America Boom Bust And Recovery - Boom And Crash Flashcards
Economic Boom
The Declaration of Independence in 1776 had declared that the new state should aim to enable “life, liberty and the pursuit of happiness”
The 1920s seemed to be the decade where this aim had been achieved, at least in an economic sense and was seen as the decade of unrivalled prosperity
The GNP rose from $73.3 bill in 1920 to $104.4 bill in 1929 (by 19929 prices), which reflected an average growth of 2% per year
Unemployment never rose above 3.7%, compared to the average of 6.1% between 1911-17
Inflation never rose above 1%
The average working week in industry fell from 47.4 hours in 1920 to 44.2 hours in 1929
Real wages rose by approx 13% between 1922-29
All of this meant that the purchasing power of Americans rose steadily
For example, in 1922, 100,000 radios were produces, which rose to 350,000 per year by 1929
Major US corporations saw profits increase by 62% between 1923-28
The car industry epitomised the 1920s boom, and General Motors saw it earnings rise from $173 mil at the start of the decade, to $1.5 bill by 1929
There was such high prosperity that in 1928, Herbert Hoover said “We in America are nearer to the financial triumph over poverty than ever in the history of our land. The poor house is vanishing from among us”
Developments in the Early Twentieth Century
By the beginning of the 20th century, economic development and technological innovation had bought American Industry to the point of making America one of the world’s leading industry nations
Henry Ford had introduced the assembly line in 1913 which sped up manufacturing and cut it costs, allowing American industrialists the chance to make large profits by suppling Allies with food and munitions and, most importantly, by taking over markets previously supplied by Britain and Germany, when their industries were disrupted by war
The main effects of war were:
- to accelerate the growth of the United States
- to change the United States from being a debtor to being the world’s main creditor
- to open up export markets previously serviced particularly by Britain and Germany
Government Policy
There were 4 men very vital in shaping economic, business and industrial events:
- Warren Harding, President from 1921-23
- Calvin Coolidge, President from 1923-28
- Andrew Mellon, Secretary of the Treasury through the decade
- Herbert Hoover, Secretary of Commerce and President in succession to Coolidge
Governments in this a period adopted laisses faire economics
They did not see itself as having responsibility in economics other than to create the conditions for a thriving economy
Each President favoured tactics which would allow businesses to grow such as lowered taxes and deregulation and they didn’t interfere with banking and the stock market
Some notable changes were:
- in 1922, Congress passes the Fordney-McCumber Tariff which was a law that places taxes on foreign goods imported into the US such as chemicals, textiles and farm products which increased profits of American Industries, however it did little to deal with agricultural overproduction
- Andrew Mellon adopted a low-tax policy, in which taxes on the rich were lowered from 50% to 20%. The 1926 Revenue Act lowered the tax rate for high earners. During his time in office, Mellon handed out $3.5 billion in tax reductions
- the Federal Trade Commission and Republican run state governments reduced regulations on businesses. Price-fixing by businesses to raise profits was ignored by the Federal Trade Commission. Little attempt was made to regulate working hours or the use of child Labour
- Coolidge stated ‘the business of America is business: which meant that the Trade Unions would face a difficult time in the 1920s. Many employers became involved in the ‘American Plan’ which reduced the power of Unions. By 1929, unions membership had declined by almost a million
Mass Production
The technological advances in this period made the 1920s a virtual second Industrial Revolution for the USA
One of the mot important developments was mass production, closely associated with Henry Ford
He established a car manufacturing plant in Detroit before WW1 where he introduced the production line which revolutionised the car manufacture
Individual workers learned how to assemble one specific part of a car
This assembly line moved at a steady pace, setting the rate of production
It meant that low-skilled and semi-skilled workers could be employed
In 1913 it took 12.5 hours to produce a Ford Car
By 1923, this has been reduced to 2 hours 40 minutes
In 1920, there were 8 millions cars in the USA
By 1929, this had risen to 26 million
This most produced car was the Ford Model T
Mass production led top higher output and lower prices
By 1925, a Model T coat $290 which was in reach of the average America
Scientific Management
Scientific Management was combined with production to increase productivity
The idea was developed by Frederick W Taylor and the name of the process was derived from the name of his 1911 book, “Principles of Scientific Management”
Taylor established a set of principles that would improve the efficiency of the industry
