Chapter 21 Section 3
The Economy in the Late 1920s
How did a decade of Republican
government affected the economy?
• Republican laissez-faire
policies caused rapid
business expansion,
opening up new
opportunities for
competitors to the giant
monopolies
• The automobile, steel,
oil, and electrical
industries boomed as
did publishing, movie,
and machine making
industries
Welfare Capitalism
• Employers raised wages
and provided benefits
like paid vacations,
health plans, recreation
programs, and English
classes for immigrants
– Strengthened company
loyalty and worker
morale
Evaluate welfare capitalism from the
point of view of a factory worker, a
labor union leader, and a factory
owner.
Factory Worker
• Support, due to
increased wages and
benefits
Labor Union Leader
• Oppose, as it would
mean a decrease in
union membership
A Factory Owner
• Mixed
• Had to offer employees
more money and
benefits
• But avoided strokes and
could thereby maintain
increased productivity
What reasons did corporations have for
practicing welfare capitalism in the 1920s?
• They hoped to meet
workers’ demands while
avoiding union
intervention, preventing
strikes, and keeping
productivity high
Looking at the circle graph on page 732, what percentage
of American families were earning less than $2,000a year
in 1929?
• 65%
• Note- $2,000 in 1929 is
worth $26,666.67 today
• Poverty line in 2013 for
a family of 4 is $23,021
How do you think a widespread increase in
personal debt could affect a nation’s
economy?
• If people are earning less,
people are less able to
pay back their loans
• This would then result in
lenders being able to give
out less money
• Could also result in
people buying less,
resulting in businesses
being less successful
– May lead to workers losing
their jobs
Speculation
• The practice of making
high risk investments in
hope of getting a huge
return
Why was speculation in the stock
market so popular in the 1920s?
• The optimism of the age
• The prevalence of a “get
rich quick” mentality
• The rise in stock values
Buying on Margin
• This allowed investors
to purchase a stock for
only a fraction of its
price and borrow the
rest
– As long as stock go up,
everything is fine
– If stocks drop…there’s
problems
How does a stockbroker profit from an
investor buying on margin?
• The brokers charge high
interest rates and could
demand payment of the
loan at any time
What issues faced farm and factory
workers in the late 1920s?
• Falling farm prices left
farmers unable to repay
their debts, facing the
loss of their farms
• Factory workers faced
long hours for low
wages and in poor
conditions