Ballyhoo, Prosperity and the Crash

Last Updated: 07 Dec 2022
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The Great Depression which came after the Crash of 1929 changed American attitudes from optimism, something that Americans had because of the increasing flow of consumer goods and because of this new better way of life to, despair. This economic despair was the lowest and bleakest time in American history. “Factories closed, machines fell silent, and millions upon millions of people walked the streets, looking for jobs that did not exist” (750). Lasting for ten years it took over every aspect of American life.

Along with this came a change in government that would give way to a Democratic majority and removed Republican hold since the 1890’s. Immigrants who had came to America before WWI took a political stance that lasted through this difficult time on through to the next generation that resulted in the election of Franklin D. Roosevelt. One of the first things his office did was developing The New Deal. This would create programs of “relief, recovery, and reform that greatly increased the role of government in American life” (750) in an effort to ease suffering and begin the path for economic recovery.

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In order to understand what happened economically during this time a look at business and government attitudes during the 20’s should be examined. During the 20’s Republicans “used their return to power after WWI to halt further reform legislation and to establish a friendly relationship between government and business” (742). This relationship led to false beliefs in economic growth and stability. The automobile and appliance industries during this time caused a saturation of the market. This slowed sales steadily and in 1927 there was a mild recession.

The owners of these industries could have raised wages or lowered prices in an effort to stimulate buying power and hold onto the “consumer-goods revolution” (750) but ignored the signs. The government could have helped by stopping installment-buying and slowing bank loans that could have made the depression not last as long, but didn’t. The only institution that saw a possible problem and tried to do something about it was The Federal Reserve Board. The Federal Reserve Board saw problems and tried to stimulate the economy by lowering the discount rate, and charging banks less for loans.

This extra credit that was given was thought to be used for re-investment but instead went into the stock market that was “touching off a new wave of speculation that obscured the growing economic slowdown and ensured a far greater crash to come” (751). Everyone jumped on the bandwagon as the 1920’s became better known as the get-rich-quick era. Millions of individuals from all the way at the top to all the way at the bottom played the stocks. Anyone with extra cash was investing heavily in the stock markets. They were betting that the huge rise in security prices would make them huge profits.

Savings were used to bet on the speculative stocks. “Corporations used their large cash reserves to supply money to brokers who in turn loaned it to investors on the margin. ” (751). By 1929 the whole country was in love with stock speculation. Offices open in huge numbers in city after city across America and people flocked to them in hopes of riches. This national obsession with the bull market gave a false idea that the economy was healthy and this caused a blind eye towards the mistakes that were happening that would lead to disaster.

It was in October of 1929 that put the stop to this obsession of speculation stock buying. Overnight corporations and financial institutions no longer would provide capital for stock market purchases and this also made investors and bankers stop giving consumer credit. This stopped consumer buying power and leading to a sharp slope downward of sales of consumer goods economic disaster that continued for 4 years. 1932 showed a time that “unemployment had swelled to 25 percent of the work force.

Steel production was down to 12 percent of capacity and the vast assembly lines in Detroit produced only a trickle of cars each day. ” (751) There were many contributing factors toward the path of the Great Depression, but the single most important was that factories produced more goods than they were consuming. Some others were unstable economic conditions in Europe, the agricultural decline since 1919, corporate mismanagement and of course over speculation. Americans didn’t have the money to buy anymore.

Even though most Americans didn’t have a car or a refrigerator the money just wasn’t there anymore. Too much money had gone into profits, dividends and industrial expansion. Not enough went into the hands of the workers who would become the consumer. Wages vs. factory productivity did not equal out. “Factory productivity had increased 43 percent during the decade, but the wages of industrial workers had only gone up 11 percent” (752). If all the money that was used for speculation had gone to increase wages then consumer purchasing would have gone up.

This would have created a balance in production and consumption. It was only after a good look at what happened would the consumer-goods economy of America be understood. Not only did this cause a huge hardship for the population it also showed a challenge for political leadership in America. When Roosevelt took office the nation was near an economic collapse with unemployment at thirteen million. His first step was to save the banks. He drafted new legislature for banking that would help the stronger banks to reopen with government help and force the weaker banks to close.

Roosevelt launched New Deal programs that would help in industrial and agricultural recovery, two of the hardest economic fields hit. This New Deal helped with immediate problems that were around in the 1930’s with programs that addressed relief in unemployment and destitute citizens. But in 1935 reform took the place of recovery and relief. “Roosevelt was developing a ‘broker-state’ concept of government, responding to pressures from organized elements such as corporations, labor unions, and farm groups while ignoring the needs and wants of the dispossessed who had no clear political voice” (761).

This caused a major pressure for change because it did not help the average guy and was meant more for internal government change. The New Deal did have an influence on the quality of life in America, but also had some downfall. Labor unions was one influenced that changed history along with the introduction of Social Security, but the New Deal seemed to only help the more vocal and organized groups and left minorities out. But still Roosevelt’s impact on U. S.

politics lead to the uplifting of the American people at a time when it was desperately needed in order to survive during a very disturbing and hard time. I don’t want to believe it was greed that caused this problem, but rather a misguided dream of the want of something better. Isn’t that the American dream? Reference: Divine, R. A. , Breen, T. H. , Fredrickson, G. M. , & Williams, R. H. (1987). America Past and Present 2nd. Ed. Illinois: Scott, Foresman and Company.

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Ballyhoo, Prosperity and the Crash. (2016, Jul 20). Retrieved from

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