Since the end of the Civil War, U S industry fed an economic, technological and expansionist boom of titanic proportions. The transcontinental railroad, the Homestead Act, the Morrill Land-Grant Acts all helped fuel massive industrialization, commerce and agriculture. The economy of the northern states and western territories boomed. Steel, especially, became a major player, both as a vital part of virtually every industry then in action and in its own right. Carnegie Steel, founded by Andrew Carnegie in Pittsburg, Pennsylvania, produced 2,000 tons of pig metal per day. The steel mills produced the tracks that were laid for the transcontinental railroad, opening up thousands of jobs for those willing to break their backs to earn a small but steady paycheck.
Consumerism, Expansionism and Cheap Labor
The steel industry fed and was in turn fed by the automotive, communications, housing and other expansionist industries. Rubber, mining and many others thrived in the wake of consumerism. With the growing demand came jobs and the workers to fill them. Immigrants from Ireland and Germany among other places flooded the gates of New York seeking work. And since the end of the Civil War, there were also former slaves looking for employment and willing to do whatever was available. In the early 20th century, child labor was accepted and encouraged. Work weeks stretched for seven days, often 10 or more hours a day, with no minimum wage.
Cheap labor, readily available goods and a national thirst for expansion drove a booming economy – for a time. However, the sad fact about a free market economy has always been the trend of “boom and bust”.
Grossly Unequal Distribution of Wealth
The end of the 19th century saw a series of “panics” (also known as recessions and depressions) caused by industrial strikes and overproduction. Investments increased almost exponentially while wages only crept up. America suffered from an undeniable gross mal-distribution of wealth. Twenty-five percent of the nation’s wealth was controlled by just one percent of the population. At the bottom of the triangle, 67% of the people held just 4% of the wealth.
America was not yet a worldwide producer of goods. Her markets were primarily domestic. But with workers stuck on virtually fixed incomes, their ability to buy consumer goods became limited. If Americans didn’t buy, stores didn’t sell and factories had to slow down their production. When production slowed down, workers got laid off. Buying power fell through the floor – and eventually so did the value of those companies.
With the end of the Great War, tens of thousands of American servicemen returned home and joined the workforce. Jobs became scarce and paid little. To further complicate things, industrialization had reached the farming industry, automating much that had previously depended upon human labor. Large corporate farms benefited while small family operations floundered.
Foundationless Stock Prices
As if weak markets weren’t enough, easy business credit, shady deals and outright speculation had fueled a false boom in the 1920’s. The Roaring Twenties had all the outward appearance of a thriving economy – massive spending, at least by some – and a carefree attitude. Investors poured borrowed money into stocks and drove stock prices to record levels, but there was no foundation for it.
The bubble did not take long to burst. Once the major financial movers of the American economy stumbled, the rest were all lined up to follow. The great collapse occurred on Tuesday, October 29, 1929. All those loans made by banks to investors were now backed with nothing. The stocks they had purchased were worthless. Banks closed by the thousands. Companies closed right along with them. In little more than an instant, millions were out of work, life savings were gone, farms and homes were foreclosed and America was neck deep in the biggest financial bust she had ever experienced.
Resolving the Great Depression would take more than a decade. The climb out was painful, even excruciating. Many Americans lost everything. Some, unable to face the devastation, chose to end their lives rather than sift through the financial rubble and keep going. But America did climb out – and with the end of World War II came another great boom cycle with further busts and booms to follow.
References:
Henretta, James A., et al, America's History Volume Two: 1865. Bedford/St. Martin's. 2008.
Robert Rydell, PhD. Montana State University. 2010
Elizabeth Linehan - Elizabeth studied American Sign Language at Brigham Young University. She has worked with hearing impaired and multipli-handicapped ...
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