Ch. 1 Great Depression Flashcards
Recession
Downturn in the economy. There was a brief post-war recession after WWI.
Real wages
the value of wages in terms of how much they will actually buy. Employees in US were paid more in 1920s, earning 3x more than employees in some European countries
GNP
Gross national product- total value of goods and services produced in a country. GNP increased as cars, radios, and electricity were produced; went from $73 billion to $104 billion in 1929
Free market
A system in which the economy is allowed to run itself with minimal government interference. A system in which the economy is allowed to run itself with minimal government interference. AKA capitalism, theory was that industrial expansion=more jobs=more wages=more consumers=more expansion
Laissez-faire
An approach where the government deliberately avoids getting involved in economic planning, thus allowing the free market to operate. Government policy in 1920s was laissez-faire for the most part
Socialism
Marx viewed this as a stage on the road to communism in which the government takes control of production to ensure that all have enough, so there are no rich or poor people.
Karl Marx
creator of Marxist theory, father of communism, command economy, and Marxist history theory. Believed that societies evolved and that capitalism was a stage toward the goal of communism. Saw private property, money, and profits as greedy self-interest
Tariffs
Import and export duties. During 1920s, US had high tariffs on foreign goods w/ Fordney McCumber Act, reducing foreign trade and protecting the US market. Meant that America exported more than imported and bought domestic goods.
National Debt
the amount of money owed by the government. Government aim in the 1920s was to reduce national debt, and Coolidge accomplished this.
Federal Trade Commission
the body charged to ensure businesses are operating fairly. They were increasingly unwilling to operate effectively, so businesses did not need to abide by regulations.
Price fixing
where companies agree to fix prices between them, thereby preventing fair competition. This was illegal but government usually let businesses do what they wanted.
Woodrow Wilson
28th US president. President during WWI, Democrat.
Warden G. Harding
29th US president. Republican. Had a term full of scandal
USSR
Union of Soviet Socialist Republics. Soviet Russia. Country of Karl Marx, and a socialist country. Their economy was heavily dependent for a while on US exports
Mass production
making large numbers of the same item using machinery and conveyor belts. Henry Ford revolutionized mass production w/ assembly line.
Trusts
companies that collude to control manufacture, supplies, and prices to ensure that other firms cannot compete, thereby guaranteeing profits for themselves. Many of the large corporations became trusts to dominate an industry.
Cartel
group of companies agreeing to fix output prices to reduce competition and maximize profits. One of the ways large corporations dominated an industry.
Holding companies
where one huge company obtains a controlling interest in smaller companies to control the market. Ex: US Steel could dictate prices throughout the industry, Samuel Insull had an empire of electrical supply with 11 businesses. Resulted in formerly competing firms being allied.
Oil concessions
involvement in foreign oil industries on favorable terms. Many corporations took advantage of foreign market oil concessions, buying them in Canada, Venezuela, Iraq, Dutch East Indies, etc.
Five year plan
where the government plans the economy, setting targets to be achieved over a five-year period. First 5yr plan for USSR was incredibly dependent on US exports. Global investment in US economy had consequences when Great Depression hit.
Henry Ford
revolutionized automobile industry through assembly line to reduce cost of making the Model T. Set a minimum wage and cared for his workers with clean factories and lunches.
Calvin Coolidge
president from 1923-8 who believed in capitalism and letting business operate without government interference. The last president to reduce the national debt while in office. Also avoided intervention in foreign affairs and had laissez-faire government
Capitalism
free-market economy. Businesses are self-regulating, not controlled by the government. Introduced by Adam Smith in Wealth of Nations. Belief in the natural growth and recession of the economy.
Fordney-McCumber Act
passed in 1922, raised tariffs to cover the difference between domestic and foreign product costs, making foreign goods more expensive than domestic goods, thereby encouraging people to purchase domestically
Andrew Mellon
Secretary of Treasury under Coolidge. Also believed in capitalism and handed out tax reductions. A Pittsburg industrialist and banker and one of the richest men in America. Believed that wealth filtered down to all classes, so allowing rich to invest in industry would promote prosperity.
Management science
application of technological/scientific ideas to running a successful company, aiming to use scientific methods to run the business. Ex: time and motion, the amount of time to complete a manufacturing process is timed and monitored. Businesses used management sciences to become more efficient and maximize profits.
Communism
after socialism comes communism, idea is that there is no private property, money, or government; everyone shares everything equally. Introduced by Karl Marx.
How prosperous was the US in the 1920s?
Apparently very prosperous, since low inflation, low unemployment, wages increased, and GNP increased. However, there were no regulations, so people who were in debt were buying everything on credit. The system was a bubble soon to burst.
