Reasons for the boom in the US economy in the 1920s Flashcards
1
Q
How did the Laissez-faire policy contribute to the 1920s boom?
A
- Republican government dominated in 1920s
- influenced by Treasury Secretary Andrew Mellon
- Laissez faire economic policy
- believed if businessmen left alone: high profits, more jobs an good wages
- contributed to prosperity of USA
- Low taxes and few regulations meant businessmen could chase profits without fear of interference
- laws concerning price fixing - ignored
2
Q
How did Rugged Individualism contribute to prosperity?
A
- Successive Republican presidents believed in this
- People achieved success by their own hard work
- originate with early Americans who moved to West and made new life for themselves through own effort
3
Q
How did Protectionism contribute to prosperity?
Tariff act?
A
- RG put tarrifs on imported goods to limit competition from foreign imports; imports became more expensive compared to American-made goods
- encouraged purchase of American goods
- Fordney-McCumber Tarriff (1922) raised import duties on goods coming into US to highest level ever
- thus protected American industry
+ Reduction of income tax rates left people with more cash to spend on consumer goods
–> more cash to buy home produced goods - Tax reductions totalling $3.5 bill to large-scale industrialists and corporations
4
Q
What were Short term factors of boom?
Long-term factors
A
ST:
- The policies of RG:
- inc Laissez-faire, Rugged Individualism, Protectionism
- Technological change and new business methods
- Consumerism and advertising
- The car industry
- Stock market boom
LT:
- WW1
5
Q
How did Technological change contribute to the boom?
A
- Development of electricity fundamental
- provided, cheaper, more reliable, form of power for industries
- stimulated other electrical goods e.g fridge vacuum cleaners and radios
- Mass production techniques e.g conveyor belt by car industry - sped up industrial production, improved productivity –> greater profits
- Plastics like Bakelite developed and used in household products
- Other innovations inc glass tubing, automatic switchboards and concrete mixers
- New mats meant new buildings e.g skyscrapers
6
Q
How did new business methods (focus on big corporations and how they operated) contribute to the economic boom?
A
- By 1929, largest 200 corporations possessed 20% of nation’s wealth
- dominated industry:
- operated cartels to fix price. Gov turned blind eye
- Some corp e.g US Steel so big that able to dictate output and price level throughout industry
- The large corps created holding companies: e.g Samuel Insull built up vast empire based on electrical supply: eventually controlled 111 companies
- business schools growth: 89 by 1928 training 67,000 students
7
Q
Why did consumerism increase and how did this contribute to the boom?
A
- 1927, 2/3 or 63% of US homes had electricity; 1912 only 16%
- electric power encouraged use of electrical goods
- consumption of oil doubled and gas quadrupled
- wages increased for workers in industry
- 1923-1929: average wage rose by 8%
- growth of female employment increased need for labour-saving devices e.g washing machines and vacuum cleaners
- hire purchase schemes made easier to buy goods on credit
- popularity of entertainment: more Americans bought gramophones and radios
8
Q
How did advertising increase and effect on consumerism and hence boom?
A
- various techniques rapidly developed 1920s
- began to hire psychologists to design campaigns and target specific groups
- e.g Lucky Strike encouraged women to smoke in public ‘torches of freedom’
- Campaigns emphasised slogans, brand names, celeb endorsements and consumer aspirations
- to fuel boom necessary for people to buy new things frequently; advertising helped create this demand (really)
- 1929: companies spending $3 bill annually on advertising, 5 times more than 1914
9
Q
How did media influence advertising?
A
- new mass media, esp in cinema and radio, brought about revolution in advertising
- 1928: 17,000 cinemas in US
- enormous potential for commercials
- 1929: 618 radio stations throughout US - audience of 50 mil - lots of potential for advertisers
10
Q
How did credit influence consumerism and thus the boom of 1920s?
A
- Made easier for people to buy goods even if they didn’t have the immediate cash
- due to development of hire purchase - goods paid for in instalments
- almost half goods sold in 1920s paid by hire purchase
11
Q
Overall how important was the car industry in the boom of 1920s
A
- important
- often lead way in technological change as well as stimulating growth of other industries
- grew in 1920s
- end of decade 4.5 mil cars on road - largest industry in US
12
Q
How did the assembly line influence the car industry and thus consumer boom?
A
- 1913: Ford introduced assembly line or “magic belt”
- An electric conveyor belt
- Saved time as tools and equipment brought to worker
- 1913: Ford factory in Detroit producing one car every 3 mins
- 1920 same factory producing same car every 10 secs
13
Q
How did the workforce influence the car industry and thus boom?
A
- Ford would walk round factory making sure workers doing job properly
- 1914 - he doubled wages to $5 a day
- workers rushed to Detroit to work for him
- reduced length of working day to 8 hours
- factory working 24 hours a day
- Ford brought down price of cars; made more affordable
- 1914: a Model T cost $850 - 1926: $295
- introduced hire purchase
14
Q
What were the benefits of the car industry for other industries?
A
- Revolutionised American industry
- used so much steel, wood petrol and leather - provided jobs for more than 5 mill people
- around 90% of petrol, 80% rubber and 75% plate glass produced in US consumed by car industry by late 1920s
- promoted road building and travel which benefited hospitality industry
- production of automobiles rose from 1.9 mill in 1920 to 4.5 mill in 1929
15
Q
How did the Road building industry expand?
A
- The Federal Highway Act of 1921 gave responsibility for road building to central gov
- highways constructed at rate of 10,000 miles a year by 1929
- Motar vehicles created growth of new service industries: garages, motels, petrol stations etc
- N. of truck registrations increased from less than 1 mill in 1919 to 3.5 mill by 1929
1929: 15 billion gallons petrol used
1929: 4.5 mill cars sold
