The Changing Quality of Life - Topic 4.1 Flashcards
The economic influences and the challenges of the economy
How did the post-WWI depression affect industry and farming?
1919-1921
Farming:
- During the war, farmers were urged to produce more wheat and were given subsidies to do so. Some took out loans to buy farmland and machinery. Wheat farmers made a profit, however after the war, they produced too much and prices fell. Some farmers had to sack workers and some went bankrupt
- Farmers who grew cotton did not escape trouble due to the Boll weevil epidemic. They caused a 34% drop in production by 1921
Industry:
- There were many strikes in 1919 and 1920 but most failed to get better working conditions and some caused businesses to fail, causing unemployment
- Older industries were declining, with the coal industry losing out to other fuels, including water power and electricity. In 1900, coal had produced almost 90% of energy supplies in the USA, but by 1930, it was down to 60%
How did the Republican government try to solve the post-war depression?
The Republican government believed in laissez-faire policies and did not try to actively stop the depression. However, the isolationist tariffs put on foreign goods led to other countries doing the same, causing US exports to fall. The government felt that the depression would soon fix itself. The economy did eventually adjust
How did new techniques in the boom influence the economy?
Mass production, New management techniques & Electrification
1921-1929
Mass production:
- Mass-produced goods were made more quickly and cheaply meaning they could be sold at a lower prices, making them more affordable
- In 1917, there were 4,727,468 passenger cars registered in the USA and by 1929 it was 23,060,421. Ford introduced the production line, brought the prices down of his cars ($260) by keeping the cars black and banned trade unions, keeping his workers more under control
- However the boom was driven by consumer spending. Once everyone had a good, demand dropped
New management techniques:
- Ford, among others, began to attempt making production as efficient as possible. This meant that each task was broken down into a series of movements and the workers stayed at the factory; scientific management advised good wages and good working conditions
Electrification:
- Older industries, like textile manufacture, became less important than newer industries that produced consumer goods. Many of the newer industries ran on electricity making these industries more efficient with a higher level of mechanisation
- In 1917, there were 7,889,000 homes and businesses wired for electricity; in 1930 there were 24,555,732.
How did changing policies in the boom influence the economy?
Federal policies & Hire Purchase and loans
Federal policies:
- The government generally avoided intervention however, they kept some wartime subsidies to farmers and cut taxes for businesses to encourage “buying American”
Hire Purchase and loans:
- In the 1920s, companies pushed hire purchase as a practical way to buy. Companies like Sears, sent out huge catalogues promising ‘easy payments’
- A sense of prosperity rose and more people bought homes and farms on mortgages that banks were willing to lend. Between 1920 and 1929, consumer debt rose from $3.3 billion to $7.6 billion.
How did the stock market influence the economy?
1917-1929
As share prices began to rise so rapidly, the media began to point out that it was possible to make money if you bought a few shares and sold them a short time later. Suddenly ordinary people began to buy and sell shares. People bought shares, they went up in price and then people sold them, and made a profit. The demand for shares ensured that prices rose because people wanted to get in on this ‘sure thing’.
People began to buy on the margin (buying shares with borrowed money to sell quickly at a profit). They felt comfortable with borrowing money because they expected to make a profit selling shares, and they would be able to repay their land. Banks became affected by the bull market (when share prices rise and people expect this to continue), and they began to use customers’ investments to trade in shares.
How did the bust and the Great Depression challenge the economy?
1929-1941
Signs of the end of the boom:
- Most people who could afford consumer goods had bought them, so demand began to fall. Companies did not cut production enough, so goods piled up in warehouses.
- By 1927, unemployment was rising; in 1926 unemployment was at 1.8% and in 1927, it was at 3.3%. As it did so, employers cut wages and working hours.
- The Republican government, still in favour of laissez-faire, did nothing.
Unlike the earlier depression, many more people, businesses and banks were in debt and the stock market was dangerously overheated. The Federal Reserve Board’s earlier attempts to control the boom by tightening the money supply made the depression worse.
