Economy: Boom and Bust (1920-32) Flashcards
1
Q
7
List the causes of the 1920s economic boom
A
- WW1
- Republican policies
- Consumerism + advertising
- Car industry
- Technological change
- Credit
- Market confidence
2
Q
4
Describe why consumerism rose during the 1920’s
A
- The growth of electricity
- Female employment led to increased need for labour saving devices under hire purchase schemes
- The popularity of entertainment meant more americans brought gramophones
- 1923 to 1929, the average wage rose by 8%
3
Q
2
Describe the growth of electricity
A
- 1912 to 1927, the no of americans living in electrically lit homes 16% to 63%
- The amount of oil used doubled and gas quadrupled
4
Q
5
Describe the rise of advertising in the 1920’s
A
- Companies began to hire psychologists to design campaigns and target specific groups
- Increasing focus on slogans, brand names, celebrity endorsements and consumer aspirations
- Lucky Strike encouraged young women to smoke by branding their cigarettes ‘torches of freedom’
- by 1928, 17k cinemas allowing for commercials pre-movie
- By 1929, companies were spending $3 billion annually on advertising, five times more than in 1914
5
Q
5
Describe the growth of the car industry
A
- production of cars increased from 1.9m (1920) to 4.5m (1929)
- Largest industry in the US
- by 1929, 23m cars on road
- hire purchase hugely increased demand
- 3 main manufacturers: Ford, Chrysler and General Motors
6
Q
4
Describe the benefits of the car industry
A
- It used many materials that generated jobs for 5 million people
- Around 90% of petrol, 80% of of rubber and 75% of plate glass made in the US was used by the car industry
- It promoted road building, travel and hospitality industry
- The production of automobiles rose from 1.9 million in 1920 to 4.5 million in 1929
7
Q
5
Describe road building
A
- The Federal Highway Act of 1921 gave responsibility for road building to central government
- Highways were being constructed at the rate of 10k miles a year by 1929
- In 1936, the Bureau for Public Roads reported that between 25 and 50% of the roads built over the previous 20 years were unfit for use as traffic was wearing them out
- Created service industries such as motels and petrol stations
- In 1929, 15bn gallons of petrol were used and 4.5m new cars sold
8
Q
5
Describe technological change
A
- by 1927, ⅔ homes had electricity - stimulated other developments such as refrigerators, vacuum cleaners and radios
- Conveyor belt and mass production techniques (assembly lines) were developed by the car industry and increased productivity and products
- Plastics like Bakelite were developed and used in household goods - could be moulded into any shape
- Other innovations included glass tubing, automatic switch boards and concrete mixers
- Skyscrapers started being built
9
Q
6
Describe new business methods
A
- By 1929, the largest 200 corporations possessed 20% of the nation’s wealth
- assembly lines
- They operated cartels to fix prices and the government turned a blind eye
- Some corporations were so big that they were able to dictate output and price level throughout the industry
- They also created holding companies (e.g Samuel Insull bought up 111 electrical companies)
- There was significant growth in business schools with 89 by 1928, training 67k students
10
Q
5
Describe Ford’s business methods in the car industry
A
- 1913, created assembly-line borrowing from slaughter houses to improve time-efficiency
- Ford Detroit Factory producing car every 10 seconds in 1920s; every 3 mins in 1913
- 1914, doubled wages to $5 a day, far exceeding rivals and leading to workers rushing to Detroit
- introduced hire purchase as method to buy
- price of Model T had dropped from $585 (1920) to $290 (1925)
11
Q
4
Describe credit
A
- Growth of availability
- This meant people could buy goods even if they did not have enough cash to pay for them immediately
- This was due to the development of hire-purchase where goods were paid for in instalments
- About half the goods bought in the 1920s were paid for by hire purchase
12
Q
5
Describe confidence
A
- Stocks and shares rose steadily throughout the decade and then rose dramatically in 1928 to 1929
- Even ordinary people became involved in buying and selling shares
- The number of shares traded in 1926 was 451m, increasing to 577m in 1927
- In 1929 there were more than 1.1 billion shares sold
- Up to 25 million Americans became involved in shares in 1929
13
Q
4
Describe the events of the Wall Street Crash
A
- 24th October 1929 - ‘Black Thursday’. Panic and prices falling, 13 million shares sold.
