Consumerism, Crisis, and the Great Depression: A Historical Analysis
The Consumer Revolution
The Consumer Revolution resulted in the rise of a consumer society. This was driven by demand for products and fueled by:
- New sales systems, such as department stores.
- New ways to buy, including installment plans and credit.
- The rise of advertising and marketing.
This led to increased household indebtedness, as people believed in permanent prosperity and ever-increasing wealth.
Negative Aspects of the Consumer Boom
- Unequal distribution of wealth: Businesses and shareholders benefited, but salaries did not rise as quickly as prices.
- Consumption grew faster than income, leading to debt.
- Crisis of overproduction: Purchasing power could not keep up with increased production.
- Agriculture was the sector hardest hit. Farmers took on debt to increase production during the war. Now, exports were reduced, and their income declined. Millions of farmers were ruined and forced to sell off their products.
Stock Market Fever
From 1925, business profits from consumption were invested in the stock market, rather than in productive sectors.
There was a boom market due to the good business situation, leading to a speculative bubble. The value of shares increased rapidly. People believed that profits were due to speed, not to dividends or surplus stock.
This greatly increased demand and drove up prices.
Small investors borrowed money, planning to repay it by selling a portion of their shares. There was no real relationship between the benefits and future enterprises. At first, all went well.
From 1929, the first signs of crisis appeared. Contributions could not keep up, and people began to sell shares in bulk. Prices started to fall, and the fall occurred in a chain reaction:
“Black Thursday”, October 24, 1929
This marked the stock market crash. 13 million shares were offered for sale with no buyers. It was the crash of the New York Stock Exchange and the bane of investors who wanted to sell as soon as possible to minimize losses. Banks were ruined, and loans were canceled.
“Black Tuesday”, October 29, 1929
A new wave of stock sales occurred, paving the way for the Great Depression.
The Great Depression
Causes of the Great Depression
- The collapse of the New York Stock Exchange led to an economic depression that spread to all economic sectors in the U.S. and the rest of the capitalist world.
- Industrial overproduction: Before 1929, economic indicators were retracting, for example, automobile production, which had been so important. Therefore, the economy probably entered into crisis but had not broken the bag.
- Crisis of liquidity (money to pay debts): The fall of the stock caused the closure of industries, banks, defaults, investment, and the withdrawal of credits to Europe.
- Declining prices: People were forced to sell at any price.
- Fall in consumption due to unemployment and fear of worsening the situation. Purchasing power decreased, agricultural prices fell, there was debt from the purchase of consumer durables, and a belief that future prices would be cheaper.
Ailing Industries: Banking and Industry
The banks could not provide loans and had also accepted shares as collateral. Moreover, the population wanted to withdraw their money, but the banks could not replenish it. 4,000 banks closed, and millions of families were ruined. Loans for both industry and consumers declined.
Industry: Production fell by 40% from 1929 to 1933. Consumption declined, and there was overproduction. Unemployment rose from 4.5 to 12 million, resulting in poverty and poor living conditions. The middle class lost its savings. Consumption was reduced as much by unemployment as by the fear of worsening the situation of those who were employed.