Overproduction of Goods and Underconsumption Flashcards
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- The 1920s boom led to…
- The new methods of production…
The 1920s boom led to a substantial overproduction of goods. The new methods of production, such as assembly lines and mechanisation meant that more consumer goods than ever were being made.
Knowledge (1)
-For example, Henry Ford produced…
For example, Henry Ford produced the Model T car and by 1918, prices had fallen from $850 to $295 because demand was so high.
Knowledge (2)
-Therefore the market was flooded with…
Therefore the market was flooded with cars, radios, fridges, vacuum cleaners and other electrical goods. 160 million electrical goods were sold in 1929.
Knowledge (3)
-By 1929, well off families…
By 1929, well off families had already purchased the brand new tech, so businesses peaked.
Analysis (1)
-This was important because it meant businesses were becoming…
This was important because it meant all businesses were becoming very prosperous, stockpiling of goods was building up because there were so many goods left over.
Analysis (2)
-The car business stimulated the…
The car business stimulated the steel industry, the rubber industry and petrol. The federal government had to build 10 000 miles of new roads each year due to all the new styles of cars people were buying.
Analysis + (1)
-However, because of the Republican…
However, because of the Republican government’s policy of low taxes, it was only the rich that were enjoying this economic boom.
Analysis + (2)
-40% of Americans lived in poverty…
40% of Americans lived in poverty, these people simply could not afford the new cars and electrical goods.
Analysis + (3)
-Companies were producing these expensive new items for…
Companies were producing these expensive new items for all Americans, not taking into consideration that only really 60% would be able to purchase them. As a result of this, demand fell a long way short of supply.
Evaluation (1) & historiography
- In evaluation, this was an important…
- John Kenneth Galbraith believes… “can become very rich”
In evaluation, this was an important factor for the cause of the great depression, John Kenneth Galbraith believes that the overproduction of goods was made worse because it meant Americans: “can become very rich”.
Evaluation (2)
-This “get rich quick” culture…
This “get rich quick” culture meant American’s didn’t stop to think that the bubble would eventually have to burst.
Evaluation (3)
-The overproduction caused many men…
The overproduction caused many men to get laid off and by 1932, 13 million Americans were unemployed and industrial production fell by 45%.
Evaluation (4)
- However…
- Bankers in the pre-Depression era did not…
However, this was not as important as the weakness of the US banking system. Bankers in the pre-Depression era did not adequately quantify the risks of giving out loans very easily, because it caused everyone to go into debt.
