By 1929, there were many weaknesses in the American economy.

  • The economic boom was faltering. It was too heavily based on cars and consumer goods.
  • Overproduction and underconsumption were affecting most sectors of the economy.
  • Old industries were in decline.
  • Farm income fell from $22 billion in 1919 to $13 billion in 1929. Farmers' debts increased to $2 billion. Sharecroppers were often destitute when cotton crops failed or prices fell.
  • Wealth was very unequally divided in America. A third of all income was earned by just 5 per cent of people.
  • Wages did not increase as quickly as company profits, especially in the construction industry where there was only a 4 per cent increase in pay during the decade.
  • 12 million Americans were below the poverty line. Hardest hit were immigrants and black Americans.
  • Working hours remained high.
  • Many people were in debt. 60 per cent of cars and 80 per cent of radios were bought on credit.
  • 20 million people were involved in the buying and selling of shares in order to make a profit on the stock market. This is known as speculation and led to over-valued shares. Ordinary people were buying shares “on the margin”.