Economic Inequality & Lessons from the 1920 Great Depression
Tiếng Việt bên dưới
1. The Widening Wealth Gap in the U.S.
According to data from the Federal Reserve (FED), as of 2021, the wealthiest 1% of Americans held 34% of the nation’s total assets. While this is lower than the 40% during the 1920s Great Depression, it still indicates an extreme concentration of wealth among the ultra-rich.
Meanwhile, the bottom 50% of the U.S. population owns only 2.5% of the nation’s total assets, and this figure has remained virtually unchanged for decades. This highlights a stark reality: economic inequality is not decreasing but persists across generations.
2. The Billionaire Boom During the COVID-19 Pandemic
A clear example of wealth disparity is seen in the COVID-19 pandemic (2020). While millions of Americans faced unemployment, income loss, and had to rely on government assistance to survive, U.S. billionaires saw their wealth increase by $1.3 trillion within just a year.
This raises a fundamental question: Why do the rich keep getting richer during economic crises while the poor struggle even more? Is it because fiscal and monetary policies, as well as the financial system, are increasingly favoring the wealthy elite over the broader population?
3. Lessons from the 1920s: The Collapse of a Financial Bubble
In 1920, the U.S. entered an era of economic prosperity after World War I. Once a war debtor, America emerged as the world’s largest creditor, holding 40% of global gold reserves.
During this period, the U.S. economy experienced rapid growth:
- Electricity production in the U.S. was equivalent to the entire European continent.
- Steel production accounted for over 50% of global output.
- Oil production made up two-thirds of the world’s total output.
- The automotive industry boomed, with Ford introducing the assembly line in 1913, increasing production by 58 times and making cars accessible to the middle class.
However, this rapid expansion also fueled excessive consumption and financial speculation:
- Banks aggressively expanded lending to stimulate consumption, but without standardized credit assessment systems, allowing anyone to borrow money—even those unable to repay.
- The installment payment model flourished, making it easier for people to buy everything from cars to home appliances and real estate.
- The stock market became a speculative tool, where instead of investing in production, many borrowed money to gamble on stock prices, hoping to “work less and earn more.”
- A culture of speculation took hold, where people bought stocks not based on intrinsic value but on the belief that prices would continue to rise.
As a result, the economy fell into an illusion of prosperity, where people relied on buying low and selling high rather than creating real value. Society gradually became less productive, consumed excessively, and relied on financial speculation, leading to a dangerously imbalanced economy.
4. The Collapse & Consequences
All these factors contributed to a massive economic bubble. When the stock market crashed in 1929, millions of Americans lost everything, countless banks collapsed, and the U.S. economy plunged into a decade-long Great Depression.
This serves as a stark warning for any economy overly dependent on debt, financial speculation, and extreme wealth inequality. When the wealthiest segment of society holds an overwhelming share of assets while the majority struggle, economic sustainability becomes increasingly fragile, making crises inevitable.
5. The Future of the U.S. Economy: Is History Repeating Itself?
Current trends suggest that America may be facing similar risks to those of the 1920s:
- Wealth inequality continues to grow, with assets increasingly concentrated among the ultra-rich.
- Personal debt is at record-high levels, as many Americans rely on borrowing to maintain their standard of living.
- Financial bubbles are emerging, particularly in the stock market and real estate sectors.
- An economy driven more by financial speculation than real production, creating a fragile foundation for sustainable growth.
Without meaningful policy reforms, the U.S. could be heading toward another major economic downturn, similar to what happened after the 1920s boom.
Conclusion
Economic history often repeats itself, and the lessons from the 1920s Great Depression serve as a clear warning. As wealth inequality widens, the middle and working classes struggle, while the ultra-rich benefit from a financial system tailored to their advantage, the risk of a significant economic crisis becomes increasingly inevitable.
Only through strong reforms in fiscal policy, debt control, wealth redistribution, and investment in real production can the economy achieve true sustainability—rather than repeating the cycle of financial bubbles, crisis, and depression seen in the past.