The Consumer Economy &
the Great Depression
U.S. History II
Consumer Economy
• Consumer goods like automobiles led economy,
rather than producer goods like steel
– Ford Model T = $300; Chevrolet = $700
– Average blue-collar salary $1,300
– Average white-collar salary $2,300
• Modern marketing techniques created demand
to meet supply
– $4.3 billion spent on advertising in 1929
– Bruce Barton’s The Man Nobody Knows described
Jesus as a salesman
Consumer Goods Production
Copyright 1998, Bedford/St. Martin’s Press
Radio Advertising
• KDKA Pittsburgh was first
commercial station in 1920
• 508 stations by 1922
• Networks created for
nationwide advertising
– National Broadcasting Corp.
(1926)
– Columbia Broadcasting System
(1927)
• By 1929, Americans spending
$50 million/year on radios
Women as Consumers
• Women still seen as
homemakers, but now
consumers rather than
producers
• Ads targeted women
• Employed married women
increased by 30% to 3.1
million, but still only 12% of
total
• Marriage seen as romantic
companionship, & divorce
rate rose
Entertainment Culture
• Entertainment grew as leisure time &
purchasing power increased
• Amount spent increased from $2.5 billion in
1919 to $4.3 billion in 1929
• Fads like mini golf swept the nation
• 100 million moviegoers a week by 1930
– Total population = 120 million
– 60 million a week = average church attendance
The Harlem Renaissance
• Black actors:
– Charles Gilpin
– Paul Robeson
• Black authors:
–
–
–
–
Langston Hughes
Countee Cullen
Claude McKay
Zora Neale Hurston
• Black jazz musicians:
– Duke Ellington
– Count Basie
Duke Ellington
Causes of the Great Depression
• Cyclical downturn came in
middle of transition from
producer to consumerdriven economy, & new
sectors too weak
• Most consumer purchases
in 1920s on credit, so
demand exaggerated
– 75% of cars; 70% of
furniture
– 80% of household
appliances
• Durable goods didn’t need
to be replaced frequently
Causes of the Depression (cont.)
• Real wages rose 17% from 19221929, but increasingly unequal
income distribution
– Slowed long-range mass
consumption
– Skewed it toward luxury goods
(inherently small market)
• Gov’t responses to depression
exacerbated problem:
– New Deal policies aimed to prop
up older producer industries
– Hawley-Smoot Tariff & increase
in taxes at all levels of gov’t
further hampered consumers’
ability to purchase goods
The Stock Market Crash – Oct. 1929
• Stock market crash was
catalyst, not cause
• Stock market seemed safe
investment:
– Investors doubled their
money between 1920-1928
– Investors could buy on the
margin or use investment
trusts
• Effects of the crash:
– Destroyed disposable income
- $75 billion lost
– 5,000 banks failed & 12
million unemployed by 1932
– Destroyed confidence in
economy
Unemployment Rate in the Depression
The Election of 1928
• Hoover won election
easily – 58% of popular
vote & all but 8 states
• Democratic N.Y.
Governor Al Smith was
Catholic & opposed
Prohibition
Hoover’s Humanitarianism
• Progressive Republican – supported
T.R. in 1912 campaign
• Organized Committee for Relief of
Belgium in 1914
– Raised millions in private donations
– Negotiated w/German & Allied
gov’ts to ship goods
• Appointed by Pres. Wilson to run
U.S. Food Administration, 1917-18
• Headed European Relief &
Rehabilitation Administration after
the war
– Channeled 34 million tons of food,
clothing & supplies to people in 20
nations
– Founded Hoover Institution in 1919
Hoover & the Depression
• Engineer, not politician – lacked
charisma
• Supported voluntary efforts:
– Asked firms not to lay off
employees
– Organized POUR – President’s
Organization for Unemployment
Relief
• Turned to direct relief, but trickledown model:
– Reconstruction Finance Corp.
(1932) loaned $2 billion to banks,
insurance co.s, railroads & states
– National Credit Corp. tried to
prop up banks
Lou Henry Hoover, Christmas 1932
Homelessness
The Bonus Army, 1932
Hoover & F.D.R.
The Election of 1932
Copyright 2000, Bedford/St. Martin’s Press