The 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 ties it should take
By following these principles, productivity would be increased
Workers who carried out here tasks in good time would be rewarded with bonus payments, so the application of scientific management had the tendency to raise real wages for workers involved, despite the pace of change in the nature of work ways sometimes very rapid
A big consequence of this greater efficiency in production in the 1920s experience was almost a doubling of the USA’s industrial output, although the size of industrial workforce barely increased at all
Electrification
Electrification also stimulated the development of the economy
By 1930, 85% of homes in his cities had access to electricity
New products were available, such as radios, vacuum cleaners, toasters, waffle makers and hairdryers
In 1912 there we 2.4 million electrical appliances in the USA, which rose to 160 million in 1929
It is important to remember that most of rural America did not have electricity at this time and did not until the 1950s
Consumerism
The development of consumer goods was also asides 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
Its chemical properties meant that it could be used for containing many electrical products
America was becoming a consumer society where the focus 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
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It was not merely the supply of consumers goods that increased because of greater efficiency in the methods used to produce them, it was also because of developments on the demand side that output increased
In order to encourage the consumer to buy the many new products that were available, developments began to take place in the ways in which they 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 policed at the side of roads to catch the motorists’ attention
Magazines, such as Good Housekeeping Magazine, especially those bought by women, presented an image of American life that all could aspire to
Advertising was also promoted on new radio stations as they increased their audience
Producers would link their products to particular programmes
To make advertising as effective as possible, the leading product producers employed psychologists to decide on the most appealing approach
By 1929, American companies were spending $3 billion every year on advertising their products, which was a five-fold increase on the amount they had spent at the start of the decade
Methods of Distribution
Alongside new methods of advertisement, there was also new methods of distribution
The Sears Roebuck mail order catalogue had begun life in 1893 as a means of providing a range of goods, especially to farmers who found that their relative isolation made it hard to buy all of the commodities that 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 store in Chicago in 1925
During the 1920s, as part of the 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, demonstrated the creativity of American retailers in advertising their services
Easy Credit/Hire Purchase
One of the most important stimulants to demand was the use of consumer credit, which began in the motor industry
Consumer credit was a vital innovation in stimulating demand for products
Consumers were provided with credit (a loan by a credit company), which enables them to have the item they desired immediately
- they would have to give a deposit and then weekly or monthly payments, with interest
This became known as ‘never never’ in Britain as the final payment seemed to take forever
The system worked well as long as people could afford each payment (and kept their jobs)
The motor manufacturers set up finance companies to help dealers buy their car when demand was slow
- from there, it was a small step to make such loans directly available to customers
This was very useful as it would take the average American family 5 years to save money to buy a car outright
And with this system, they could have it now and pay later in the instalments
From the finance company’s perspective, if a customer defaulted on the loan, there was a commodity that could be repossessed
Such schemes has always been available, but there had been something not so reputable about paying this way, but this perception changed in the 1920s and it became an acceptable method for buying expensive items
This is clearly evidenced by the fact that by the end of the decade 60% of furniture and 75% of all readies were bought on the the hire purchase schemes
Limits to the Boom
Overall, the 1920s were clearly a period of exceptional economic growth
- nearly 50% in the years 1921-1925
- the next 4 years saw slower growth, but it was still impressive despite the slight setback in 1927
The clear really big winners were tycoons like Ford, Insull and Clarence Birdseye who made their millions, our even bullions
However, many other gained as well
The trickled-downs theory of wealth creation and distribution really did work for the USA
Managers of companies, salesmen and estate agents all prospered
On the other hand, rural America was suffering from falling agricultural prices and over-production
