Factors of Prosperity

FACTORS UNDERLYING THE PROSPERITY OF THE 1920S MASS CONSUMPTION

SPECULATION BOOM UNEVEN PROSPERITY

MASS CONSUMPTION

• CHANGES IN PRODUCTION LED TO NEW PATTERNS OF CONSUMPTION (MASS MARKETS FOR GOODS) • MORE ADVERTISING • WORKERS WITH HIGH WAGES & MORE TIME= GREATER PURCHASING POWER • NEW PROGRAMS FOR INSTALLMENT PURCHASES AND BUYING ON CREDIT • SMALL DOWN PAYMENT TO TAKE ITEM HOME : PAY THE REST IN MONTHLY INSTALLMENTS + INTEREST • CONSUMERS WERE ABLE TO BUY MORE (AND MUCH MORE EXPENSIVE) GOODS. • CARS, REFRIGERATORS, WASHING MACHINE, VACUUM CLEANER, FURNITURE, RADIOS, ETC

• ONCE ONE SELLER OFFERED AN INSTALLMENT PLAN, COMPETITORS WERE USUALLY FORCED TO DO THE SAME

SPECULATION BOOM • SPECULATION IS THE PURCHASE OF ANY ITEM (NOT FOR PERSONAL USE), BUT IN THE HOPE OF SELLING IT LATER AT A HIGHER PRICE • 1920S SAW A SPREAD OF SPECULATION – STOCK AND REAL ESTATE

• DEVELOPMENT OF NEW INDUSTRIES, IMPROVED PRODUCTION TECHNIQUES, AND THE EXPANSION OF MASS MARKETS LED SHARES OF CORPORATIONS LISTED ON THE STOCK MARKET TO CLIMB TO DIZZYING HEIGHTS • GAINS IN STOCK FUELED SPECULATION EVEN MORE • PEOPLE READ ABOUT THE SUCCESS OF OTHERS AND IT ENTICED THEM TO BUY STOCKS FOR “EASY PROFITS” • MORE PEOPLE BOUGHT STOCKS… STOCK PRICES KEPT GOING UP….

UNEVEN PROSPERITY • WEALTH WAS HIGHLY CONCENTRATED • 1929 STUDY SAID THE TOP ONE THOUSANDTH (.1%) OF AMERICANS COMBINED INCOME WAS EQUAL TO THAT OF THE BOTTOM 42% • SAME TOP GROUP CONTROLLED ABOUT 1/3 OF ALL SAVINGS • ¾ OF AMERICANS HAD NO SAVINGS AT ALL • MANY STILL IN POVERTY • DUE TO TRACTORS AND THE SPREAD OF ELECTRICITY, FARMERS FACED LOWER INCOME DUE TO OVERPRODUCTION • RAILROADS SUFFERED FROM NEW COMPETITION WITH CARS • TEXTILE WORKERS FACED LOWER WAGES BECAUSE OF FOREIGN COMPETITION • MINORITY GROUPS FACED CONSTANT DISCRIMINATION