The Great Depression:
- The Wall Street Crash significantly worsened the depression as businesses and banks went bankrupt, unemployment skyrocketed; unemployment was at 24.9% in 1933.
- Many people lost their jobs and those who could not keep up payments on mortgages and so lost their homes too. As people stopped buying, prices dropped and more businesses closed.
- The outcome was homelessness and poverty for many people, and at first the government did nothing. When president Hoover tried to push for federal action, the mainly Republican Congress was unwilling to agree, and although some measures were implemented, it was not enough.
How successful was the recovering effort made by Roosevelt?
1932-1941
- Roosevelt’s first action as President was to close all the banks, have FED officials inspect them and then only reopen the ‘healthy’ ones. This, and using the federal agencies to create employment and help those in trouble with loans, began to re-establish confidence.
- Natural disasters hampered recovery e.g. the Dust Bowl.
- Roosevelt ran up huge government debts funding the New Deal. Recovery was slow and bumpy, with a small decline in 1938-39.
- In 1937, the Wagner-Steagall Housing Act set up the Federal Housing Association to oversee slum clearance and the building of housing for low-income families. The second Agriculture Adjustment Act , provided subsidies for farmers to produce less.
- By 1940, recovery still wasn’t certain. Unemployment was at 14.9%, but in 1939, the USA moved to war production to provide for the allies in the second world war, and later joined the war in 1941, creating employment in factories and the military.
WWII and industry changes & Economy and inflation
WWII and industry changes:
WWII boosted the economy, as the US moved towards war production and the war had the effect of creating employment in factories and the military. After the war, military factories remained and began producing peacetime goods. The development of air conditioning made the area more attractive for retirement etc., as a sizable population moved towards these areas.
Economy and inflation:
- Farmers and businesses wanted to exploit the demand for goods and food. Prices jumped by 25% in 2 weeks with price rising quicker than wages at points.
- The government was careful to keep taxes low and buying on credit meant that inflation didn’t damp down spending in the 1950s. The federal government put controls on the money supply to control in inflation. Keeping interest rates low increased the money supply from $169.7 billion in 1952 to $215.8 billion in 1960.
How did post-war affluence influence the new economy?
The Baby Boom & the Suburbs
1941-1969
The Baby Boom:
The Baby Boom of the 50s was fuelled by men returning home from the war, fewer women working and a buoyant economy. By 1955, the number of babies that were being born reached the 4 million mark. This meant a growing demand for child-centred goods. Toy manufacturers made $1.6 billion in 1959. More babies meant more toddlers and teenagers to come. This would create a need for more schools and colleges, and would also be consumers themselves
The Suburbs:
- One reason for the growth of the suburbs was because people moved to leave inner cities because they saw it as increasingly dangerous and slum-ridden. The government funded the building of roads and homes (the 1956 Highways Act allowed for 41,000 miles of interstate highways).
- Due to the boom, builders were willing to invest in the suburbs. The Levitt Company specialised in mass-produced, mod-con homes
- As suburbs grew, businesses moved into the new areas. Large shopping centres containing a variety of shops which changed consumer patterns and the number of these centres increased from around 8 at the end of WW2 to 3,840 in 1960.
How did post-war affluence influence the new economy?
The President & Social-classes and race
The President:
- When the coal miners went on strike, Truman put down these strikes harshly and took control of the mines. When the railway workers went on strike, he asked Congress if he could draft them into the army. Strikes stopped after that
- ‘Fair Deal’ Policies - he supported the military by providing health care and loans and introduced the Employment Act of 1946 which set the goal for full employment
Social-classes and race:
- Some farmers managed to do well, thanks to the continued subsidies and the demand for farm produce at home and abroad. However, gains in productivity led to agricultural consolidation making it very hard for family farms to compete
- The Levitt Company refused to sell to black Americans, as did some other developers which led to the building of black suburbs (example of Northern, de facto segregation)
- The economic boom made more people feel like they were part of the middle class as they could now afford much more
What were the policies and aims of the Nixon administration?
