American Economy in the 1920s: Consumerism, Stock Market & Economic Shift

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  1. 0:05 The Roaring Economy of the 1920s
  2. 1:04 Consumerism in the 1920s
  3. 2:33 Coolidge Prosperity
  4. 3:07 The Stock Market
  5. 4:12 The Stock Market Crash
  6. 5:11 Lesson Summary
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Taught by

Nate Sullivan

Nate Sullivan holds a M.A. in History and a M.Ed. He is a middle school history teacher, freelance writer, and historical reenactor.

In this lesson we will learn about the American economy throughout the 1920s. We will explore the role of consumerism and the stock market during this time, and we will learn how the prosperity of the decade came to a crashing halt.

The Roaring Economy of the 1920S

The 1920s have been called the Roaring '20s and for good reason. Not only was American culture 'roaring' in terms of style and social trends, but the economy was 'roaring' as well. The decade was a time of tremendous prosperity. Following the end of World War I, the industrial might of the United States was unleashed for domestic, peaceful purposes. Within a few short years, an economic shift took place as the economy transitioned from wartime production to peacetime production. New technologies like the automobile, household appliances, and other mass-produced products led to a vibrant consumer culture, stimulating economic growth. Furthermore, under the administration of three consecutive Republican presidents, the government adopted fiscally conservative policies that fueled private business.

Consumerism in the 1920s

Consumerism can be thought of as the culture surrounding the buying and selling of products. Consumerism came into its own throughout the 1920s as a result of mass production, new products on the market, and improved advertising techniques. With more leisure time available and money to spend, Americans were eager to own the latest items. Advertisers used this to their advantage, often stressing luxury and convenience. Through mediums like radio and print advertisements, consumer culture was more visible than ever before.

Sears, Roebuck & Co., a company founded in 1893, regularly issued a mail-order catalog. By the 1920s, the catalog, nicknamed the consumer's bible, had become enormously popular. It completely revolutionized how people purchased items. The catalog contained literally hundreds of pages featuring products like sewing machines, bicycles, clothing, radios, and just about everything else imaginable. Installment buying, or buying on credit, was also popular, allowing families to purchase large items like automobiles or refrigerators and pay them off gradually over a period of time. Large department stores also became popular during this time.

Coolidge Prosperity

Nicknamed Silent Cal because he was a man of few words, Calvin Coolidge was president of the United States from 1923-1929. His fiscally conservative policies helped usher in the era of 'Coolidge Prosperity.' Coolidge slashed taxes and supported legislation that encouraged private business. He also talked incessantly about the virtue of thrift. Coolidge deserves considerable credit for the economic success of the 1920s.

The Stock Market

With money to invest, many Americans began buying stock. This was the thing to do in the 1920s. It was seen as modern: a venture for those who were smart, sophisticated, and urbane. And while it carried risks, it was generally seen as a sound investment. As the economy continued to grow throughout the decade, some people came to see investing in stock as a foolproof way to get rich quick.

In 1928 the stock market was booming and buying on margin became commonplace. Buying on margin was a risky practice in which the buyer would typically borrow money from their broker in order to pay for the stock. For example, a buyer might put down 20% of the cost of stock, but borrow the other 80% from a broker. Although there were subtle signs that the stock market could not continue to soar indefinitely, many people ignored these signs and continued with their risky, speculative stock market strategies.

The Stock Market Crash

The prosperity of the 1920s came to crashing halt in the last year of the decade. In September of that year, the stock market began to show signs of stagnation. Then, in October, the bottom fell out as people panicked and began selling out their stock. On October 29, 1929, a day known as Black Tuesday, some 16 million shares were traded on the New York Stock Exchange, leading to billions of dollars instantly lost. Almost overnight, some people went from being millionaires to having virtually nothing. There were even reports of bankers committing suicide by leaping from their high-rise offices. Sadly, the stock market crash of 1929 was only the beginning. For the next ten years Americans suffered through the Great Depression, one of the darkest times in American history.

Lesson Summary

Let's review. Following the end of the First World War, an economic shift took place as America's industrial might was unleashed for peacetime production. By the early 1920s, the economy was booming. Advances in technology, mass production, and new advertising methods led to a vibrant consumer culture. Advertising came into its own throughout the 1920s. Installment buying, or buying on credit, allowed Americans to purchase expensive items like automobiles and refrigerators. The Sears, Roebuck & Co. mail-order catalog revolutionized how people purchased.

President Calvin Coolidge's fiscally conservative policies ushered in the era of Coolidge Prosperity. Investing in the stock market became popular throughout the 1920s, and many Americans practiced the risky, speculative strategy of buying on margin, meaning they borrowed money from a broker to pay for their stock. On Black Tuesday, October 29, 1929, investors panicked and sold out their stock, leading to the stock market crash and, ultimately, the Great Depression.

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