Economic problems in the 1920s (T1) Flashcards
What was distributed unevenly in the USA?
Industry and income which meant that some regions were much more prosperous than others.
What was the issue of patterns of employment?
Patters of employment could be unstable, with much employment and unemployment.
What was the per capita income in the Northeast and Far West?
Northeast: $921
Far West: $881
What was the per capita income in the Southeast?
$365
What was the per capita income of non-agricultural sectors in South Carolina?
$412
What was the per capita income of farmers in the South?
$129
What percent of American families had annual incomes of less than $2,000?
60%
Why was employment often unstable?
Due to owing to fluctuating demand for goods.
Was there a lot of support for unemployed people?
Very little welfare or unemployment benefit and most relief was supplied by charitable organisations.
Was there any support workers could find?
Workers could not, on the whole, look to labour unions for help.
Did the government offer any support for workers?
- The government did nothing to protect workers.
- Supreme Court had blocked attempts by unions to ban child labour and impose a minimum wage for women as being unconstitutional.
What did many companies operate to exploit workers?
Many employers operated ‘yellow dog’ clauses by which their employees were not allowed to join a union.
How high was union membership in the early 1920s?
4 million.
How much did union membership fall by?
Declined overall by 1 million.
How much of the industrial workforce was unionised in 1910?
8.5%
How much of the industrial workforce was unionised in 1930?
7.1%
What was a popular aim for many Americans in the 1920s?
‘Get rich quick’ schemes
What were ‘Get rich quick’ schemes?
People would invest in hugely speculative ventures and inevitably many lost their money.
What did ‘Get rich quick’ schemes allow for?
Provided golden opportunities for confidence tricksters and crooks.
What are some examples of ‘Get rich quick’ schemes in 1920s America?
Notably the Florida land boom and on the stock exchange.
What was Florida like before the 1920s?
A relatively undeveloped state with a small population.
What was the population of Miami in 1910?
54,000
What allowed for Florida to become more accessible to people?
With the coming of the motor car, Florida’s all year-round sunshine became much more accessible.
Who was most attracted to Florida?
The nation’s middle classes.
What led to the land boom?
Massive interest that grew in the state as a paradise for vacations and retirement.
How much did the population of Florida increase by?
Between 1920 and 1925, increased from 968,000 to 1.2 million.
What were the large-scale coastal developments in Florida?
Parcels of land began to be sold to wealthy northerners on the basis of glossy brochures.
What was the problem that began with the Florida Land Boom?
People began to invest their money in unseen developments, hoping to sell and make a quick profit.
How did people pay for developments in Florida?
Often they paid on credit, with a 10% deposit known as a ‘binder’
How could the land boom be sustained?
Only as long as there were more buyers than sellers.
When did demand for land in Florida begin to tail off?
1926
What led to this tailing off of demand?
Scandals of land advertised as within easy access of the sea that were really many miles inland or in the middle of swamps.
How did nature impact the land boom?
Hurricanes in 1926 killed 400 people and left 50,000 homeless.
How did the Florida land boom collapse?
With thousands of people bankrupted, Florida was left with half-finished and storm battered developments.
What happened between 1927 and 1929?
Many Americans went ‘Wall Street Crazy’
What did easy credit allow for?
Meant many were able to invest in stocks and shares.
How were stocks and shares bought?
Could be bought ‘on the margin’ - on credit with loans from their broker.
What was this demand to buy shares called?
This demand to buy shares is known as a ‘bull market’.
Why were people buying stocks and shares?
People purchased stocks and shares as a speculation.
How was quick and easy profit made?
If the price rose shares were sold so making a quick and easy profit.
What was the ‘bull pool’?
Many ‘streetwise’ brokers took full advantage of the boom, intending to make as a much money as possible before the inevitable collapse.
Who were typical ‘streetwise’ brokers?
Tended to be the large-scale financiers and bankers.
What did many of ‘streetwise’ brokers attempt to do?
- Many of these attempted to inflate prices artificially.
- Eg. William Durant operated the famous bull pool, he and his colleagues bought and sold shares to each other.
What would ‘streetwise’ brokers do to create a huge profit?
Once unwary outsiders began to buy, sending the prices still higher, they would sell, making a huge profit.
What would this selling cause?
Cause prices to fall and the outsiders would be left with much depreciated stock.
What did little regulation mean for these bull pools?
Little regulation of these activities such as insider dealing meant it was easy to take advantage of others’ naivety.
What was the banking system of the USA like in the 1920s?
Outdated by the 1920s even though the central banking system had only been created in 1913.
What did the banking system consist of?
Twelve regulatory Reserve Banks were headed by the Federal Reserve Board with seven members appointed by the president.
What did the banking system allow banks to do?
Allowed banks to regulate themselves without the government having to intervene.
What was the importance of the Reserve Banks?
Represented the interests of the bankers and so could not be completely relied on to act on the best interests of the nation if there was a conflict of interests.
How did the banking system fuel easy credit?
The Federal Reserve Board wanted to keep the market buoyant so it favoured low interest rates.
What was the difference between national banks and local state banks?
While national banks had to join the centralised system, local state banks did not.
Why were smaller, local state banks important?
Most ordinary people’s money, particularly in rural and semi-rural areas, was invested in the latter.
How many banks were there in the USA in the 1920s?
30,000
What was the issue with these banks?
Many were small and therefore unable to coper with financial problems.
What was the problem with these banks collapsing?
If they collapsed their depositors would probably lose virtually all their savings.
What was at the heart of economic problems in the USA?
Cycle of international debt
What was America’s priority?
For Europeans to repay the loans they had taken out to finance WW1.
Why was this an issue for America?
Most European countries, still suffering from depressed economic conditions, could not afford to repay.
What made this cycle worse?
Prohibitive tariffs
Why did tariffs make this issue worse?
European countries could not export their goods to the USA in great quantities so found it impossible to earn the money to repay the loans.
What was the boom dependant on?
Continuing domestic consumption
What created a problem in selling goods?
High tariffs and generally depressed economies in Europe meant that American producers could sell comparatively little abroad.
What were the three indicators that the boom was slowing down?
- Problems in small business
- The construction industry
- Falling domestic demand
What was the rate of businesses in the 1920s?
For every four businesses that succeeded, three failed.
How much did the number of motor vehicle companies fall by?
Fell from 108 in 1920 to 44 by the end of the decade.
Was the government prepared to help failing industrial concerns?
The government was no more prepared to help out failing industrial concerns than it was to help the farmers.
Where was there a boom in construction?
Housing, office building and highways.
When did construction demand begin to tail off?
1926
What did this loss of demand in construction lead to?
Led to a fall in demand of building materials, skills such as plumbing and the transportation of building materials.
What did this fall in demand of materials lead to?
- Led to higher unemployment in construction-related businesses
What happened with the fall in domestic demand?
The domestic market was becoming flooded with goods that could not be sold.
What were examples of falling domestic demand?
- Electrical goods such as labour saving devices seemed to have reached their peak.
- Credit seemed exhausted.
What was the result of a fall in domestic demand?
Growing unemployment as firms cut back production, thousands of automobile workers were laid off.
How many Americans were living in subsistence in 1929?
80%, even when they were in work.
How did the economy enter into a downward spiral?
- Growth in new industries began to slow.
- Full-time employment fell
What added to this problem in the economy?
A fall in income led to a fall in demand, led to a fall in production which added to unemployment and underemployment.
How was the problems in the economy concealed?
Concealed by superficial optimism and the frenzy of stock market speculation.
