Topic 1 - 1920s Economy Flashcards
What evidence is there that there was an economic boom in 1920s America?
- Gross National Product rose by 40%.
- American industrial production doubled.
- Unemployment fell from 11.9% (1921) to 1.9% (1926).
- Income per person rose by 27%.
- Sales of consumer products increased (e.g. by 1920, only 60,000 radios had been sold; by 1929, this had increased to 10 million)
What proportion of the American workforce was unemployed in 1921 (%)?
11.9%
What proportion of the American workforce was unemployed in 1926 (%)?
1.9%
By how much (%) did personal income rise in the 1920s?
27%
What happened to industrial production in America in the 1920s?
It doubled
How did America help Britain and France’s war effort during the early part of WWI (1914-17)?
America lent money to its allies, and sold arms and munitions to GB and France.
In which industry did America overtake Germany after WWI?
Chemical Industry
Why did the First World War help the American economy to boom?
- US industries made more money selling food, arms and munitions to the Allies → profits invested to develop/expand US industries.
- America did not suffer damage to their industry and economy during the war → able to overtake European competitors in key industries and trade → greater demand for US goods → greater profits for US industry.
- USA lent money to the Allies → loans paid back to America in 1920s, including interest → this money was invested to expand American industry.
Name three Republican government policies.
- Laissez-faire
- Tariffs
- Low taxation
Which Act was introduced in 1922, which increased tariffs higher than ever before?
The Fordney-McCumber Tariff Act
When was the Fordney-McCumber Tariff Act introduced?
1922
Why did Republican government policies encourage the economic boom?
- High tariffs increased the price of foreign goods → American consumers were more likely to buy cheaper American products → kept the money in America and allowed American industries to prosper.
- Laissez-faire allowed US businesses to manage themselves → businesses had the freedom to maximise their profits without rules and regulations (e.g. increase working hours and lower wages).
- Low taxes → consumers had more disposable income → increased demand and sales of consumer goods, and investment in shares.
Low taxes → companies left with more money to re-invest to grow their business.
What allowed Americans to get consumer goods and pay for them later in regular weekly and monthly instalments (“buy now, pay later”)?
Hire purchase
What was hire purchase?
“Buy now, pay later”. Americans could get consumer goods on credit and pay for them at a later date in regular weekly and monthly instalments.
What proportion of radios was bought on credit?
8/10
Why did hire purchase lead to an economic boom in 1920s America?
- Consumers could buy consumer goods without having the money to pay up front → more people were able to afford the new products → greater demand and sales of American products.
- Easy availability of credit → climate of consumerism → encouraged Americans to buy the latest consumer products.
Describe an assembly line.
- Each worker only completed one specific task.
- The skeleton product was kept in motion, moving to each worker along a mechanised production line.
- Products were standardised.
- Products could be produced more cheaply and in a shorter amount of time, leading to mass production.
Who pioneered the use of the assembly line in American factories?
Henry Ford
What was the name of Ford’s most famous car in this period?
The Model T
What was the price of a Model T when it was first produced in 1908?
$850
What had the price of a Model T fallen to by 1925?
$290
By 1924, what had happened to the time it took to build a Model T?
Fell from 12.5 hours to 1.5 hours
By 1927, how often did a Ford car come off a production line?
Every 10 seconds
How many cars were produced in 1929 alone?
4.8 million
What production method led to the mass production of consumer goods?
The assembly line
Why did mass production help to cause the economic boom in 1920s America?
- More goods could be produced → high consumer demand could be met.
- Goods could be produced more cheaply → they became more affordable for a greater number of people → demand for products increased → greater sales and higher profits for industries/companies to expand (e.g. by creating more jobs).
What proportion of Americans owned a car by 1929?
1 in 5
Which other industries benefitted from the growth of the motor car industry?
- Glass production (75% was used by the car industry)
- Leather, steel and rubber
- Petrol and petrol stations
- Road-building (extent of roads doubled in the 1920s)
- House-building in suburbs (e.g. Grosse Point Park outside of Detroit grew by 700%)
- Motels and holiday resorts
Why were more people able to buy consumer goods in the 1920s?
- On average, personal income per person increased by 27% → Americans had more disposable income to spend on US goods.
- Low taxes → Americans had more disposable income.
- Hire purchase → Americans could ‘buy now, pay later’ (in monthly instalments) → enabled consumers to buy consumer products without having the money to pay up front.
- Mass production methods → prices of consumer goods fell → goods became affordable to more people.
Identify three groups of people who did not benefit from the economic boom of the 1920s.
- Farmers
- Coal miners
- Traditional textile workers
What happened to total farm income between 1919 and 1928?
Fell from $22 billion to $13 billion.
How many farmers were forced off the land in the 1920s?
6 million
How much did farm prices fall by in 1921 alone?
Fell by 50%
In the 1920s, how much was the average farmer producing?
Enough to feed his family and fourteen others (which is evidence of overproduction).
Why did farmers not benefit from the prosperity in 1920s America?
- New innovations (e.g. combine harvesters and fertilisers) → increased crop yields → overproduction → crop prices fell → farmers could not make payments → farms repossessed by banks.
- European economy was damaged after the war, and countries put tariffs on US products → US products were more expensive in European countries → demand fell → made problem of overproduction worse → farmers’ prices and incomes fell further.
- Competition from other countries (e.g. Canadian wheat producers) → less demand for American farm products → made problem of overproduction worse → farmers’ prices and incomes fell further.
What was the name of farmers given a proportion of the crop to sell rather than a cash wage?
Sharecroppers
How many black farm workers lost their jobs in the 1920s?
Approx. 1 million
What did the coal industry suffer competition from?
Oil and electricity
How much did a coal miner earn compared to the national average?
One-third of the national average wage (e.g. men were paid $18 and women $9 for a 70-hour week.
Why did the coal industry not benefit from the economic boom?
Coal industry suffered from competition from oil and electricity → demand for coal fell → profits in coal industry fell → workers fired or wages fell (or didn’t rise as fast as other industries).
What proportion of homes had electricity by 1929?
Almost all urban homes; but only 10% of rural homes.
What did traditional textiles suffer competition from in the 1920s (two examples)?
- Man-made materials, e.g. rayon and nylon.
2. Cheap labour in the southern states.
How many pairs of silk stockings were sold in 1900?
12,000 pairs
How many pairs of rayon stockings were sold in 1930?
300 million pairs
Why did the traditional textile industry not benefit from the economic boom?
- Traditional textiles suffered from competition from new and cheaper synthetic (man-made) materials (e.g. nylon and rayon) → demand for textiles fell → workers fired or wages fell (or didn’t rise as fast an other industries).
- Traditional textile industries in the north suffered from competition from cheaper labour in the southern states → northern leather and textiles industry had to lower wages or cut workforce.
Describe three problems facing the US economy by 1929.
- Wealth inequality (60% lived below the poverty line by 1929)→ many families too poor to buy consumer goods → many of those who could afford to buy consumer goods had bought them → demand likely to begin to fall.
- Hire purchase and investors “buying on the margin” → high levels of debt → if people became unable to pay back loans, banks and businesses would collapse.
- Rising unemployment (5.2% in 1929).
