America - Boom, Bust And Recovery Flashcards
Economic Boom
Declaration of Independence, 1776, declared new state should aim to enable “life, liberty and the pursuit of happiness”
20s seemed to be decade when it happened in economic state
Decade of unrivalled prosperity
GPN $73.3 bil 1920 - $104.4 bil 1929
- reflected average growth around 2% per year
Unemployment never rose about 3.7%
- compared to average 6.1% 1911-1917
Inflation never rose above 1%
Average working week in industry fell 47.4 hours 1920 to 44.2 hours 1929
These economic stats meant purchasing power of Americans rose steadily
For example:
- 1922 100,000 radios produced
- 1929 increased to 350,000 per year
Major corporations saw profit increase by 62% 19232-29
Industry that epitomised the 20s boom was motor car industry
- General Motors saw its earnings rise from $%173 mil at start of decade to $1.5 bil at end
1928, Herbert Hoover declared:
“We in America are nearer to the financial triumph over poverty than ever before in the history of our land. The poor house is vanishing from among us”
Developments in early 20s
Beginning of 20th century, economic deployment and technological innovation brought American industry to point making America world’s leading industrial nation
Henry Ford introduced assembly line in 1913
- both sped up manufacturing and cut it costs
- offering American industrialists chance to make large profits
- WW1 presented golden opportunity for some businesses to maximise their profits by supplying Allies with food and munitions and take over markets previously supplied by Britain and Germany, whose industries were disrupted by war
So main effects of war were:
- accelerate growth United States
- change US from being a debater nation to being world’s main creditor
- open up export markets previously serviced by Britain and Germany
Government Policy
Four men particularly influential in shaping economic, business and industrial events in this period:
- Warren Harding, president 1921-1923
- Calvin Coolidge, president 1923-28
- Andrew Mellon as Secretary of Treasury 1921-1932
- Herbert Hoover, Secretary Commerce and President following Coolidge
Many of these people were very different, but their policies were very similar
Governments in this period adopted laisses faire economics
Meant gov did not see itself as having responsibility in economics other than to create the conditions for a thriving economy
Each president favoured fact is which would allow businesses to grow such as lowered taxes and deregulation
Also didn’t interfere with banking and shop market
- 1922, Congress passed the Fordney-McCumber Tariff. This law place taxes on foreign goods imported into US such as chemicals, textiles and farm products. Increased profits of American industries. However, did little to deal with agricultural overproduction
- Andrew Mellon adopted a low tax policy. Taxes on rich lowered 50% to 20% from 1921-1926. 1926 Revenue Act lowered tax rates for high earners. During his time in office, Mellon handed out $3.5 billion in tax reductions
- Federal Trade Commissions and Republican run state governments reduced regulations on business. Price-fixing by businesses to raise profits was ignored by Federal Trade Commission. Little attempt was made to regulate working hours or use of child labour
- president Coolidge stated ‘the business of American is business’, this meant that the Trade Unions would face a difficult time in the 1920s. Many employers became involved in the ‘American Plan’ which reduced power of unions. By 1929, union membership had declined by almost a million
Mass production and technological advances
The technological advances in this period made the 1920s a virtual second Industrial Revolution for USA
Important development was mass production,closely associated with Henry Ford
Ford established a car manufacturing plant in Detroit before WW1
He introduced the production line, which revolutionised car manufacture
On the Ford assembly line individuals workers learned how to assembly one specific part of a car
This assembly line moved at a steady pace, setting rate of production
Meant low-skilled and semi-skilled workers could be be employed
In 1913 it took 12.5 hours to produce a Ford car
In 1923 it had been reduced to 2 hours 40 minutes
In 1920 there were 8 million cars in US
By 1929, it was 26 million
Most produced was Ford Model T
Mass production allowed higher output and lower prices
By 1925, a model T cost $290, which was in reach of average American
Production was also increased by combining mass production with scientific management
Scientific management was the brainchild of Frederick W Taylor and derived its name from his 1922 book the Principles of Scientific Management
