Great Depression

11 Pages 2765 Words

facturing jobs increased only 8%. Thus, wages
increased at a rate one fourth as fast as productivity increased. As production costs fell quickly, wages rose slowly, and
prices remained constant, the bulk benefit of the increased productivity went into corporate profits. In fact, from 1923-
1929, corporate profits rose 62% and dividends rose 65%. The federal government also contributed to the growing gap
between the rich and middle-class. Calvin Coolidge's administration (and the conservative-controlled government) favored
business, and consequently those that invested in these businesses. An example of legislation to this purpose is the Revenue
Act of 1926, signed by President Coolidge on February 26, 1926, which reduced federal income and inheritance taxes
dramatically. Andrew Mellon, Coolidge's Secretary of the Treasury, was the main force behind these and other tax cuts
throughout the 1920's. Even the Supreme Court played a role in expanding the gap between the social/economic classes. In
the 1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional. The large
and growing disproportion of wealth between the well to do and the middle-income citizens made the U.S. economy
unstable. For an economy to function properly, total demand must equal total supply. In an economy with such different
distribution of income, it is not assured that demand will equal supply. Essentially, what happened in the 1920's was that
there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather
that those whose needs were not satisfied could not afford more, whereas the wealthy were contented by spending only a
small portion of their income. Three quarters of the U.S. population would spend essentially all of their yearly incomes to
purchase consumer goods such as food, clothes, radios, and cars. These were the poor and middle class: ...