1969-1977
- By the end of the 1960s, there was growing criticisms that ‘Great Society’ programmes weren’t helping people out of poverty but made them only want to remain on welfare. Those against the idea of the CAPs pointed out that all CAPs were set up by and for non-whites; which is not surprising as they had the most problems
- In 1969, Nixon shifted the focus of federal aid to the working poor, children and people with disabilities. In his first year, Nixon focused on taking apart the Office of Economic Opportunity. This took a long time as many programmes were being funded and once their funding finished, many local groups could not find enough support to keep going
- Nixon did pass legislation like enlarging the food-stamp programme and making the federal government administer it; it made the process more efficient and became a real benefit to those relying on food stamps
- To encourage the poor to find work, Nixon emphasised ‘workfare’ not ‘welfare’. However, his Earned Income Tax Credit only helped those who could find work and gave the working poor with children up to $400 a year, which those who couldn’t find work would not receive and this was a problem for many
- The Nixon administration set up family planning advice and resources for the poor; however this would only benefit those who wanted small families.
- Nixon cut welfare benefits while seeming not to. This meant that those claiming benefits lost out e.g. Family Assistance Plan 1970.
- There was a growing public support for reducing benefits and Nixon had focused more on encouraging a work-focused welfare programme which may have even been seen as too much to some people.
What were the policies and aims of the Carter administration?
1977-1981
- Carter was elected in 1976 and planned to help both the working and non-working poor. He planned to do this all without raising the budget costs. This of course was not possible and even with a reduced idea it couldn’t get through Congress.
- In 1978, the National Consumer Cooperative Bank was set up and was allowed to give low interest loans. It loaned money to small local groups who otherwise would struggle to raise the money to start businesses or to buy homes. This helped the working poor, however it didn’t help the poorest. The bank began work in 1980 with a $184 million budget. The Rural Development Loan Fund was set up before Carter’s defeat. It extended forms of help available to farmers by giving low interest loans to rural communities.
- In the last two years of administration, he introduced tax cuts in the hope that this would be more successful than trying to manipulate the money supply. His new methods may have worked, however the public had begun to lose confidence in him. He was honest which was a relief after Nixon, despite his initial popularity with the public in Congress. This was exploited by Reagan in the 1980 Election.
What challenges did the economy face in the 1970s?
In the 1970s, the government struggled to face the economic crises. Government spending was high, there was rising food and fuel prices. The end of the Vietnam war saved money but the soldiers that came home added to the unemployment.
Connecting wages, pensions and benefits to inflation helped, but this had put the government in greater debt; many couldn’t keep their homes.
In early 20th century, the USA led the world in technological development, but by 1950, other countries like Japan and Germany overtook the USA. In 1953, USA’s share of the world’s exports manufactured goods was 29%. By 1973, it was 13%. The prices of raw materials increased which meant less money for businesses were being used to invest in new technology. America was now experiencing stagflation.
During the Arab-Israeli war, OPEC supported the Arabs and increasing fuel prices by 70% as well as putting a trade ban on oil to the US and countries supporting Israel. Oil prices never went back down and remained 4x higher than before 1973 which led to long fuel queues, speeds limit of 55 mph and fuel rationing. In 1979, another fuel shortage took place between May and June. Unlike 1973, there were no dual rations, despite the shortage being just as bad. Car-dependent America was shattered, and the car industry found it hard to recover. There were also high levels of unhappiness among the public as the government was failing to deal with the crisis. People began to buy smaller cars from Japan or Europe that took up less petrol rather than American gas-guzzlers.
High fuel prices led to increasing inflation and a recession.
In 1978, unemployment was at 5.8% and had increased to 7.1% by 1979. Carter attempted to mirror and reproduce the attitude of Roosevelt but failed, and with little confidence in the economy, living standards fell and homelessness and unemployment rose.