Taylor established a set of Principles that would improve efficiency of industry
They key to his method was careful observation of all components of a task
Based on these observations, standards could be established which laid down the way in which the task should be performed and the amount of time it should take
By following these principles m productivity should be increased
Workers who carried out their tasks in good time would be rewarded with bonus payments, so they application fo scientific management had the tendency to raise real wages for the workers involved, even though the pace of change in the nature of work was sometimes very rapid
An important consequence of this greater efficiency in production was that the 1920s experience almost a doubling of the USA’s industrial output, although the size of the industrial workforce barely increased at all
Electrification also stimulated the development of the economy
My 1930, 85% of homes in cities had access the electricity
New products were available such as radios, vacuum cleaners and toasters
There were many other items available too:
- toasters
- waffle makers
- hairdryers
In 1912 there were 2.4 million electrical appliances in the USA
This rose to 160 million in 1929
It is important to remember that most of rural America didn’t have electricity at the same time
It wasn’t until the 1950s that most parts of the US had their own electricity supply
Consumerism
Development of consumer goods was also aided by technological advances that saw the creation of new materials
Bakelite was effectively the first synthetic plastic and was patented in the US in 1909
It’s chemical properties meant that it could be used for containing many electrical products
America was becoming a consumer society where the four was on buying and earning
The American Dream seemed like a reality
People began to live beyond their means which was seen as more socially acceptable
It was not merely the supply of consumer goods that increases because of the greater efficiency in the methods used to produce them
It was also because of the developments on the demand side that output increased
In order to encourage the consumer to buy many new products that were available, developments began to take place in the ways in which hey were advertised
Products began to display their brand name prominently on the advertisements they produced
They were displayed in a range of places
Large billboards were placed at the side of roads to catch motorists’ attention
Magazines, such as Good Housekeeping Magazine, and especially those bought by women, presented an image of American Life that all could aspire to
Advertising was also promoted on the new radio stations as they increased their audience
Procures would link their products to particular programmes
To make the advertising as effective as possible, the leading product producers would employ psychologists to decide on the most appealing approach
By 1929, American companies were spending $3 billion every year on advertising their products
- a five-fold increase on the amount hey had spent at the start of decade
Alongside new methods of advertising, there were also new methods of distribution
The Spears Roebuck mail order catalogue that began in 1893 as a means of providing a range of goods, especially to farmers who found that their isolation made it hard to buy all of the commodities they might want
This gave them the opportunity of choosing things in the comfort of their own homes
Building on the success of the catalogue, the company opened its first retail department in Chicago in 1925
During the 1920s, as a part to drive to greater efficiency there was a sharp increase in the numbers of such stores
In New York City, Macy’s expanded during the 1920s and introduced its Thanksgiving Day parade in 1924, demonstrating the creativity of American retailers in adversities their services
Easy hire/hire purchase
One of most important stimulants to demand was the use of consumer credit which began in motor industry
Consumer credit was a viral innovation in stimulating demand for products
Customers were provided with credit, in reality, a loan by a credit company, which enables them to have the article they desired immediately
In return for a deposit and then a series of weekly or monthly payments, which included interest on the loan
In GB it came to be known as the “never never” as final payment seemed to take forever
They system worked well to everyone’s advantage as long as the purchaser retained their job and didn’t buy more than they could afford to repay
The motor manufactures set up finance companies to help dealers buy their cars when demand was slow
The motor manufactures set up finance companies
Easy hire/hire purchase
