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