Economics of 1920
The Positive
Taxes cut, resources plentiful,
cars cheap
People called the 1920s the “Roaring ‘20s” as times were improving. Factories produced more goods, prices were reasonable and people worked shorter hours and received higher wages.
Presidents Warren G. Harding and Calvin Coolidge both cut taxes for the rich. Coolidge encouraged Americans to spend and save wisely. By 1927, more than half of American families owned cars. Chain stores or companies with stores in many locations became popular places for groceries and other items.
President Herbert Hoover said, “We shall soon, with the help of God, be in sight of the day when poverty will be banished from this nation.”
At the end of WWI, weapons and military equipment were no longer bought and sold but as the 1920s progressed, the economy grew quickly. New technology gave way to affordable cars and electronics like radios, vacuum cleaners and washing machines. Before the 1920s, people saved and only bought the necessities but now everyone wanted nice things like radios. They bought on credit, which means a bank or company lends the money to buy something and the buyer pays the lender back over time, usually with interest. More than half the cars in 1920s were bought on credit.
The average pay increased in the 1920s. Women started working and becoming financially independent. People were making more and spending more, which caused the economy to grow.
The Negative
Farmers and factory workers still struggled
Life was not good for everyone. WWI ended. Many farmers borrowed money to buy land and plant more crops to feed the Allied troops, but then they were left with large debt. They had more crops than they could sell. Food prices dropped, and farmers struggled to pay off their loans.
Factories produced more good than they could sell, forcing them to lay off workers. People who were out of work couldn’t afford to buy goods made by factories. The problem got worse. Factories lower the wages they paid to workers.
Many Americans invested in the stock market, which is an organized system for buying and selling units of company ownership. Stock prices rose throughout the 1920s Investors or people who bought stocks, hopped to get rich. In October 1920, the stock market crashed. This meant that stock prices fell to record low levels. Many people lost their savings, their homes and their businesses. Banks closed, and about one in every four people lost their jobs. The U.S. was about ot enter the GREAT DEPRESSION. This was a time of extreme economic hardship.