One of most important stimulants to demand was the use of consumer credit which began in motor industry
Consumer credit was a viral innovation in stimulating demand for products
Customers were provided with credit, in reality, a loan by a credit company, which enables them to have the article they desired immediately
In return for a deposit and then a series of weekly or monthly payments, which included interest on the loan
In GB it came to be known as the “never never” as final payment seemed to take forever
They system worked well to everyone’s advantage as long as the purchaser retained their job and didn’t buy more than they could afford to repay
The motor manufactures set up finance companies to help dealers buy their cars when demand was slow
From here, it was only a short step to make such loans directly available to the customers
In order to buy car outright with cash, it would y take a typical American family 5 years to save suffiencidnt funds for the purchase
Using credit, the customer could literally buy now and pay later
By putting down an initial payment, and then making regular payments by instalment, the item could be purchased
From the finance company’s perspective, if the customer defaulted on the loan, there was a commodity that could be repressed
Such schemes had been available previously but there has been something not quite reputable about buying this way
That perception has changed permanently in the 1920s and it became ac acceptable method for buying expensive commodities
This is clearly evidenced by the fact that by the end of the decade, 60% of all furniture and 75% of all radios were bought on the hire purchase schemes
Limits to the boom
Overall, the 1920s were clearly a period of exceptional economic growth
- nearly 50% in the years 1921-25
This is exceptional by any standards
In next 4 years, growth was slower but still impressive despite slight set back in 1927
Clearly, really big winners were the tycoons like Ford, Insull and Clarence Birdseye
They made their millions, or even billions, but many others gained as well
The trickle-down theory of wealth creation and distribution really did work for USA
Managers of all sorts prospered, as did salesmen and estate agents
On the other hand, much of rural America was suffering from falling agricultural prices and over-production
In many areas, there was no electricity, the cost og brining it to disparate rural communities was prohibitive
Here a grinding life of back-breaking toil for declining return marked the decade
Worst served of all were the poor share-croppers of the South, most of whom were black
Many chose to leave and find a new life in the crowded ghettoes of the North
It is important to remember that although the 1920s were predominantly a time of boom and prosperity, for many, the prosperity was merely a dream and in their misery lay Some of the explanation of the “bust” that was to come
Exclusions from the Economic Boom
Farmers:
- farm income dropped dramatically, million of farmers were forced off the land to see unskilled, poorly paid work in the cities
- farming communities lived in poverty and squalor i.e. unsanitary shacks with no electricity
- improved fertilisers and new machinery like the combine harvester meant that farming had become so efficient that there was over production. When the farmers produced more than they could sell, they lost money
- there was massive competition from Canadian wheat farmers who were producing crops Nat a cheaper price than American farmers
- WW1 had bankrupted Europe, so they could no longer buy USA farm products. Now the war was over, Europe also went back to producing their own farm products. Europe also introduced protectionism policies against the USA
Black people:
- job opportunities were incredibly different to blacks in comparison to whites. Black people were not given any job opportunities and were left with the jobs white people didn’t want
- black people suffered enormously in the 1920’s. They were poorly educated in comparison to whites
- black people found themselves in the poorest of accommodation in the worst areas of towns
Ethnic Minorities:
- Native Americans lives on reservations which produced low crops on bad land. Their numbers dwindled ton just 250,000 -
- the culture of Native Americans was during because of white efforts to destroy their lives, beliefs and traditions
Workers in traditional industries:
- coal miners were stuck in traditional industry. These were already low paid anyway, but further to this coal mining suffered from seasonal unemployment and form competition from new industries like oil and electricity
- old industries such as leather and textiles suffered from competition from new man made products
To what extent were the 1920s a decade of intolerance?
