Causes class; and lastly in world markets, between

Causes of the Great DepressionIn 1929 the stock market crashed, triggering the worst depression ever in U.

S. history, which lasted for about a decade. During the 1920s, the unequal distribution of wealth and the stock market speculation combined to create an unstable economy by the end of the decade. The unequal distribution of the wealth had several outlets. Money was distributed between industry and agriculture within the U.S.; in social classes, between the rich and middle class; and lastly in world markets, between America and Europe. Due to the imbalance of the wealth, the economy became very unstable.

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The stock market crashed because of the excessive speculation in the 1920s, which made the stock market artificially high (Galbraith 175). The poor distribution of the wealth, excessive speculation, and the stock market crashes caused the U.S. economy to fail, signaling the start of the Great Depression.The 1920s were a time when the American people and the economy were thriving.

This period of time was called the Roaring Twenties. Unemployment dropped as low as 3 percent, prices held steady, and the gross national product climbed from $70 billion in 1922 to nearly $100 billion in1929 (EV 525). However, the prosperity of the 1920s was not shared evenly among the social classes in America. A study conducted by the Brookings Institution stated, 78 percent of all American families had incomes of less than $3,000. Forty percent had family incomes of less than $1,500.

Only 2.3 percent of the population enjoyed incomes of over $10,000. Sixty thousand American families held savings which amounted to the total held by the bottom 25 million families. (Goldston 26). The 40 percent of Americans at the lowest end of the economic scale received only 12 percent of the national income by 1929 (EV 549). This maldistribution of income between the rich and the middle class increased throughout the 1920s.

A major reason for this large and growing gap between the upper class and the working class Americans was that the manufacturing output increased throughout this period. As the production costs fell, wages went up slowly, and prices for goods remained at a constant. The majority of the benefits created by increased productivity fell into the hands of corporate owners. The federal government also helped to make the growing gap between the upper and middle classes. President Calvin Coolidges administration favored business, and as a result, the wealthy invested in these businesses. An example of this type of legislation is the Revenue Act of 1926, which significantly reduced income and inheritance taxes (Goldston 23). The introduction of credit to the American public proved to choke the economy rather than to stimulate it.

To make an economy run properly, the total demand must equal total supply. The economy of the 1920s produced an over supply of goods. It was not that the surplus products were not wanted, but that the people who needed them could not afford the products. The working class spent most of their money on things they needed: food, shelter, and clothes. They also purchased some luxury items, but their income limited them to only a few of these purchases. Meanwhile, the rich were enjoying their increased profits.

While the vast majority did not have enough money to satisfy all of their material wants and needs, the manufactures continued to produce surplus goods. Recognizing that the surpluses could be sold if consumers were financially able to buy them, the concept of buying on credit was established. Credit was immediately popular. Nearing the end of the decade, 75 percent of all automobiles were purchased on credit (EV 526).

The credit system created artificial demand for products which people could not usually buy. People could not spend their regular wages to purchase products, because much of their income went toward their credit payments.The poor distribution of wealth within the U.S extended to entire industries, helping one at the expense of another. The prosperity of the decade was not shared among the industries equally. While the automotive industry was thriving in the 1920s, some industries, such as agriculture, were declining steadily.

Most of the industries that were prospering in the 1920s were in some

The the only man in America making this

The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920’s.

The people of the working class were significantly increasing their output, but their wages only increased slightly. For example, the average worker out put from 1923-1929 increased about 32%, but the average income of the worker only increased about 8% (Gusmorino, Main Causes of the Great Depression). Therefore one may conclude that wages only increased one-fourth the amount production increased. Another amazing feat of the manufacturing increase was that prices for goods stayed the same, therefore the executives in the companies were keeping the mass amounts of profit that were now coming into the company. In fact, one can see that top executives in a certain company increased significantly because their salaries from 1923-1929 rose 64% (Gusmorino, Main Causes of the Great Depression), eight times more than what the workers wages increased.The “roaring twenties” was an era when the United States prospered tremendously.

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The national income rose from $74.3 billion to $89 billion (Gusmorino, Main Causes of the Great Depression). The whole American population did not live through the benefits of the “Coolidge Prosperity.” For example McElvaine, in his research on the Great Depression, stated, “in 1929 the top 0.1% of the population had an income equivalent to the bottom 42% of the population,” (McElvaine, Causes of Depression). That same top 0.

1% of the population in 1929 had 34% of all the savings, while 80% of the population had no savings at all. A good example of this maldistribution of wealth can be seen with Henry Ford. In 1929, Ford reported an income of fourteen million dollars, while the average income of the American people was seven hundred and fifty dollars annually (McElvaine, Causes of Depression).

If one were to calculate these numbers by present daily standards, with the average income at eighteen thousand dollars, Henry Ford would be making an astonishing three hundred and forty five million dollars. However, one should be reminded that Ford was not the only man in America making this amount of money, there were many people just like Ford around the Nation. Comparing the 1920’s to today, one could say that such businessmen are like the Internet CEO’s today. With such a growing gap in the income of the people, it was without surprise that such a catastrophic event could occur. The Federal government also could be held responsible for contributing to the growing gap between the rich and the working-class. The President at the time, Calvin Coolidge, and the conservative Congress favored business; additionally, they supported the wealthy individuals who controlled the business.

One great example of the federal government helping the wealthy of the nation came in the Revenue Act of 1926. This acted decreased the amount taxed on a person’s annual salary. For example, a business owner in the beginning of 1926 would have expected to pay six hundred thousand dollars on his annual one million dollar salary; however, when the Revenue Act of 1926 was passed, this businessman was obligated to pay only two hundred thousand dollars of his annual salary (None, Causes of The Great Depression). The driving force behind this tax cut was President Coolidge and Andrew Mellon, the Secretary of the Treasury. Besides the executive and legislative branches, the judicial branch was known for their influence in the growing gap between the socioeconomic classes. In a 1923 Supreme Court case named Adkins vs. Children’s Hospital, the Supreme Court declared minimum-wage legislation to be unconstitutional (Kanjas, Timeline of the Great Depression).

The impact of this a declaration showed that employers did not have to pay their workers any certain wage so that the top executives and stockholders of a company may collect larger profits.The large gap growing between the United States citizens was creating a very unstable economy. According to economists who have studied the Great Depression, in order for the economy to operate appropriately the total demand must equal the total supply. Unfortunately in the twenties this equilibrium with supply and demand was not held; there was incredible excess in the amount of goods produced and unfortunately the price of goods

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