he seems to have more money than he needs.”

Tax Reform under Mellon

65

25

0

10

20

30

40

50

60

70

Maximum Income Tax Rate

19211926

Revenue Act of 1926

• Lowered Estate Taxes • Repealed the Gift Tax

Calvin Coolidge on Business

• “The chief business of the American people is business.”

• “The man who

builds a factory, builds a temple. . . the man who works there worships.”

II. Economic Growth and Affluenza

Henry Ford

I want “to democratize the automobile. When I'm through everybody will be able to afford one, and about everyone will have one.”

Affordable Automobiles

1200

290

0

200

400

600

800

1000

1200

1924

Ford Auto WorkerAnnual SalaryCost of Model T

Assembly Line of the Ford Motor Company

Before the assembly line it took Ford workers 12 ½ hours to assemble a car; it took only 93 minutes on an assembly line. By 1927 Ford produced a car every 24 seconds.

Economic Effects of Automobiles

29,000,000

3,700,000

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

By 1929

Automobiles

Workers Connected tothe Auto Industry

3.5 Million Automobiles Purchased in 1923

Bought on CreditPaid for in Cash

65% of the American families had an income under $2000.

A refrigerator cost around $180.

A radio cost around $75

Calvin Coolidge considered the regulation of securities the business of the states, not the federal government.

Election of 1928

Calvin Coolidge, Andrew Mellon and Herbert Hoover in 1928

III. Stock Market Crash

Hoover warned of the evil of “putting the government into business,” and stressed the importance of free enterprise.

Hoover and his dog, King Tut

“Unemployment in the sense of distress is widely disappearing. . . . We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not yet reached the goal, but given a change to go forward with the policies of the last eight years, and we shall soon with he help of God be in sight of the day when poverty will be banished from this nation.” - 1929

“I have no fears for the future of our country. It is bright with hope.”

False Prosperity

252

452

0

100

200

300

400

500

Stock Market

Jan-28 Sep-29

Problems in the Economy

• Declining Demand

• Massive Debt

• Unequal Distribution of Wealth

Effects of Mellon’s Tax Policy

• Per capita disposable income rose about 9% in the 1920s,

• The income of the wealthiest 1% rose 75%, accounting for most of the increase.

• 5% of the population accounted for 1/3 of all personal income

• The wealthy used most of their money to buy stocks instead of consumer goods.

NYC Stock Exchange on Black Friday, October 29, 1929

The Stock Market Crash

252

452

224

58

0

100

200

300

400

500

New York Times Stock Market Average

September October November Jul-32

The crash started a nationwide run on banks, destabilizing the country’s entire financial and economic system.

IV. Onset of Depression

“Let the slump liquidate itself. Liquidate labor, liquidate stock, liquidate the farmers, liquidate real estate . . . It will purge the rottenness out of the system.”

- Andrew Mellon

In 1930 Hoover and Congress cut personal and corporate income taxes.

Lack of Investment10

7

3

1

0

1

2

3

4

5

6

7

8

9

10

New Issues of Capital, in Billions of Dollars

1929 1930 1931 1932

Unemployment

4

7

11

0

2

4

6

8

10

12

Unemployemnt in Millions

1930 1931 1932

Bank Closings

659

1352

2294

200

853

1700

0

500

1000

1500

2000

2500

Number of Banks Bank Deposits in Millions

1929 1930 1931

“Hoover” Acquires New Meanings

• Hoover Flag

• Hoover Blanket

• Hooverville

Hut in a California Hooverville

Resident in an Ohio Hooverville

Hoover considered unemployment and poverty a local problem for cities and charities

• Local funds covered 4/5 of the cost of relief by 1932.

• Relief payments in New York were $2.39 a week for a family.

• Local agencies were running out of money.

Paris Breadline—in the spring of 1931 financial panic swept Europe, leading to a further sell off in the American stock market

“The depression has been deepened by events from abroad which are beyond the control either of our citizens or our government.”

V. Depths of Depression