Although the 1920s were a decade of unrivalled prosperity, they also saw major changes in the US society
They had been the recipient of of million of European immigrants in the 19th century
The 1920s saw the first restriction on immigrations
Decade saw the reappearance of the KKK
Introduction of national prohibition helped fuel the growth of organised crime
Women received the for in federal elections for the first time an their role in society changed radically
The First World War marked USA’s entry on the world stage and transformed it into world’s most powerful country
Yet the war itself triggered a rabid nationalism and a real struggle as to hat the national identity really was
Old-time rural America, largely white and Protestant and connected with farming and found itself at loggerheads in many different ways with a vibrant new urban industrial USA, which added to existing tensions within US society
The growing cities themed with immigrants, from groups including:
- Catholic
- Irish
- Italians
- Polish
- Jews from Austria-Hungary and Russia
- blacks escaping poverty in the South in increasing numbers
A clash in value systems was inevitable
Many people connected new ideas, particularly those associated with city life, with vice and immortality
There was widespread distrust of cinema, jazz mucus and its associated dances, particularly the Charleston and the Black bottom
Women who wore skirts, smoked in public and frequented speakeasies were regarded as shameless
There was corners with the growth of crime and fear4 that it might spread into rural and small town areas
The concerns about the effect of new ideals on morality led to something of a revival in religious belief and religious fundamentalism
Popular preachers (evangelists) such as Billy Sunday, spoken of hellfire and damnation
They were quick to take advantaged of both new marketing techniques, such as radio advertising and old ones, such as mass rallies to win more and more people over to Christianity
The scopes monkey trial
One of most illuminating events of decade was scopes money trial, in Dayton Tennessee in 1925
It embodied the class between big cities and old fashioned settler America with its religious certainties and belief that old time religion”
Fundamentalists had set up an Anti-Evoltuion League and six states, including Tennessee, had made it illegal for evolution to be taught in schools
At the centre of it was a young science teacher, John Scopes, prosecuted for teaching Darwin’s theory of evolution
The trial involved two of the biggest names in US popular politics
William Jennings Bryan appearing for God and old time religious and atheist Lawyer Clarance Darrow from Chicago, defended Scopes
Darrow famously called Bryan to take the stand as an expert on the Bible. Humiliating him by exposing his ignorance and old fashioned credulity, Braun asserted that Jonah had really been stalled by a large fish and Joshua had made the sun stand still
- “fool ideas that no intelligent Christian on Earth believes” according to Darrow
Whole many urbanities found this hilarious, the small-town just nevertheless found Scopes guilty and he was fined $100
The case highlighted the difference between small town beliefs abd those of many city dwellers
The trial could almost be seen as a battle between the beliefs of the 19th century and the 20th
In the long term those of the 20th century won, although religious fundamentalism is still important in modern US society
Reasons for tension
This tension between old and new America led to many issues, including:
- red scare and immigration
- The KKK and racism
- Prohibition and organised crime
- Women’s rights
Immigration and the red scare
In November 1917, the Bolshevik Revolution in Russia created the world’s first communist state
Communist ideas were seem as a direct threat to the US political and economic system
Immigrants from Central Europe came to be feared as being susceptible to these ‘un-American’ ideas
Also, from April 1917, when the USA joined WW2, resentment towards immigrants from opposing countries increased
In 1919 there was great industrial unrest which caused widespread strikes (over 4 million workers nationwide)
This led many to think a communist revolution was imminent
This fear was known as the red scare
A General Intelligence Division was created to investigate socialist and communist activity
From 1920 the Palmer Raids were enacted which led to 6,000 arrested
Limits to immigration
1917 Immigration Act - denied entry to USA t5o immigrants who couldn’t read of write
1921 Emergency Immigration Act - limited immigration to 3% of the total number of people from a national group already living in the US as recorded on the 1920 Census
Johnson-Reed Immigration Act 1924 - made above changed permanent and set new quotas of 2% based on the 189- census
Prohibition and Organised crime
Originates in rural and small town America
Crusade against liquor inspire by misery, poverty and depraviltiy and violence that alchol was perceived
The saloon and it’d hard liquor had been seen as anti chambers of hell by Protestant churches and chapels of the south and west
Drink also acclimated with waves of poorer immigrants
Powerful anti-alcohol lobby groups developed in many states to close saloon and limit traffic in liquor
Campaign driven by pressure group called the Anti Saloon League who’s membership drawn from middle class and church
Other groups supported, such as Women’s Christian Temperance Union and big tycoons like Henry Ford
John. D Rockefeller gave monetary support, as he believed prohibition would make his workers more efficient
Collect voting for politicians who would back in Congress
Several states already had own prohibition laws and federal prohibition built on this
By Time war declared in 1917, 18 states adopted prohibition and 33 had done by 1920 when Volstead Act made ban nationwide
By early 1919, necessary 36 states had made backed amendment which was necessary to make the change constitutional in 18th amendment
Only Rhode Island and Connecticut refused to support
Intoxicating liquor classed anything 0.5%v or above
Keenest supporters were likely to live west of Mississippi or south of Mason-Dixon line, self employed and attended Methodist or Baptist
Opponents were likely to live in large city and be Roman Catholic
