The American Economy in the 1920’s Was a Bubble Destined to Burst
“The Economy of 1920’s America was a bubble destined to burst” The statement that the economy of 1920’s American was a bubble destined to burst is thoroughly correct. The uprising issues of Protectionism, weak industries, weak banks, overproduction of goods and an uneven distribution of wealth meant that America was in a vicious spending spree that could only be broken by the 1929 Wall Street Crash. When one thinks of an economic depression, one first considers the banks and how they were linked to the said crash.
The banks in the case of the Depression were closely related to the Wall Street Crash. In the 1920’s banks weren’t the large networks that they are today, so when they went bankrupt, there was nothing to fall back on. Banks had also loaned out far too much money keep a stable economic flow. Many Americans also decided to join in on the share market game in hopes of living out the American Dream in a “get rich quick” manner and were borrowing huge amounts of money to invest, often in an uneducated manner.
As this was continuing, banks were making it possible to borrow huge sums of money and the government, still stuck in its belief of Laisseize Fare- that is, that the government would simply let the economy sort itself out without any government intervention. With this flimsy and unstable system of banking- there was bound to be a huge economic impact such as the crash. After the atrocities of World War 1, America decided it’s safest way to keep out of global issues and wars was to focus on being a self-serving country run on the idea of Protectionism.
The key act of Protectionism was that tariffs were placed on imported goods, thus making American products much more appealing to its citizens. This also created a huge economic flowing acting almost exclusively nationally. However the notion of Protectionism became detrimental to America as 23 countries soon placed tariffs on American exports that were already seen as luxuries by other countries. It could be said that most other long term causes of the crash of the American economy simply snowballed off the issue of protectionism.
One of the largest of these was over production. As American export rates came down, the country was met with the newfound issue of overproduction. As sales for products such as cars dropped dramatically (how many new cars could one family need? ) America still did not stop making them. There were now warehouses full of products that were either un-wanted or that couldn’t be afforded. Soon enough, many companies began to close down in a domino ffect, leaving only the products necessary to live as a profitable part of the economy. The issue of overproduction is closely linked to the un-even distribution of wealth in America. As there were only a select few who could afford to buy the luxury items companies were trying to sell, and because of the tariffs now placed on American goods, there were no exports. As 5% of the country’s population held a massive 30% of the wealth, that too was far too unstable to continue.
Thus proving that the American economy was in fact, a bubble destined to burst. The final factors of the economic crash of 1929 are closely linked. The cotton, farming and railroad industries being far weaker than they seemed and the instant panic when there was any cause for concern by the American people were both such issues because of lassiz fare and the conservative government not being willing to back down on this that the economy ended up in a crisis.
There were low wages for people industrial workers and farmers- (ironically enough the jobs that could have saved the economy) yet Americans were encouraged to have the highest faith in the farming, cotton and railroad industries. In 1929- the year of the crash, President Hoover himself said that America could expect a “financial triumph over property”. It was due to this huge faith and over confidence in the economy that the panic when things went a little haywire Americans were in such shock that all they wanted to do was sell their shares and get their money back.
This of course was just making matters worse for themselves and their country. It is because of these factors, that it is indeed obvious that America in the 1920’s was simply a bubble destined to burst. There were too many half-thought-out ideas put into immediate motion and the lack of communication or assistance from the American government lead to the three factors that made the American crash inevitable.