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The period during the late 1920s turned out to be a significant challenge for the United States. It was remarkable due to its unpredictable and influential economic changes that determined the quality of national and international relationships. According to Irwin, “by mid-1920, prices, output, and employment were all plummeting” (1). Despite the fact that the American economy had achieved considerable success and growth, the stock market crash in 1929 dictated new rules and defined new problems. The country and the government were not ready for new prices and requirements, and millions of Americans crossed the line of poverty in a short period of time. It was hard to control and distribute wealth priorities, and farmers were in need of new resources. As a result, trade problems, speculations, and unfair judgments grew. Instead of enjoying the achievements of “roaring twenties”, millions of farmers, immigrants, Black Americans, and industrial workers experienced serious challenges based on increased inequality and legal prohibitions (2). American society faced farming and trading changes, poor regulations, public concerns, wrong financial decisions, and judgments, which resulted in new economic weaknesses and the stock market crash in the late 1920s.
As a rule, economic problems do not occur accidentally, and there are many reasons for situations, decisions, and outcomes. However, in the case of the United States, its economic weaknesses were hard to recognize and solve in order to predict a coming crisis. To control employment and provide native citizens with solid working opportunities, the government signed the Immigration Act of 1921 and limited the presence of immigrants to 3% (3). Therefore, the relationships between immigrants and native-born citizens were properly regulated and did not influence the economic situation. However, immigration was not the only threat to the American economy. Many workers (usually immigrants) were involved in old industries, like building, mining, and textile, and received low salaries (4). They were not satisfied with the prosperity that was frequently declared in the 1920s United States. In addition, the government was obsessed with recent achievements and manufacturing discoveries but failed to develop new regulations and acts in terms of which the protection and stability of every citizen were possible.
During the 1920s, agriculture was the field that experienced a number of changes and negative outcomes in the United States. Farmers produced more crops than it was needed for the country. It was impossible to find buyers, and farming prices were decreased from $2.58 to $0.93 per bushel, and from $1.86 to $0.41 per corn (5). At the same time, the value of land was dramatically increased, and farmers had to borrow without the possibility of controlling their assets, which made them unable to participate in the current economic boom. The end of the war provoked the emergence of new tastes and preferences. The promotion of the free market economy established new high tax policies, and farmers could not meet the standards. After-war recovery was beneficial from a variety of perspectives, but farmers were in need of additional protection. The McNary-Haugen bills were created to protect home market prices from import options (6). The Agricultural Marketing Act was signed to stabilize prices and explain the worth of cooperatives (7). However, the outcomes of overproduction were severe, and farmers had to borrow money, avoid cooperation, and survive when other industries prospered.
The beginning of the 1920s was also known due to the victory of the Republicans in the election. The government, with its President Harding, returned their protectionism policies to support farmers and reduce the impact of import (8). Such steps increased trade tariffs and challenged international relationships at multiple levels. Trade problems grew as long as farmers and old industries faced overproduction. It was necessary to sell farm products abroad, but the Republicans close that door with the intention to reduce external influences. The trade deficit continued to grow, and trade unions were forbidden. No international experience, limited import or export opportunities, and the lack of low prices challenge American society. Those who had money and could earn used their recent achievements and new technologies and could develop. The representatives of old industries and those dependent on international trade failed to benefit from the boom.
Decreased opportunities, protectionism enhanced by the Republicans, and complex national relationships contributed to an unequal distribution of wealth. According to Walton and Rockoff, wealthy people were described as “self-satisfied and self-indulgent – drinking champagne and ignoring the growing misery around them” (9). These people were not eager to share their incomes, and poor citizens could not afford to consume as per their needs without some credit options. Despite the fact that average incomes grew, prosperity was not equally distributed. At the beginning of the 1920s, the top 1% of the population shared 14.8% of total income and 22.4% at the end of the same decade (10). The top 10% of the population shared 39% in 1920 and 46.7% in 1929 respectfully (11). Such inequality signalized about the situation with the purchasing power and its concentration in rich American citizens only. Due to the development of “modern” industries like airlines, autos, and finance, it was believed that the United States did not suffer from the losses connected to the war and economic changes. However, the needs of millions of Americans who were not involved in the above-mentioned spheres were neglected.
The establishment of tax policies and regulations was a critical step in the economic development of the country, but the 1920s were characterized by the lack of effective changes in this area. The representatives of those who suffered from the economic boom (including farmers, Black Americans, and immigrants) did not support government interference in their affairs. Poor regulations resulted in the American banking system caused additional problems and instability. The stock market was not regulated at all because the country wanted to check its possibilities after the war. Borrowing practices and illegal affairs were developed to cover debts. At the end of the 19th century, the national banking system set the barriers to enter the banking services and kept the doors closed for a long period of time (12). People did not understand who controlled their financial decisions and defined what activity deserved investment. The inability to regulate the current business affairs and the desire to obtain as many benefits from the after-war boom as possible made the American government and the wealthy part of the population blind to the existing problems and concerns.
One of the most dangerous outcomes of poor regulations was the rise of speculations in different areas. Land speculations and building investments were caused by farming problems, increased loans, and small salaries (13). Speculation on Wall Street was another concern of political leaders and federal bodies. On the one hand, brokerages lend money in the form of call loans to all clients who were willing to buy stocks (14). The economic boom stimulated people to invest in unknown activities and participate in trading. The immense volumes of stocks were bought, without a chance to be detected. Speculations of stocks contributed to the promotion of inequality in wealth and employment opportunities. People could not find well-paid jobs and had to reconsider their needs in regard to the available options. Economic panic could not be avoided, and the speculation-based crash was inevitable. Consumers had to cut their purchases, manufacturers reduced their production, and people lost their jobs. Many industries and independent businesses suffered from speculations in which they were not involved. Banks speculatively invested in those clients who seemed to be profitable, and poor organizations and people did not get similar opportunities.
In general, the economic weaknesses in the late 1920s made millions of Americans worry about their present and future. On the one hand, the country observed certain positive changes and strengths in the auto and airline industries. On the other hand, the problems because of poorly regulated government policies, wealth inequality, challenged farming, and trade relationships could not be neglected. The representatives of traditional industries and minorities (immigrants or Black Americans) could not find well-paid jobs. Speculators controlled the stock market, and white, rich people did not find it necessary to share their achievements with the rest of the population. The economic boom demonstrated the possibility of the United States in the after-war period. However, its outcomes in the form of national and international debts, speculations, and unpredictable price ups and downs changed the country and its economy in the 1930s.
Notes
- Douglas A. Irwin, Clashing over Commerce: A History of U.S. Trade Policy (Chicago, IL: University of Chicago Press, 2017), 348.
- Gary M. Walton and Hugh Rockoff, History of the American Economy, 13th ed. (Boston, MA: Cengage Learning, 2018), 387.
- “Immigration Act of 1921,” Documents of American History II, 2020. Web.
- Julia G. Young, “Making America 1920 again? Nativism and US Immigration, Past and Present,” Journal on Migration and Human Security 5, no. 1 (2017), 223.
- Walton and Rockoff, History of the American Economy, 386.
- Ibid., 387.
- “Agricultural Marketing Act,” United States Senate Committee on Agriculture, Nutrition. & Forestry, 2020. Web.
- Irwin, Clashing over Commerce, 349.
- Walton and Rockoff, History of the American Economy, 387.
- Ibid., 388.
- Ibid.
- Walton and Rockoff, History of the American Economy, 322.
- Irwin, Clashing over Commerce, 367.
- Walton and Rockoff, History of the American Economy, 390.
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