The ‘20s: Culture, Consumption, and Crash 149economic conditions, but here they are cited to indicate that there was a tre-
mendous, growing amount of capital in the hands of U.S. bankers, corporate heads,
businessmen, commercial traders, and investors of all sorts, and it was idle.
There were few outlets for investment—capitalists in the producer’s sector had
built the plants and railroads and ships and so forth needed for economic
growth and had made as many products as American consumers could pur-
chase in the 1920s. In 1898, the U.S. spread its power abroad to find new
markets, resources and areas for investment. But that option, in the horrible
aftermath of the Great War, did not exist in 1929. As already seen, global
trade was about to take a deep dive.
Foreign Economic Crisis. This free fall in global trade points to another
important factor, the economic catastrophe rising out of the Great War and
settlement at Versailles. In stable economic times, that surplus capital would
have been invested in domestic production and international trade. But there
was already a problem with overproduction—inventories had risen over 300
percent by 1929 while construction spending fell from $11 billion in 1926 to
$9 billion in 1929 and auto sales declined rapidly, by one-third in the first 9
months of 1929 alone. At the same time, trade, as noted, fell from $3 billion
in 1929 to $900 million in 1933. Normally, extra capital would be invested
abroad—especially in Europe. However, the major economic partners—
England, France, Germany—were in the depths of their own economic crises
and could not absorb U.S. capital because their own industry and commerce
had been so badly damaged during the war and not recovered yet, plus they
had their own financial obligations to meet. Without begin able to invest in
Europe, American capital might have found a home in the colonial areas [as
it had in 1898] but those places—Africa, much of Latin America, parts of
Asia—were still so underdeveloped, without any industry or even accessible
raw materials in many cases, that investments there would have been wasted.
This also led to around of competitive devaluations by major countries.
Devaluation occurs when a country decreases the value of its money in relation
to others. [For instance, if $1.70 bought £1, but then the U.S. devalued to
$2.55 or $3.40—33 or 50 percent—American goods would cost less. At the
original price, for instance, bottle of American wine in London might cost
£10, but if devalued to $3.40, it would cost only £5. So the U.S. would
export more wine, which, at the lower price, would sell in higher volumes.
Exports would rise and the U.S. would have more revenues]. In the early