Many areas had no electricity and the cost of bringing it into rural communities was prohibitive
For those in these areas, this decade brought lots of brutally hard work, worst of all for share-croppers of the South, most of whom were black
- many had to leave and find a new life in the crowded ghettos in the North
Exclusions from the Economic Boom - Farmers
Farm income dropped dramatically, millions of farmers were forced off the land to seek unskilled, poorly paid work in the cities
Farming communities lived in poverty and squalor
- i.e. unsanitary shacks with no electricity
WW1 had bankrupted Europe, so they could no longer buy USA farm produce, and Europe also went back to producing their own crops now the was over, as well as having introduced protectionist policies against the USA
Improved fertilisers and new machinery like the combine harvester meant that farming had become so efficient that there was over production
- when farmers produced more than they could sell, they lost money
There was massive competition from Canadian wheat farmers who were producing crops at a cheaper price than American farmers
Exclusions from the Economic Boom - 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 did not want
Black people suffer red massively in the 1920’s as they were poorly educated in comparison to white people
Black people found themselves in the poorest of accommodation in the worst areas of town
Exclusions from the Economic Boom - Ethnic Minorities
Native Americans lived on reservations which produced low crops on bad land
- their numbers dwindled to just 250,000
The culture of Native Americans was dying because of white efforts to destroy their lives, beliefs and traditions
Exclusions from the Economic Boom - Workers in Traditional Industries
Coal miners were stuck in a traditional industry
- these were already low paid anyway, but further to this coal mining suffered seasonal unemployment and from competition from new industries like oil and electricity
Old industries such as leather and textile suffered from competition from new man made products
Introduction of Intolerance in America
WW1 marked the USA’s entry on the world stage, transformed it into the world’s most powerful country
Yet the war triggered a rabid nationalism and a real struggle as to what the national identity 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 and industrial USA, which added to existing tensions within US society
The growth in cities teemed with immigrants whether Catholic, Irish, Italians, Polish or Jewish from Austria-Hungary and Russia, as well as blacks escaping poverty in the South in increasing numbers
A clash in value systems was inevitable
Intolerance of New Cultures
Many people connected new ideas, particularly associated with city life, with vice and immortality
There was widespread distrust of cinema, jazz music and its associated dances, particularly the Charleston and the Black Bottom
Women who wore short skirts, smoked in public and frequented ‘speakeasies’ were regarded as shameless
There was a series of high-profile scandals, such as that which destroyed the career off “Fatty Arbuckle”, a very popular comedian
- Arbuckle was accused of a sexual attack in which his victim died
Due in part to these scandals, the movie industry agree in 1922 to self-censorship through an office ran by Will Hays
- this examined every movie made in Hollywood for any immoral content and also attempted to promote clean leaving among movie stars
There was concern with the growth of crime and fear that it might spread into rural and small-town areas
Intolerance Linked to Religion
The concerns about the effect of new ideas on morality led not a revival in religious belief and religious fundamentalism
Popular preachers (called evangelists) such as Billy Sunday, spoke of hellfire and damnation
They were quick to take advantage 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
Church figures showed that, while fewer people were going to worship, the churches they did go to were actually growing more popular
- this was particularly the case in cities, possibly as a reaction by God-fearing urbanites against the sinfulness of their neighbourhoods
Aimee Semple-McPherson, for example, was an evangelist who ran the Angelus Temple in LA
- it had a congregation of 5000 and contained a huge tank in which she could baptise 150 people at a time
The Scopes Monkey Trial
One of the most illuminating events of the decade took place in Dayton Tennessee in 1925, the “monkey trail”
It embodied the class between the big cities, and old fashioned settler America with its religious certainties and belief in that “old time religions”
Fundamentalists has set up and Anti-Evolution League and 6 states, including Tennessee, had made it illegal for evolution to be taught in schools
At the centre of this trial was a young science teacher, John Scopes, who was prosecuted for teaching Darwin’s theory of evolution
The trial involved 2 of the biggest names in US popular politics
- William Jennings Bryan appearing for God and old time religion
- atheist Lawyer Clarence Darrow from Chicago, defended scopes
Darrow famously called Bryan to take the stand as an expert witness of the Bible, humiliating him by exposing his ignorance and old fashioned credulity
