The lack of distribution of wealth in the 1920's existed on many levels. Money was distributed unequally between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy. The stock market was kept artificially high, but eventually led to large market crashes. These market crashes, combined with the lack of distribution of wealth, caused the American economy to capsize.

The "roaring twenties" was an era when our country prospered tremendously. The nation's total realized income rose from $74.3 billion in 1923 to $89 billion in 1929(Sobel 26). However, the rewards of the "Coolidge Prosperity" of the 1920's we

For an economy to function properly, total demand must equal total supply. Essentially what happened in the 1920's was that there was an oversupply of goods. It was not that the surplus products were not wanted, but rather that those who needed the products could not afford more, while the wealthy were satisfied 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 goods such as food, clothes, radios, and cars. These were the poor and middle class. Families with incomes around, or usually less than, $2,500 a year (Fremon 14). While the wealthy too purchased consumer goods, a family earning $100,000 could not be expected to eat 40 times more than a family that only earned $2,500 a year(14).

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge's administration favored business. An example of legislation to this purpose is the Revenue Act of 1926, which greatly reduced federal income and inheritance taxes (McElvaine 23). Andrew Mellon was the main force behind these and other tax cuts throughout the 1920's. Because of these tax cuts a man with a million-dollar annual income had his federal taxes reduced from $600,000 to $200,000 (23). Even the Supreme Court played a role in expanding the gap between the socioeconomic classes. In the1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional(McElvaine 30). The large and growing difference of wealth between the well-to-do and the middle-income citizens made the U.S. economy unstable.

The U.S. economy was also reliant upon luxury spending and investment from the rich to stay afloat during the 1920's. The largest problem with this reliance was that luxury spending and investment were based on the wealthy's confidence in the U.S. economy. If conditions were to take a downturn (as they did when the market crashed in the fall of 1929), this spending and investment would slow to a halt. Lastly, the search for ever greater returns on investment led to wide-spread market speculation. Lack of distribution of wealth within our nation was not limited to only socioeconomic classes, but to entire industries. In 1929 a mere 200 corporations controlled approximately half of all corporate wealth (McElvaine 201). During World War I the federal government had encouraged farmers to buy more land, to modernize their methods with the latest in farm technology, and to produce more food. This made sense during the war since Eu

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Approximate Word count = 1734
Approximate Pages = 7 (250 words per page double spaced)