A significant factor in the economic downturn of the 1930s involved a substantial imbalance between the nation’s productive capacity and the purchasing power of its citizens. This dynamic, characterized by insufficient demand relative to available goods and services, ultimately hindered economic activity and contributed to widespread unemployment and business failures.
The expanding industrial output of the Roaring Twenties created a surplus of goods that the average worker, whose wages did not keep pace with productivity gains, could not afford. Wealth concentrated disproportionately in the hands of a few, leaving a large segment of the population without sufficient disposable income to sustain demand. The resulting decline in sales led to reduced production, layoffs, and further contraction of the economy, creating a self-reinforcing downward spiral.
