Reasons for 1920s prosperity

Question 1

What were unemployment figures like in the USA at this time?

Answer 1

Unemployment never rose above 3.7%

Question 2

What happened to the wages of industrial workers?

Answer 2

Employees were paid more. The real wages of industrial workers rose by 14% from 1914 - 1929.
On average their wages were two or three times higher than in Europe.

Question 3

What happened to the production of industrial goods?

Answer 3

Production of industrial goods rose by 50% between 1922 and 1929

Question 4

What two developments in the early 20th century enabled mass production?

Answer 4

The wider scale introduction of electricity

The assembly line

Question 5

What products began to be mass produced for the first time?

Answer 5

Clothing after sizes were standardised

Automobiles, pioneered by Henry Ford

Question 6

Compare the number of automobiles on the road in 1920 to 1929.

Answer 6

In 1920 there were 7.5 million cars on the road

In 1929 there were 27 million approx, 1 for every 5 people

Question 7

What percentage of workers, and of wages, were employed by the motor vehicle industry?

Answer 7

7% workers

9% of wages

Question 8

By 1924, what % of the motor vehicle market did Ford control?

Answer 8

50%

Question 9

What other industries did the boom in motor vehicle production and ownership also impact?

Answer 9

Road building, Petrol, Rubber, Plate glass,
Services such as garages, motels, petrol stations and car salesrooms
The transportation of other industrial goods became easier

Question 10

Why was there an overproduction of labour saving devices?

Answer 10

By the end of the 1920s, everyone who could afford devices such as vacuum cleaners and washing machines, had already bought them. Much of rural America had no electricity and could not afford the items.

Question 11

What impact did technological advances have on leisure?

Answer 11

More motor vehicles meant more travel to National Parks and short holidays
Tourism developed as an industry
The radio was a leisure item
People had more time free due to labour saving devices
More theatres and cinemas were built

Question 12

Which political party were the 1920s Presidents a part of?

Answer 12

Republicans

Question 13

Who were the Presidents?

Answer 13

Harding 1921-23
Coolidge 1923-29
Herbert Hoover 1929-33

Question 14

What was the general government policy, and what did this mean for the market?

Answer 14

Laissez-faire meant very little government involvement in policy. The free market was allowed to operate with minimal restrictions

Question 15

What did the Fordney-McCumber Act 1922 do? What did this mean for the market?

Answer 15

It raised tariffs (tax) on imported goods meaning foreign goods were much more expensive to buy than domestic (American) goods. This meant American producers sold more of their goods.

Question 16

How did the federal tax cuts impact the population?

Answer 16

They benefited the wealthy, who paid less tax.

They did not impact the poor who were too poor to pay taxes any way.

Question 17

What did the reduction in economic regulations mean for business activity?

Answer 17

Companies would fix prices to prevent fair competition

Workers could be easily exploited

Question 18

What three ways could huge corporations dominate industry?

Answer 18

Cartels formed (When a group of different producers work together to fix prices or limit supplies so that they make the most profit. It is illegal!)
Holding companies were created (When a company is so big that it ends up controlling other companies, giving it the power to fix prices and make big profits)
Small businesses struggled to compete

Question 19

How were businesses changed by the growth of management science?

Answer 19

They became more complex to manage so businesses controlled by one manager/ entrepreneur became old fashioned

More specific management role were created such as marketing, production, design and accounting

Question 20

How did advertising change during the 1920s?

Answer 20

Some companies employed psychologists to help them reach a target market e.g. young women

Campaigns began to include slogans, brand names, celebrity endorsements and consumer aspirations

Consumers began to believe that they could not survive without a product

The amount spent on advertising increased fives times from 1914 to $3 billion dollars

Question 21

How did credit work?

Answer 21

Consumers would pay a deposit, and then the rest in regular installments (hire purchase)

Question 22

Why was this so unstable?

Answer 22

Many consumers and businesses ended up with debts that they could not afford to pay back

Question 23

What percentage of cars and household appliances were bought on credit?

Answer 23

75% of cars

50% of appliances

Question 24

What did government encourage businesses to do with sourcing raw materials?

Answer 24

To develop extensive interests abroad. For example, buying oiling concessions in countries such as Canada, Venezuela and Iraq. That meant that US businesses were allowed to explore for oil and then use it.

Question 25

Between 1912 and 1929 what was the increase in the amount of electrical goods sold

Answer 25

Went from 1.4 million in 1912 to 160 million in 1929

Question 26

What did the government do to help the prosperity

Answer 26

Kept taxes low, Limited government activity, minimal interference in the economy and high tariffs

Question 27

What was the name of the tariff placed on imports from around the world

Answer 27

Fordney-McCumber tariff

Question 28

How many goods were bought on hire purchase

Answer 28

$7 billion dollars worth of goods bought by 1929

Question 29

How reliant was the country on the automobile industry

Answer 29

It was very reliant. When Ford temporarily closed, the loss of wages piled up to around $50 billion and caused damaging ripples in the economy