The Roaring Twenties: Economic Boom and Great Depression

The Contrasts of the 1920s

During the 1920s, low taxes led to a dramatic rise in living standards, and the consumption of goods and services increased. However, overproduction by factories and farms, overprotection of domestic business through tariff barriers, and speculative mania led to the Wall Street crash in 1929, marking the beginning of the worst depression in American history.

Social Tensions and Ultra-Patriotism

A mood of ultra-patriotism prevailed during and after World War I, targeting Germans, political radicals, and those not of Anglo-American stock. The tough Sedition Acts targeted anyone who spoke or wrote any ‘disloyal, profane, scurrilous or abusive language against the government, flag or uniform of the United States’.

• German language was removed from school curricula.
• The Loyal Legion used vigilante methods to break immigrant-led industrial strikes in 1919.
• First Red Scare (1919-21): Following the Bolshevik Russian Revolution of 1917, the fevered atmosphere against left-wing and anarchist groups led to the deportation of numerous foreign-born radicals.
• Anti-immigration laws of 1921 and 1924 had a clearly racist intent.

Prohibition and Social Movements

Evangelical Protestants campaigned for decades against the ‘demon of drink’. The Anti-Saloon League pressured Congress to pass the 18th Amendment, which prohibited the manufacture, import, and sale of intoxicating liquors from 1919 to 1933. Meanwhile, the Ku Klux Klan (reaching 4 million members in 1925) attacked Blacks, Catholics, Jews, and non-white immigrants, while supporting prohibition and Bible reading in schools.

From Boom to Bust

By the mid-1920s, the economy was growing at 7% per year and unemployment was under 4%. Share values on the New York Stock Exchange increased 15-fold between 1923 and 1929. Few took notice of warnings that the market had become overheated, fueled by the easy credit policies of the banks.

The 1929 Market Collapse

In October 1929, a week of panic selling cut the value of the market by one-third. The collapse of demand for consumer goods led to a price slump, the closure of factories, and the loss of jobs. Between 1929 and 1932:

• Unemployment rocketed to 22%.
• The income of the average American family was reduced by 40%.
• The unemployed could not keep up with credit and mortgage payments, which undermined the banking system (20% went bust).
• Many people lost their homes, and parts of the country became almost barter economies.