- 25th October 1929 - Bankers meet at midday and pour money into the markets in an attempt to support them. Prices steadied.
- 26th October 1929 - Hoover claims the panic is over and that banking would soon recover
- 29th October 1929 - ‘Black Tuesday’. The worst day ever with 16.5 million shares traded. Shares lost all value and many lost everything. Suicides reported.
14
Q
4
Describe how the banking system was a cause of the 1929 Wall Street Crash
A
- Many banks existed outside reguated, centralised system
- The Reserve Banks acted in the interest of bankers rather than the country as a whole
- In the 1920’s there were over 30,000 banks in the US and most of them were small and unstable.
- The Federal Reserve Board favoured low interest rates and in 1927 it lowered them from 4% to 3.5%. This encouraged easy credit and the ‘bull market’
15
Q
5
Describe how overspeculation on the stock market was a cause of the 1929 Wall Street Crash
A
- ‘bull market’ created by growing expectations
- Lack of government regulation allowed speculation to continue
- Trading exploded after Harding victory
- The stock market value of shares increased from $27 billion in 1925 to $87 billion by October 1929
- By summer 1929, there were 20 million shareholders in the US
16
Q
5
Describe how the availability of easy credit was a cause of the Wall Street Crash
A
- This allowed people to buy with money they didn’t have
- Firms allowed customers to pay in instalments in hire purchase
- ‘Buying on the margin’ - practice of buying shares on credit
- As prices started to slow down and then fall problems began
- Over 75% of the purchase price of shares was borrowed and this had created artificially high prices
17
Q
5
Describe how loss of market confidence was a cause of the 1929 Wall Street Crash
A
- The market was only maintained by peoples financial confidence
- In autumn 1929, experts started to sell their shares before prices fell further and small investors panicked
- This led to a rush to sell shares and prices fell
- Thousands of investors lost millions of dollars
- This was partly caused by rumours that the Federal Reserve Banks was about to make credit less available and experts were starting to sell their shares
18
Q
5
Describe the effects of the 1929 Wall Street Crash
A
- The collapse of businesses with individuals losing billions
- President of Union Cigar died after falling from a New York hotel when stock in his company fell from $113.15 to $4 in a single day
- ‘Credit squeeze’ with exisitng loans called in and new ones refused
- Unemployment reduced consumerism and investment, worsening spiral
- Destroyed market confidence
19
Q
5
Describe how falling demand for consumer goods was a cause of the Great Depression
A
- The construction boom came to an end in 1928
- Industrial production fell in the two months before the Wall Street Crash
- Unequal distribution of wealth meant that almost 50% of American families had an income of less than $2,000 a year (the minimum needed to survive)
- The market became oversaturated
- The US could not sell its market surplus abroad as Europe was still recovering from the war and had responded to America’s high tariffs with similar
20
Q
2
Describe how the instability of ‘get rich quick’ schemes caused the Great Depression
A
- There was huge over speculation and gambling on the markets
- In the early 1920’s Charles Ponzi conned thousands into investing in his ventures, promising 50% profit within 90 days
21
Q
6
Describe the Florida Land Boom and how it was a cause of the Great Depression
A
- Between 1920 and 1925, the population of Florida increased from 968,000 to 1.2 million
- Parcels of land were being sold to wealthy northerners and people began to invest in developments
- There were scandals of land being falsely advertised
- Demand tailed off in 1926
- Hurricanes in 1926 killed 400 people and left 50,000 homeless
- The Florida land boom collapsed leaving the state strewn with half-finished, storm-battered developments
22
Q
6
Describe how problems with agriculture was a cause of the Great Depression
A
- Post-war, demand fell and prices dropped
- Demand for natural fibres (such as cotton) dropped as they were replaced by cheaper artificial fibres
- Prohibition cut demand of crops used for alcohol production
- Farmers went into debt trying to mechanise
- There was a big divide between urban Northerners and rural Southerners
- By 1928, half of all US farmers were living in poverty
23
Q
3
Describe how problems with old industries was a cause of the Great Depression (coal)
A
- Coal mining was in decline as gas and electricity were used more commonly
- US coal prices were undercut by cheap polish coal
- This led to many mine closures and unemployment.
24
Q
3
Describe how problems with old industries was a cause of the Great Depression (textiles)
A
- Lowering of tariffs on wool and cotton in 1913, increased competition from abroad
- The development of the artificial fibre ‘rayon’ undercut wool, cotton and silk
- Many textile mills in the North closed down or moved south for cheaper labour.
