Factors of Prosperity

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FACTORS UNDERLYING THE
PROSPERITY OF THE 1920S
MASS CONSUMPTION
SPECULATION BOOM
UNEVEN PROSPERITY
MASS CONSUMPTION
• CHANGES IN PRODUCTION LED TO NEW PATTERNS OF CONSUMPTION (MASS MARKETS
FOR GOODS)
• MORE ADVERTISING
• WORKERS WITH HIGH WAGES & MORE TIME= GREATER PURCHASING POWER
• NEW PROGRAMS FOR INSTALLMENT PURCHASES AND BUYING ON CREDIT
• SMALL DOWN PAYMENT TO TAKE ITEM HOME : PAY THE REST IN MONTHLY INSTALLMENTS +
INTEREST
• CONSUMERS WERE ABLE TO BUY MORE (AND MUCH MORE EXPENSIVE) GOODS.
• CARS, REFRIGERATORS, WASHING MACHINE, VACUUM CLEANER, FURNITURE, RADIOS, ETC
• ONCE ONE SELLER OFFERED AN INSTALLMENT PLAN, COMPETITORS WERE USUALLY FORCED
TO DO THE SAME
SPECULATION BOOM
• SPECULATION IS THE PURCHASE OF ANY ITEM (NOT FOR PERSONAL USE), BUT
IN THE HOPE OF SELLING IT LATER AT A HIGHER PRICE
• 1920S SAW A SPREAD OF SPECULATION – STOCK AND REAL ESTATE
• DEVELOPMENT OF NEW INDUSTRIES, IMPROVED PRODUCTION TECHNIQUES,
AND THE EXPANSION OF MASS MARKETS LED SHARES OF CORPORATIONS
LISTED ON THE STOCK MARKET TO CLIMB TO DIZZYING HEIGHTS
• GAINS IN STOCK FUELED SPECULATION EVEN MORE
• PEOPLE READ ABOUT THE SUCCESS OF OTHERS AND IT ENTICED THEM TO BUY
STOCKS FOR “EASY PROFITS”
• MORE PEOPLE BOUGHT STOCKS… STOCK PRICES KEPT GOING UP….
UNEVEN PROSPERITY
• WEALTH WAS HIGHLY CONCENTRATED
• 1929 STUDY SAID THE TOP ONE THOUSANDTH (.1%) OF AMERICANS COMBINED INCOME
WAS EQUAL TO THAT OF THE BOTTOM 42%
• SAME TOP GROUP CONTROLLED ABOUT 1/3 OF ALL SAVINGS
• ¾ OF AMERICANS HAD NO SAVINGS AT ALL
• MANY STILL IN POVERTY
• DUE TO TRACTORS AND THE SPREAD OF ELECTRICITY, FARMERS FACED LOWER INCOME DUE
TO OVERPRODUCTION
• RAILROADS SUFFERED FROM NEW COMPETITION WITH CARS
• TEXTILE WORKERS FACED LOWER WAGES BECAUSE OF FOREIGN COMPETITION
• MINORITY GROUPS FACED CONSTANT DISCRIMINATION
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