Great Depression

From the economic devastation of World War I the United States became the world’s banker, lending money to those countries most affected by the war. At the same time the US was protecting its own agricultural and manufacturing base by imposing trade barriers on other countries. European countries were using US loans to buy US products and, by 1929, exports made up 10% of the United Sates gross national product. A stage was met where debtor countries could no longer afford to import goods which inevitably meant that American exports would fall rapidly. It was not only the US that imposed trade tariffs and global trade was becoming so restrictive that the volume of international trade fell dramatically.

The federal government actually contributed to this wealth disparity. For example, President Calvin Coolidge signed the Revenue Act of 1926 that effectively reduced federal and inheritance taxes which favored the wealthy business owners. As the United States manufacturing output increased during the 1920s, workers wages only rose a quarter of the increased productivity. In comparison, business profits surged as much as 62%.

This disproportionate distribution of wealth was even found in industries themselves. By 1929 half of America’s corporate wealth was controlled by only 200 corporations. While the automotive industry was booming, agriculture had a large surplus which led to food prices crashing and agricultural industry workers were among the lowest paid in the country. During the First World War, the federal government assisted the agriculture industry in order to increase food production. However, when the war ended government help stopped and farm and food prices soon fell. Many farmers went into debt.

Because the United States was the world’s largest creditor and supplier of manufactured goods, international trade declined soon after the Wall Street crash. In many countries, construction projects halted and crop prices fell leaving many of these workers out of a job. European countries were particularly vulnerable as many of their farms and factories had been destroyed in the war. With the United States increasing import tariffs during the 1920s, European exports to the US were proportionately low.