Inequalities of wealth

How far did the USA achieve prosperity in the 1920s?

Going Deeper

The following links will help you widen your knowledge:

Basic accounts from BBC Bitesize:

- Economic problems in the 1920s

- People who prospered

- People who missed out

- Life for Black Americans

- Life for Native Americans

  Essay: What was the impact of the Boom on the lives of different groups of Americans?

Stuart Chase, Prosperity: Fact or Myth (1929)

The 'cruel illusion' of America's 'prosperity decade' 

Vincent Geloso questions EVERYTHING (2020) - essential reading

'Labour' and 'Capital' - extensive resources about unions, strikes, worker-employer relations, and the balance between labour and capital in the free marketplace

YouTube

Daily Life in the 1920s - traditional account

People who prospered [BUSY FEW]

If you do a google search for "which groups prospered in America during the 1920s" you turn up remarkably few sites – most seem immediately to get down to the business of who didn't prosper. 

The economist and social theorist Stuart Chase found that, even amongst groups which were supposed to be prospering, some were struggling, and for others that increased prosperity came at a price – e.g. debt, or a more pressured way of working, the pressure of keeping up with the Joneses, or a world where a household now NEEDS money, and can no longer 'get by', producing enough itself to support itself.  Business, commerce, the cityscape, culture – all showed signs of huge progress ...  but as for "economic security and peace of mind", that had not happened for most people.  The 1920s Boom, he concluded, was "a rate of advance rather than a state of affairs".

Nevertheless, it is possible to identify some groups of people who seem generally to have boomed with the Boom – basically, if you were in the right place at the right time with the right skills and right drive (especially if you came from an advantaged background), you could do very well in America in the 1920s:

1. Business owners

   Although times got worse for small businesses, wealthier businessmen and corporate executives (notably in steel, oil, automobiles construction and housing) were able to reap the rewards of huge profits.  By 1930, 100 corporations controlled half of the USA’s business interests.  In 1924 Henry Ford paid $2.6m in tax, his son Edsel $2.2m ...  and John D Rockerfeller Jr triple that.

   Bankers such as JP Morgan Jnr made lots of money from the credit boom, the stock market boom … and lending money to foreign countries. 

   Cartels, trusts and monopolies ‘fixed the market’ to keep prices high and wages low. 

   Some large farmers prospered, and niche producers such as salad growers and dairy farmers near cities. 

2. Upper middle classes

   Managers, engineers and professions such as lawyers, accountants, advertisers – i.e. the upper ranks of white-collar workers – were able to shop in department stores or own a motor car. 

3. Stock Investors

   The stock market seemed to be on a constant bull market, with many investors making significant profits especially in the late 1920s. 

4. Young and rich

   For the children of the wealthy – such as the flappers and college students – life was full of fun and opportunity. 

5. Factory workers

   The growth of cities meant that life for skilled urban workers improved – especially where unions had been set up.  Wages largely rose as business owners came to understand that production improved with happier workers.  Working hours decreased by about 20 per cent, leaving more time for leisure. 

   Urban workers also benefited from better housing; e.g. electricity and new consumer goods such as vacuum cleaners and refrigerators.  There were expanded opportunities for entertainment and leisure … IF you had the money. 

6. Entertainment and Leisure

   A few actors, entertainers, musicians and sports personalities were able to prosper.

7. Women

   BBC Bitesize suggests that “many women, benefiting from growing independence after World War One, were able to move into jobs too.  This gave them a greater sense of financial independence”. 

People who missed out [FLOP NUTS]

Not every one shared in the prosperity, however, and there were glaring weaknesses in the American economy in the 1920s. 

However, there is plenty of evidence that all was not well with the American economy in the 1920s, and in 1928 the 'boom' began to slow down. 

Problem areas included:

1. Farming

   Machinery and overproduction led to rapidly falling prices (wheat prices fell from $183.  a bushel in 1920 to 38 cents ain 1929).  In 1929 average income in of farmers was only 40% of the national average, and many farmers could not afford their mortgage; in 1924 600,000 farmers went bankrupt.  Note also that rural areas did not have electricity, so most country-dwellers were excluded from the consumer boom. 

2. Low wage earners

   e.g. unskilled and casual workers, or the 2 million who were unemployed - could not share in the prosperity.  There were great inequalities of wealth; the top 5% of the population earned 33% of the income, while 60% of Americans earned less than $2000, and 40% were below the poverty line (notably farmers/ Black Americans/ immigrants).  Only 3% of semi-skilled workers owned a car. 

3. Old Industries

   Overproduction of coal (which was being replaced by oil and gas) led to mine closures and falling wages.  In 1929 a coal miner's wage was barely a third of the national average income.  There were also problems in the textiles industry (where 'flapper' fashions were reducing the amount of cloth used to make clothes). 

4. Poor Black Americans

   It is difficult for us to appreciate the degree of discrimination and hardship facing African Americans (see Source C).  One million black farm workers lost their jobs in the 1920s.  Black workers in the towns in the north were the lowest paid; the only work available to them were low-paying, menial jobs.  New York's black Harlem district was a severely overcrowded and segregated community, with more than 250,000 citizens crammed into an area 50 blocks long and eight blocks wide.  In 1928, there was one hospital bed for every 139 white people, and one for every 1,941 black people.  Life expectancy in 1929 was 59 for white people, 47 for black people.

   

    'A bread line' queueing in front of an advertising billboard.  This photo is from the 1930s, but it sums up the position of Black people in the 1920s - they can SEE the prosperity, but they don't SHARE in it. 

    

5. Native Americans

   also lived in extreme poverty, trying to survive on government-controlled reservations. 

6. Unemployed

   New technology was throwing more and more people out of work; the number of unemployed stood at 2 million throughout 1920s.  There was no welfare state to act as a safety net.  If you were unemployed, you were literally 'on the bread line'.

   In addition, there were problems building in:

7. Trade problems

   High tariffs were causing other countries to retaliate, as well as reducing the purchasing power of those countries, which made it hard for American companies to export their products abroad.  Farmers, who relied on exporting wheat, were especially hard-hit by this. 

8. Stock Market

   And, finally, there was one group that thought they were doing well, but were actually heading for catastrophe.  Wall Street was 'over-heating.  So great was over-confidence that people were even buying shares in imaginary companies.  Many were buying shares ‘on margin’ (a person could get a loan of up to 90% to buy shares) expecting to make enough profit to repay the loan when the shares were resold – brokers’ loans almost trebled 1926-9.  All this threatened disaster if share prices ever stopped rising.