An Unsound Economy America’s SocioEconomic Gap and the Coming of the Great Depression

Irresponsible financial speculation, trade imbalances and a profoundly vulnerable banking and finance system created a vortex of financial instability exacerbated by social ferment that threatened to plunge the United States into a class war. This dual social-economic problem and the economic disequilibrium it engendered is central to Howard Zinn’s book A People’s History of the United States. Zinn quotes the renowned economist John Galbraith, whose reference to a bad distribution of income in which just 5 percent of the population controlled one-third of the nation’s personal wealth addressed this fundamental flaw in America’s capitalist system. It seems that a republic founded on the principle that all men are created equal had embraced an industrialized, capitalist ethos that trivialized the individual and was, in truth, as class conscious as the old system Americans claimed to have rejected. Poor decisions among the nation’s banks and financiers and at the government level simply exacerbated the problems of the country’s underclass, problems that had always been present. Forced to take desperate measures to survive, many Americans were radicalized by the Depression and took matters into their own hands. Zinn offers a socialist explanation for the particular vulnerability of the nation’s banking and investment system, the Great Depression and of the capitalist system in general. This model sees American capitalism as driven by the one overriding motive of corporate profit and therefore unstable, unpredictable, and blind to human needs. The result of all that: permanent depression…and periodic crises for almost everybody (Zinn, 393). Indeed, the depth and severity of the depression seemed symptomatic of something fundamentally flawed in the American economic system. More than 80 years later, the results are still shocking: more than 5,000 banks closed and industrial production dropped by 50 percent, leading to as many as 15 million Americans unemployed (Zinn, 397). The sheer severity of the problem demanded a sea change in every aspect of the country’s economic system. the country’s survival required nothing less. One of the primary themes in Self Help in Hard Times, Chapter 15 in Zinn’s book, is that the apparent prosperity of the 1920s, which on the surface seemed to certify the efficacy of capitalism, was misleading in the extreme. True, American manufacturing was more productive than ever before, but demand did not rise accordingly. Overinvestment followed, as did the over-extension of credit. It is perhaps unsurprising, given the high spirits and enthusiasm of the period, that over-exuberance should have ruled the day but the bubble that was produced proved catastrophic. The wealthiest of Americans would come to know what poverty truly meant, and understand the circumstances in which the poor lived. It is, in part, to this state of perpetual poverty and of wealth inequity that Galbraith referred when he asserted that the American economy was unsound. But this was America in the early 20th century. America’s financial instability and social inequity was manifested in a tradition of financial and labor exploitation by the country’s business owners and major investors. In the country’