Causes of the Great Depression In the 1920's American economic policy was laissez faire. Businesses were left alone and for sometime things appeared to fine. American businesses reported record profits, production was at an all time high. The problem was that while earnings rose and the rich got richer, the working class received a disproportionally lower percentage of the wealth. This uneven distribution of wealth got so bad that 5% of America earned 33% of the income. What this meant was that there was less and less real spending. Despite the fact that the working class had less money to spend businesses continued to increase production levels.
so poor business management was an issue. Do you buy that the working class actually had less money to spend? Does that make sense at all or is that wordsmithing to make a point? Does it mean that less money was actually spent? Notice how the author, trying his or her hardest to make the class warfare point actually couldn't say that. Strange, no?
Purchasing dropped internationally as well. Since Europe was in a depression people there weren't buying as much as businesses had estimated. Then the Fordney McCumber Tariff and the Hawley Smoot Tariff raised tariff levels to as much as 40%. Europe which was already angered at US foreign actions responded with high tariffs of their own. International trade was at a standstill.
The international tariff business was senseless, but it's the exact jingoism that was driving the OP's point and that you chimed in upon. By the way, was the European depression caused by US disjointed incomes?
At this point you should be asking the question "If no one buying and companies were increasing production levels, wasn't there going to be a problem?" BINGO!!! The problem is known as overproduction. American businesses were producing far more than could be consumed. The result was lost profits and eventually debts. After a while many companies went out of business. Why would these companies continue to overproduce? There are several reasons. Some were managed poorly. Others were part of holding companies that placed layers and layers of companies, each relying on the others production levels like a pyramid. If one company in the pyramid reported lower production levels the others fell off and it looked bad. In many cases however crooked company owners reported earnings that were higher than they were actually were in order to drive up the stock price.
I never made an argument for wider margin as a reason for outsourcing. You must have me confused with someone else. My argument was that loss of jobs due to outsourcing would eventually come back to haunt those companies practicing it in the form of lower sales due to loss of middle class purchasing power.
Please. You absolutely argued that wider margin is the driver in saying that the wealthy are taking on a larger pile of income from doing business. Say it however you'd like, but that's the gist of the point or it wouldn't be cloaked in this silliness about the workers getting screwed.
If my facts are faulty as you imply, blame UT for that is where I received my Masters Degree in US History, but you are a manager, you know more about history than I do.
What I know, is more economics than you and don't sell me short on the history.
It is documented historical fact that low wages resulting in little purchasing power helped bring about the depression. It let to overproduction because units were not being moved from warehouses causing huge overhead costs.
No it isn't. Limited demand was what prolonged the issues because folks began hording money and businesses closed en masse, generating huge unemployment. To pretend it was this income gap that drove the world South is simply not true. Incomes didn't go down and the population grew. Aggregate demand actually increased leading up to the Depression. You can read every history text in the history of the world and it's not going to make the bent of scholarly authors revert to reality. You're still going to get the ivory tower bent on everything because they get to speak in generalities and ignore the actual facts behind what was happening.
Small business is an integral part in our economy. However, if the US citizen lacks the power to buy products, everyone suffers.
again, arguing that American citizens lack the power to buy products is preposterous when aggregate demand isn't falling and real incomes remain generally steady. Just makes no sense, unless you want to look at it in the context of broad sweeping generalities that ignore the realities of the actual economy.
It it illogical to think the Americans can continue to fuel the economy by purchasing if their jobs continue to be outsourced at current rates.
Our economy, and every other developed economy has regularly transitioned to a new driver. If ours finds one, it will move forward. If not, we won't find a way to remain a global economic power. It's the reality of constant progress. It's not going to stop because we want to make it OK for our deteriorating work force to make what their parents think they're worth.
Everyone including the companies themselves will suffer. One main ingredient that separates our economic system from communism or fascism (both failed concepts) is the existence of a viable middle class that provides the fuel and greases the gears to our economic engine. The engine (small businesses) that you refer to is as useless as teats on a boar hog if it doesn't have fuel (middle class) to run it.
