How did popular perception of prosperity influence the election of 1928

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In August 1929, Ladies Home Journal published an article titled “Everybody Ought to Be Rich.” In it, businessman John J. Raskob told Americans that if they invested $15 in the stock market every month, in 20 years they could have $80,000 (over $1 million today). Raskob insisted that “almost anyone who is employed can do that if he tries.”

For wealthy, white Americans like Raskob, the “Roaring ‘20s” was a time of immense economic prosperity. Yet for most Americans, it wasn’t. Low-wage jobs paid an average of $25 a week for men and $18 for women. So if low-wage workers had followed Raskob’s advice, they would have been placing most of a week's earnings in the stock market every month.

In fact, income inequality increased so much during the 1920s, that by 1928, the top one percent of families received 23.9 percent of all pretax income. About 60 percent of families made less than $2,000 a year, the income level the Bureau of Labor Statistics classified as the minimum livable income for a family of five.

As W.E.B. Du Bois observed in a 1926 essay: “We have today in the United States, cheek by jowl, Prosperity and Depression.”

Farmers Were Stuck With Surplus

How did popular perception of prosperity influence the election of 1928

A  farmer with a chicken, circa 1925.

FPG/Hulton Archive/Getty Images

The speakeasy party culture popularized in books, movies and magazines was only accessible to a small portion of wealthy, urban and mostly white Americans. Black Americans and immigrants faced violence from the newly revived Ku Klux Klan, and many workers’ wages either didn’t keep up with productivity or fell off completely. For farmers in particular, the Great Depression basically began after World War I.

During that war, U.S. farmers had increased food production to feed European allies. Afterward, prices and demand dropped, and farmers were stuck with an oversupply they couldn’t sell.

“Coming out of the war when exports fall, [farmers] get into this very unfortunate feedback loop,” says David Sicilia, a history professor at the University of Maryland. “Prices are falling and in order to continue to survive, farmers basically respond by planting even more. So there’s overproduction layered on top of overproduction, and so they get into this kind of vicious cycle.”

Overproduction also became a problem with manufacturing companies. Even though families that couldn’t afford to pay for radios, cars, dishwashers and other expensive items upfront could now purchase them on credit, the amount of new products companies produced still exceeded the number that families were able to buy. One of the contributing factors to this overproduction was companies’ desire to expand and drive up profits for shareholders.

Anti-Labor Climate

There was a strong belief under the presidents of the 1920s that prioritizing shareholder profits would create a stronger economy. Robert Chiles, a history professor at the University of Maryland, says that when New York Governor Al Smith tried to gain state control of hydroelectric development to give residents lower energy rates, a memorandum from President Calvin Coolidge’s administration opposing the idea stated that it was acceptable for New York residents to pay a lot for electricity because this increased the price of stocks.

Although many factory workers saw their wages increase modestly during the 1920s, these wages didn’t keep up with their productivity. Most corporations rewarded their shareholders with large dividends while trying to keep worker wages low.

It was difficult for workers to fight for higher wages because “there was a movement in terms of more aggressive application of labor law,” says Mark Joseph Stelzner, an economics professor at Connecticut College. Courts often ruled in favor of businesses (the Supreme Court even struck down a child labor law in 1918). Southern Black workers in particular had little recourse against Jim Crow laws that forced them to work for low wages. In this anti-labor climate, unions were weak and strikes became extremely rare.

Great Depression Causes

How did popular perception of prosperity influence the election of 1928

Calvin Coolidge, former president, and Alfred E. Smith, who was defeated when he ran for president in 1928, are seen in conversation when they met as members of the non-partisan railroad committee, c. 1932.

Bettmann Archive/Getty Images

There were many factors that caused the Great Depression, but Sicilia argues that the stock market crash of 1929 was not one of the major ones. Instead, he says, the major drivers were more complex. One of the main factors was the government’s adherence to the gold standard. Another, he argues, was income inequality that had developed throughout the 1920s.

“With increased inequality you have a much less stable economy because of the fact that the most stable component of GDP is essentially consumption,” Stelzner says.

Many Americans tried to call attention to this inequality by arguing that “Coolidge prosperity” was a myth. “Prosperity to the extent that we have it is unduly concentrated and has not equitably touched the lives of the farmer, the wage earner and the individual businessman,” said Al Smith when he accepted the Democratic nomination for president in 1928.

