03. reasons for prosperity Flashcards
How did the USA emerge from WW1?
No fighting happened on US soil meaning there was no structural damage to repair
The USA had helped the old empire powers like Britain, lending them money during WW1
The US spent $27 bn on WW1 compared to $50 bn spent by Britain and its Empire.
Which political party were the 1920s Presidents a part of?
Republicans
Who were the Presidents?
Harding 1921-23
Coolidge 1923-29
Herbert Hoover 1929-33
What was the general government policy, and what did this mean for the market?
Laissez-faire meant very little government involvement in policy.
The free market was allowed to operate with minimal restrictions.
The belief in self-help and individualism meant that people should create wealth for themselves and that in a successful economy wealth would naturally trickle down.
What did the Fordney-McCumber Act 1922 do? What did this mean for the market?
It raised tariffs (tax) on imported goods meaning foreign goods were much more expensive to buy than domestic (American) goods.
This meant American industry sold more of their goods.
Tariffs were on average 38.5% on dutiable products.
It had a negative effect on farmers who relied on foreign markets to export their surplus goods and purchased their machinery from abroad.
What were Andrew Mellon’s tax cuts?
Mellon implemented tax cuts to the rich in 1924, 1926, 1928, that mainly benefitted the wealthy
1925 - Coollidge’s gov operated on a surplus despite tax cuts, at $677 million.
Also handed out reductions totalling $3.5 bn to large industry and corporations - the rich got richer.
How did the federal tax cuts impact the population?
They benefited the wealthy, who paid less tax.
They did not impact the poor who were too poor to pay taxes anyway.
What did the reduction in economic regulations mean for business activity?
Companies would fix prices to prevent fair competition
Workers could be easily exploited.
In the Southern textile mills, child labour was common, as was a 56 hour working weeks. Wages rarely rose above 18cents an hour.
How did industry develop new techniques?
The assembly line method was a much quicker and more efficient method of production which allowed mass production, and therefore mass consumer sales and profit.
How could huge corporations dominate industry?
JP Morgan was the first $billion corporation. It controlled 67% of steel production in USA.
Cartels formed (When a group of different producers work together to fix prices or limit supplies so that they make the most profit. It is illegal!)
Holding companies were created (When a company is so big that it ends up controlling other companies, giving it the power to fix prices and make big profits)
Small businesses struggled to compete
How were businesses changed by the growth of management science?
They became more complex to manage so businesses controlled by one manager/ entrepreneur became old fashioned
More specific management role were created such as marketing, production, design and accounting
How did advertising change during the 1920s?
Some companies employed psychologists to help them reach a target market e.g. young women
Campaigns began to include slogans, brand names, celebrity endorsements and consumer aspirations
Consumers began to believe that they could not survive without a product
The amount spent on advertising increased fives times from 1914
How did credit work?
Consumers would pay a deposit, and then the rest in regular instalments (hire purchase).
By 1929, almost $7 billion worth of goods were sold using credit.
Why was easy credit so unstable?
Many consumers and businesses ended up with debts that they could not afford to pay back
What percentage of cars were bought on credit?
75%
