676 Chapter 25 From “Normalcy” to Economic Collapse: 1921–1933
associations.“We are passing from a period of extremely
individualistic action into a period of associational activ-
ities,”Hoover stated. After Coolidge became president,
the antitrust division of the Justice Department itself
encouraged the trade associations to cooperate in ways
that had previously been considered violations of the
Sherman Act.
Even more important to the trade associations were
the good times. With profits high and markets expand-
ing, the most powerful producers could afford to share
the bounty with smaller, less efficient competitors.
The weakest element in the economy was agricul-
ture. Farm prices slumped and farmers’ costs mounted.
Besides having to purchase expensive machinery in
order to compete, farmers were confronted by high
foreign tariffs and in some cases quotas on the impor-
tation of foodstuffs. As crop yields per acre rose, chiefly
because of the increased use of chemical fertilizers,
agricultural prices fell further.
Despite the efforts of the farm bloc, the govern-
ment did little to improve the situation. President
Harding opposed direct aid to agriculture as a matter
of principle.“Every farmer is a captain of industry,”he
declared. “The elimination of competition among
them would be impossible without sacrificing that fine
individualism that still keeps the farm the real reservoir
from which the nation draws so many of the finest ele-
ments of its citizenship.”During his administration
Congress strengthened the laws regulating railroad
rates and grain exchanges and made it easier for farm-
ers to borrow money, but it did nothing directly to
increase agricultural income. Nor did the high tariffs
on agricultural produce have much effect. Being forced
to sell their surpluses abroad, farmers found that world
prices depressed domestic prices despite the tariff wall.
Thus the unprecedented prosperity rested on
unstable foundations. The problem was mainly one of
maldistribution of resources. Productive capacity raced
ahead of buying power. Too large a share of the profits
was going into too few pockets. The 27,000 families
with the highest annual incomes in 1929 received as
much money as the 11 million with annual incomes of
under $1,500, the minimum sum required at that time
to maintain a family decently. High earnings and low
taxes permitted huge sums to pile up in the hands of
individuals who did not invest the money productively.
A good deal of it went into stock market speculation,
which led to the “big bull market” and eventually to
the Great Depression.The Stock Market Crash of 1929
In the spring of 1928, prices on the New York Stock
Exchange, already at a historic high, began to surge.
As the presidential campaign gathered momentum,
the market increased its upward pace, stimulated byWalter Thompson saw his assets evaporate during the stock market collapse in 1929. Desperate for cash (like
nearly everyone else) he offered his snappy roadster for $100.