Smith lost the election to Herbert Hoover, who argued that Americans were experiencing prosperity. Soon after Hoover took office, the U.S. economy crashed. 

The 1920s were a period of optimism and prosperity – for some Americans.  When Herbert Hoover became President in 1929, the stock market was climbing to unprecedented levels, and some investors were taking advantage of low interest rates to buy stocks on credit, pushing prices even higher.  In October, 1929, the bubble burst, and in less than a week, the market dropped by almost half of its recent record highs.  Billions of dollars were lost, and thousands of investors were ruined.

After the stock market crash, President Hoover sought to prevent panic from spreading throughout the economy.  In November, he summoned business leaders to the White House and secured promises from them to maintain wages.  According to Hoover’s economic theory, financial losses should affect profits, not employment, thus maintaining consumer spending and shortening the downturn.  Hoover received commitments from private industry to spend $1.8 billion for new construction and repairs to be started in 1930, to stimulate employment.

The President ordered federal departments to speed up their construction projects and asked all governors to expand public works projects in their states. He asked Congress for a $160 million tax cut while doubling spending for public buildings, dams, highways, and harbors.


Praise for the President’s intervention was widespread;  the New York Times commented, “No one in his place could have done more. Very few of his predecessors could have done as much.”  Together, government and business spent more in the first half of 1930 than in the entire previous year. Still consumers cut back their spending, which forced many businesses and manufacturers to reduce their output and lay off their workers.

In October 1930, with unemployment rising, Hoover created the President’s Emergency Committee for Employment (PECE) to coordinate state and local relief programs, and to develop methods for increasing employment in the private sector.  But with no direct control of funding for relief or jobs, PECE had only limited success.

As the Depression worsened, Hoover requested that the Federal Reserve increase credit, and he persuaded Congress to transfer agricultural surpluses from the Federal Farm Board to the Red Cross for distribution to relief agencies. Hoover asked Congress for even more spending on public works, and he continued to encourage states and private businesses to generate new jobs.


Economic conditions improved in early 1931 until a series of bank collapses in Europe sent new shockwaves through the American economy, leading to additional lay-offs.  In August 1931, PECE was reorganized as the President’s Organization on Unemployment Relief (POUR). POUR expanded on PECE's work but also implemented a national fund drive for unemployment relief.  The national fund drive raised millions of dollars but proved to be woefully inadequate as unemployment soared to record levels.

Hoover was criticized for almost every program he proposed.  His public works projects, designed to create jobs, were characterized as wasteful government spending.  His efforts to promote local relief programs, rather than asking Congress to create nationwide relief programs, were viewed as callous disregard for the unemployed.


On January 22, 1932, Hoover established the Reconstruction Finance Corporation (RFC) to make emergency loans to businesses in danger of default.  At first the RFC lent money only to banks, railroads, and certain agricultural organizations, but the scope of its operations was later expanded, and it proved to be an effective tool for stabilizing business and industry.  In July 1932, Hoover signed into law the Emergency Relief Construction Act, which allowed the RFC to lend $300 million to the states for relief programs and $1.5 billion for public works projects.  Hoover also persuaded Congress to establish Federal Home Loan Banks to help protect people from losing their homes.

By the summer of 1932, the Great Depression had begun to show signs of improvement, but many people in the United States still blamed President Hoover.  With the Presidential election approaching, the Democratic candidate, New York Governor Franklin D. Roosevelt, exuded hope and optimism, and promised the people a "New Deal."  Hoover, defending his record, came across as pessimistic and defeated.  In November, Roosevelt won in a landslide.


Four long months intervened between the election and Roosevelt's inauguration. Economic signs that had looked so promising in the summer of 1932 trended downward, unemployment went up, and banks failed at an alarming rate.  As weak banks closed their doors, nervous depositors began withdrawing cash from even the soundest banks, but Congress refused to enact Hoover’s plans to stem the panic.  When Roosevelt was inaugurated on March 4, 1933, the banking system was near total collapse, and unemployment had reached 25%.  Within days, Congress passed and FDR signed into law the Emergency Banking Relief Act, which stemmed the panic and restored confidence in the financial system – and was almost identical to legislation Hoover had proposed weeks before.  Despite all the efforts of Roosevelt's "New Deal," the Depression persisted seven more years, until World War II stimulated the economy with increased demand for commodities and war materials.