1. Problems In The Economy Flashcards
Agriculture - Declining Exports
Europe imported far less food from the USA
Europe was poor + response to USA’s high tariffs
Agriculture - New Competitors
Competition from highly efficient Canadian wheat producers
Competition arrived during population decline -> smaller market with high competition lead to price drop meaning farmers’ profits were heavily reduced
Agriculture - Over Production
1900-1920 - more was being farmed whilst machinery kept improving (improved fertilisers + combine harvester)
Highly efficient US agriculture lead to surpluses of wheat produced -> market became saturated and farmers weren’t able to make sufficient profits to cover their expenditures
Agriculture - Falling Prices
1921: 50% price drop
1920: $2.5 per bushel -> 1929: $1 per bushel
5 times more farm bankruptcies in 1920s than 1910s
Farm income 1919: $22billion -> 1928: $13billion
Agriculture - Indirect Effects
Half of all Americans lived in rural areas on farm/selling to farms - if farmers are poor they can’t sell to farmers
Affected 60million people
6million rural Americans forced off their land in 1920s
Majority were unskilled workers -> migrated to cities due to low demand for labour
African American farm workers most badly affected - 750,000 left unemployed
Agriculture - Fibre+Grain Cut
Prohibition cut demand for grains used in alcohol manufacture
Growth of synthetic fibres decreased demand for natural ones e.g. cotton
Traditional Industries - Coal
Overproduction led to price drop which led to profit decrease
New power sources (e.g. electricity) were highly efficient -> still needed coal but only little
Improved technology - less coal required for same service (e.g. boilers - same heat, less coal)
Traditional Industries - Other
Not growth markets
Competition from industries which used new man-made materials and were mechanised
Wider Society - 1920s Chicago
Most didn’t make big purchases on credit (e.g. car) in order to save money for potential unemployment
Bought smaller items on credit (e.g. radio)
3% of semi-skilled workers had car - richer areas=29%
Poorer people shopped at local grocers rather than chains stores
Local grocer owners were more flexible on prices and often gave credit
Wider Society - Unemployment
Industry growth often exacerbated unemployment as industries became increasingly mechanised
1920: 5% of population unemployed -> 1925: 9% unemployed
Unemployment caused a decrease in consumerism as families were the main consumers and it meant they were often too poor to buy ordinary things
Wider Society - Wealth Disparity
• Increasing irregularity of wealth - not equally shared
Dividends to shareholders increased 60% from 1920 to 1929 whereas the average earnings only increased by 10% over the same period
Creates social tension + sense of a rigged system
1928 North Carolina strike
Male workers = $18 for a 70hour week
Female workers = $9 for a 70hour week
Living wage =$48
42% of Americans lived beneath poverty line
Boom=consumer led -> if 42% aren’t engaging in consumerism then market will heavily decrease and become saturated faster
Florida Land Boom - Boom
State became accessible to middle class due to the car
Large scale coastal developments + parcels of land sold to wealthy Northeners on the basis of glossy brochures
People began to invest in unseen developments using credit + 10% binders fees
Success stories fuelled boom - parcel of land in 1900: $25 -> 1925: $150,000
Wealthy industrialists built hotels for the rich to enjoy
1920: 950,000 population -> 1925: 1.2million population
Florida Land Boom - Crash
Hurricanes in 1926 left thousands bankrupt + 750,000 homeless
Decrease in buyers -> success stories shown to be fake
Mediterranean fruit-fly epidemic caused circus industry to collapse in the 1930s
Banking System - Fed
Federal Reserve Board - allowed banks to regulate themselves without government interference
Represented the interests of the bankers - couldn’t be relied upon to act in the best interests of the nation in a conflict of interest
Favoured low interest rates in order to fuel consumerism through credit
Banking System - Risks
People buying on credit often couldn’t pay back their loans
Companies began investing into one another
If 1 firm crashes others lose their investments causing a domino effect - lots of risk in one place
Over 30,000 small banks in 1920s
Not as safe as large banks as unable to cope with financial problems - if they collapse depositors lose virtually all their savings
