Thus, although American Capitalism gave rise and support to America being the land of freedom and prosperity, the sharpest challenge came in the 1930s. The Great Depression was by far the most severe economic upheaval endured by American Capitalism. Thus, no event of the twentieth centu

The Great Depression also revealed that workers and consumers by and large received too small a share of the enormous increases in labor productivity. Better machinery and more efficient industrial organization had increased labor productivity enormously. However, salaries and wages had not risen nearly as much. Thus, American Capitalism was being steered as an automobile, with one foot pressed to the accelerator of production and another on the brake of consumption. A prime example of this was between the years of 1923 and 1929, when manufacturing output per worker-hour increased by 32 percent, and wages rose only 8 percent. As a result, this rise in production, led to the encouragement of overproduction. In addition to that, farmers suffered a burden of declining prices for their crops, a drop in exports, and large debts incurred by wartime expansion.

To add to the troubles, also came the whole issue of the stock. Only about 4 million Americans owned any stocks, out of a total population of 120 million. Many of these stockholders were brought into the market through the discovery of “credit” in the form of margin accounts. Thus, people portrayed to be rich, but were truly not. The prices of stocks were rising far beyond the worth of the shares of the companies they represented. People were willing to pay inflated prices because they believed the stock prices would continue to rise and they could soon sell their stocks at a profit. Americans paid only a small part of the price and borrowed the rest, gambling that they could sell the stock at a high enough price to repay the loan and make a profit. Although this seemed to have worked for some time, thus, for example, in 1928 the price of stock in the Radio Corporation of America (RCA) multiplied by nearly five times, and the Dow Jones industrial averaged doubled in

In addition to all the previously mentioned problems, the Great Depression also revealed that America had a weak government. Thus, a government who did not enforce its regulations, and who did

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