25
Q
6
Describe Hoover’s initial industry policies
A
- Aimed to reduce federal spending to balance budget
- Opposed proposed congressional relief schemes
- Hoped to persuade wealthy individuals to solve GD through voluntary action - wishful thinking at time of economic malaise
- Smoot-Hawley Tariff Act 1930
- Met with businessmen to implore them to not cut wages
- Policies changed nearer 1932 election to outrival FDR and democrats
26
Q
4
Describe Hoover’s initial laissez-faire beliefs
A
- Wrote American Individualism (1922), promoting rugged indivdiualism and self-achievement
- Hoover claimed end to poverty was nearer than ever before in 1928 campaign
- Laissez-faire could not solve GD
- Macroeconomics was only an emerging concept
27
Q
2
What work did Hoover do to assist farmers in the Great Depression?
A
- Agricultural Marketing Act of 1929 - enabled government to lend to farmers to stabilise prices
- Grain Stabilisation Corporation set up 1930 - aimed to guarantee fair prices by pruchasing wheat when its price dropped until its original price resumed
28
Q
4
Describe the problems with Hoover’ agricultural policies
A
- Resistant to loan to farmers as felt it was unconstitutional
- Support did not go far enough - agricultural depression had began soon after WW1
- Hawley-Smoot Tariff Act 1930 - badly damaged farmers as competitors rose import prices
- By 1932, 25% of farmer had lost their land and they blockaded roads to demand more support
29
Q
3
What did Hoover do to assist banks in the Great Depression?
A
- Home Loan Bank Act 1932
- stimulated house building and home ownership
- 12 regional banks set up with $12m fund
30
Q
4
What did Hoover do for infrastructure at the end of his term?
A
- Construction of the Hoover Dam on the Colorado river began in 1931
- 1932, supplied additional $500m to help various agencies to provide relief
- Emergency Relief and Construction Act 1932 - gave $300m to state governments
- Reconstruction Finance Corporation (RFC) set up 1932 - spent $1.5bn on roads, bridges and buildings (foreunner of New Deal)
31
Q
3
What did Hoover do about tax during the Great Depression?
A
- Internal Revenue Service and Justice Department prosecuted gangsters, including Al Capone, for tax evasion
- Closed tax loopholes
- Revenue Act 1932 increased taxes on businesess and corporations
32
Q
4
Describe the Smoot-Hawley Tariff Act 1930 under Hoover
A
- Raised tariffs on over 20k goods
- This removed the US from world trade and made the depression worse both at home and abroad
- Other countries retaliated with tariffs of their own and US imports and exports fell by 67% during GD
- Had been a 1928 campaign promise to raise tariffs on agricultural imports - though made little sense in new economic context
33
Q
6
Describe the March on Washington 1932
A
- Bonus marchers - WW1 war veterans asking to be allowed access to their war pensions, which were not supposed to be available till 1946
- 12.3k pensioners and unemployed
- Would have cost $2.3bn
- Hoover ordered General Douglas MacArthur to deal with it 5k marches refusing to leave
- Dispersal using tear gas led to death of 2
- Hoover’s credibility completely destroyed
34
Q
5
Why did Hoover take so longer to respond to the Great Depression?
