Wall Street Boom and the Inequalities Beneath It
A Bull Market and a Divided Country
If Lesson 1 explained how the Boom worked for middle-class buyers, Lesson 2 looks at where their money went and who was left out. Across the 1920s the Dow Jones industrial average climbed from 100 points in 1924 to 381 points in September 1929. Newspapers ran daily share-price columns; shoeshine boys offered tips. But while a third of American homes bought their first radio, another third had no electricity at all. The Boom was loud at the top of society and silent at the bottom.
By 1929 around three million Americans owned shares, and most paid only 10% of the price up front, borrowing the rest from their stockbroker. This was called buying on the margin. It worked while prices were rising — but if shares fell, the loan still had to be repaid in full.
The Wall Street Boom
The Wall Street stock market boomed because three things happened at once. Republican tax cuts (Lesson 1) left wealthy Americans with billions to invest. Mass production was generating record corporate profits, so company shares looked like a sure bet. And new buying rules let small investors join in. The result was a rising stock market in which prices ran far ahead of the real value of the companies underneath.
Brokers offered buying on the margin as a way for ordinary Americans to take part. A clerk who put down $100 could borrow $900 to buy $1,000 of shares. If the shares rose to $1,500, he sold, repaid the $900 loan, and walked away with a $500 profit on his original $100. Speculators — people who bought shares to make a quick profit rather than to invest in a business — piled into the market. By 1929 the volume of margin loans had reached over $9 billion.
Speculation drove prices upward in a self-feeding loop. People bought shares because they were rising; the buying made them rise more; rising prices attracted yet more buyers. Newspapers printed stories of secretaries and lift operators making fortunes. By 1929 the Radio Corporation of America’s shares had risen 500% in two years, even though the company had paid no dividend. Investors were not buying a stake in a business; they were buying the chance to sell to someone else for more.
Most ordinary Americans never bought shares — those three million shareholders came from a country of 30 million households. But banks invested customers’ deposits in the market, so when share prices wobbled, the banks themselves were exposed. The whole edifice rested on the assumption that prices would only ever climb.
The Inequalities Beneath the Boom
The richest 5% of Americans took home one third of all national income in 1929. The poorest 40% received less than a sixth. The Boom benefited shareholders, business owners and skilled industrial workers. It largely bypassed the groups below.
Farmers and Sharecroppers
The First World War had been good for American farmers: European fighting wrecked French and German agriculture, so the USA exported huge surpluses of wheat and meat. After 1921 European production recovered and prices collapsed. Wheat prices fell from $2.50 a bushel in 1920 to under $1 by 1929. Six million American farmers were forced off their land across the decade. Mechanisation made matters worse — tractors meant fewer labourers were needed, and farm employment fell sharply.
Conditions were worst in the South. Sharecroppers — both white and black, but disproportionately African-American — rented land in exchange for half their crop. When cotton prices fell, sharecroppers could end the season owing the landlord more than they earned. Their incomes were a fraction of the national average and stayed there throughout the Boom.
African-Americans, Native Americans and Immigrants
In the southern states, Jim Crow laws kept African-Americans out of decent jobs, schools and voting booths. The Great Migration north to Chicago, Detroit and New York gave some families industrial wages, but they faced housing segregation and were the first to be sacked when work slowed. Native Americans, confined to reservations on poor land, lived in extreme poverty — the 1928 Meriam Report described conditions as a national disgrace. New immigrants from southern and eastern Europe were funnelled into the lowest-paid factory jobs and faced the immigration restrictions covered in Lesson 5.
Between 1916 and 1929 around 1.3 million African-Americans left the rural South for industrial cities like Chicago, Detroit, New York and Cleveland. They escaped the worst of Jim Crow segregation and could earn factory wages well above sharecropping incomes. But the welcome was conditional. Estate agents enforced ‘restrictive covenants’ that kept whole neighbourhoods white-only, so African-Americans were channelled into overcrowded districts like Harlem and Chicago’s South Side. Trade unions in many industries refused to admit black members, leaving them in the lowest-paid roles. White workers in some cities rioted when black migrants arrived — Chicago in 1919, Tulsa (Oklahoma) in 1921, where a thriving African-American business district called Greenwood was burned to the ground. The Great Migration was an opportunity, but it was an opportunity inside a country that was still deeply hostile.
The Boom left out farmers (collapsing crop prices), sharecroppers (debt to landlords), African-Americans (Jim Crow segregation), Native Americans (reservations) and unskilled industrial workers (whose wages rose far less than profits). For the unit’s analytical question — opportunity for whom, inequality for whom? — this list is the answer.
Why Two Halves of the Same Decade
Take the two halves of this lesson together. Wall Street was rising on borrowed money for a small minority. The countryside was sinking into debt for a much larger one. When the bubble burst in October 1929 (Lesson 6) it would not just hurt the speculators; it would hit a country whose foundations were already unequal. That is why historians remember the 1920s as a decade of opportunity AND inequality, not one or the other.