- Bryan asserted that Jonah had really been swallowed by a large fish and Joshua had had made the sun stand still
- “fools ideas that no intelligent Christian on Earth believes” according to Darrow
While many urbanites found this hilarious, the small-town jury nevertheless found Scopes guilty and he was found $100
The case highlighted the difference between small town beliefs and those of many city dwellers
Many really thought evolution was a wicked doctrine and the story of creation in the Bible was literally true
- many sophisticated urbanites found these beliefs ludicrous
However, this did lead to more tolerant Christians to insist there was no conflict necessary between their beliefs and scientific knowledge and their voice became louder through the years and they became more influential
The trial could almost be sen as a battle between the beliefs of the 19th century and the 20th
In the long term, the beliefs of the 20th century won, although religious fundamentalism is still important in modern US society
Introduction to Racism and Immigration
The conflict between cold and new America was most obvious in the attempts made in the 1920s to limit immigration
The USA prided itself on being an land born of immigrants
However, this did not prevent there being laws banning Asians from entry
The truth was that the USA basically welcomed white immigrants, preferably north-western Europe rather than from non-white areas
Racism Towards African Americans
Following the abolition of slavery, African-Americans had been guaranteed their civl rights by the 14th and 15th Amendments
The first of these gave them regular equality before the law and the second gave them the right to vote
- both of these had been disregarded
The southern states evaded the law and excluded black people by imposing literacy and t5ax qualifications to obtain the vote
They continued to be persecuted throughout the last 3 decades of the 19th century
- almost 2,000 black people were killed in the south during this time by lynch mobs who hung their victims and sometimes even burned them alive
The accelerated movement of African-Americans into the cities during WW1 years extended and increased these tensions
Their arrival resulted in serious housing shortages that adversely affected the white population
In parts of St,. Louis and Chicago there was violence from time to tie during 1917
- in July 1919, violence one again erupted in Chicago
- this happened when a teenaged black oh accidentally drifted towards a “whites only” beach
Immigration of Minority Groups
The period of 1880-1914 had been marked by a new flood of immigrants from eastern and southern Europe
- over 2.3 million Jews from Russia and Poland became US citizens along with 2 million Catholic Poles
Between 1880-1920, 4 million Catholic Italians crossed the Atlantic to the “land of the brave and the home of the free”
These new arrivals seemed to threaten the lifestyle of the old migrants who had come mainly from GB, Germany and Scandinavia, all mainly Protestant in religion and culture
At various times in the past, there had been “nativist” protests against particular groups
- the “Known Nothing” Party in 1849 attacked the new wave of Irish immigrants brought about by the Irish Potato Famine of 1846-1847
- the flood of Chinese labourers into California after the Civil War produced the Chinese Exclusion Act of 1882
Grumbles against the new wave varied in intensity, according to the state of the economy but in general, the expansion and buoyancy of the US economy in the years before n1917 made immigration not only tolerable but desirable to provide new industries with workers
Racism Before WW1
There was a growing racialism even before WW1 with a series of books and articles emphasising the inferiority of the new immigrants compared to the old “Nordic” stock
- the most famous of these became in 1916, “The Passing of the Great Race” by Madison Grant
- a wealthy New Yorker, Grant believed in the new pseudo-science of eugenics, which divided the world up into a hierarchy of races, with the “Nordics” at the top
Congress had already set up a commission to study immigration in 1907 and it recommended literacy tests to limit the entry of “inferior races”
- popular pressure and concern did produce the introduction in the 1917 of literacy tests, which required all immigrants to be able to read and write, although it did not necessarily have to be English
- this act was originally vetoed by President Wilson, but Congress re-passed it with the necessary 2/3s majority to overcome the veto
Thus, even before the USA’s entry into the war, there was growing pressure for restrictions
During WW1, the Army began to administer Stanford-Binet intelligence tests to new recruits to identify potential officers
- however, most of the questions demanded good knowledge of American history and geography
- recent immigrants from southern and Eastern Europe tended not to have this
- the result was that they came out seeming less intelligent than the Northern Europeans who had been in the USA for longer
Nevertheless, this was all fuel to the racist fire