A
- It was not immediately apparent to anyone how severe the crisis was going to be
- Current economic theory suggested it would sort itself out
- Rugged Individualism
- He believed in a hands off government and instead empowered voluntarism (whereby people and charities supported the poor)
- He did not wish to overstep his constitutional boundaries
35
Q
4
Describe the criticism of Hoover by 1932
A
Name had become term of abuse:
- ‘Hooverville’ - shanty towns of unemployed
- ‘Hoover blankets’ - newspapers used to cover homeless
- ‘Hoover flags’ - empty pockets turned inside out
36
Q
4
Describe how the Great Depression affected unemployment
A
- Unemployment increased from 3% in 1929 to 25% in 1933
- rose by 607% under Hoover
- Labour Research Association estimated 17m unemployed
- few unaffected regardless of race, gender, class, region, etc
37
Q
4
Describe the uneven distribution of unemployment in the GD
A
- New York State had 1m unemployed
- Toledo, Ohio was at 80% unemployment
- Unemployment was 4-6 times greater among AAs
- There was much higher unemployment amongst wc women
38
Q
3
Describe how the Great Depression affected the economy
A
- The growth rate went from 6.7% in 1929 to (-14.7%) in 1932
- 1932 coal production was the lowest since 1904 with 300,000 unemployed in the industry
- Iron and steel production fell by 59%
39
Q
4
Describe how the Great Depression affected the cities
A
- Factories closed down en masse with finding employment an impossibility
- By 1933, almost ⅓ of industrial workforce unemployed
- shack house ‘Hoovervilles’ e.g. Central Park
- Homeless estimated at 2m in 1932
40
Q
6
Describe how the Great Depression and Dust Bowl affected agriculture
A
- Long-term agricultural decline started in the early twenties
- 1928-32, heat waves, drought and wind-erosion created the ‘Dust Bowl’
- Demand for crops was low due to poverty so prices fell
- Oklahoma, Colorado, New Mexico and Kansas were the worst affected
- Dust storms affected 20 million hectares
- More than 1 million people left their homes to seek seasonal work in fruit-picking in the West
41
Q
5
Describe how Republican policies facilitated an economic boom
A
- Successive Republican presidencies enagged in laissez-faire to facilitate ‘rugged individualism’
- Low taxes and regulation to spur growth
- Fordney-McCumber Act 1922 - raised import duties on goods to highest level ever
- Reduction in income tax (e.g. Revenue Act 1926) encouraged consumption
- Mellon handed out tax reductions to large-scale industrialists and corporations totalling $3.5bn
42
Q
2
What is a limit to the argument that Republican policies that facilitated an economic boom
A
- Low regualtion led to price fixing being ignored
- hurt competition and wider econ growth
43
Q
4
List the reasons for the Wall St Crash 1929
A
- Banking system
- Overspeculation
- Availability of easy credit
- Loss of market confidence
44
Q
2
Describe the political effects of the Wall St Crash
A
- Humiliated Coolidge and Hoover’s optimism
- vindicated concerns on over-speculation and ‘buying on the margin’
45
Q
11
List the causes of the GD
A
- Collapse in demand
- European banks defaulted on debt repayment
- Small business failure
- Unemployment
- Bank collapse - led to deflation (further collapse in demand)
- Credit crunch
- Investors demanding loans back and repossessions
- Tight monetary policy
- ‘get rich quick’ schemes
- Florida Land Boom
- problems with agriculture
46
Q
3
Describe the agricultural decline of the 1920s and early 1930s
A
- Decline after WW1
- Post-WW1 wheat demand fell from $2.50 to $1 across 1920s
- Worsened by GD, Drought of 1931 and Dust Bowl
47
Q
3
Describe how the GD affected agriculture
A
- Bankruptcy amongst farmers grew because they were unable to sell produce
- Much food left to rot on ground
- Farming prices (dropped?) as much as 25%
48
Q
3
Describe the Drought of 1931
A
- Crops damaged by high temps, dry weather, and attacks from grasshoppers
- Oklahoma, Colorado, New Mexico and Kansas worst affected by drought
- Further reduced output
49
Q
3
Describe the cause of the ‘Dust Bowl’
A
- Poor farming methods and drought had exhausted soil
- then winds came, dust storms occurred
- affected 20m hectares
50
Q
3
Describe the effect of the Dust Bowl
A
- Forced more than 1m to leave homes and seek work in fruit-growing areas of west coast (itinerary workers)
- those from Oklahoma nicknamed ‘Okies’
- those from Arkansas nicknamed ‘Arkies’
51
Q
4
Describe the effect of the GD on AAs
A
- Unemployment 4-6x higher
- By 1932, approximately 1/2 of African Americans were out of work
- Intensifed Northern racism amid calls for AAs to be fired until full white employment was restored
- Progress towards decline of lynching in South reversed - surged from 8 in 1932 to 28 in 1933
52
Q
2
Describe the effects of the GD on health
A
- Few starved to death, though many died from malnutrition
- Suicide rates rose increased by 23% from 1928 to 1932
53
Q
3
Describe the effects of the GD on crime
A
- Prostitution on rise as desperate women sought ways to pay the bills
- Unemployed workers resorted to petty theft to put food on the table
- Homicide rate hit 20th C high of 9.7 per 100k in 1933
54
Q
How many hectares did the Dust Bowl affect?
A
20 million
