Topic 4 Flashcards
Post-war (1) depression
-farming:
farmers were encouraged to produce as much as possible during the war and were given subsidies
some took out loans to invest
when the war ended, production was too high and prices too low - some farmers produced more to make more money, driving prices lower (deflation)
some farmers went bankrupt, some sacked workers
-industry:
there were nationwide and local strikes 1919-20 (3600)
older industries in the north and the east were in decline (e.g the coal industry losing to other fuels)
-gov reaction:
there was little federal action against the depression (due to commitment to laissez faire)
US exports fell as other countries retaliated to American tariffs
the economy soon righted itself - this was thinking in 1929
boom
-mass production:
Henry Ford’s car factories pioneered the production line - faster and cheaper to produce goods
sales of goods like cars and electronics rose as they could be sold for less
-hire purchase:
borrowing had previously been seen as a last resort and only banks and building societies lent money. After the war companies pushed HP as a political way to buy.
banks and building societies were more willing to lend
consumer debt more than doubled between ‘20-29 as more people borrowed and borrowed more.
-changing industry:
new industries often required electricity due to increased mechanisation
electrification roughly tripled ‘17-30
the stock market boom
-share prices rose quickly during the 20s
-people initially bought shares for long-term dividend payouts because later they could be bought and sold for a profit
-ordinary ppl - not just traders - bought and sold shares through brokers
-the demand for shares was high so prices kept rising. People bought ‘on the margin’ - with loans, for which the dividends would more than cover the repayments
-banks were tied into the stock market as they invested customers’ deposits
-gov involvement in the stock market was minimal, even as it overheated
bust
-there were signs that the boom was over - demand for goods fell as there was overproduction and unemployment rose from 1927. The gov thought that the economy would right itself like it did in ‘19
-there was far more debt in the economy than in ‘19 and the stock market was dangerously overheated
-some investors sold up in September ‘29, thinking that the market was too overheated. share prices fell and then crashed as ppl lost confidence
-ppl kept selling and selling as a bear market took over
-investors (including companies, banks and private individuals) lost their investments as their shares became worthless
the Great Depression
-the Wall Street Crash worsened the depression as banks and businesses closed. ppl lost their jobs and their savings. they had less to spend
-unemployment shot up as businesses closed
-ppl could no longer afford their mortgages and their homes were repossessed
recovery
-roosevelt had the banks closed as soon as he came to office and only the ‘healthy’ ones were allowed to reopen
-confidence was re-established in America’s financial institutions by Roosevelt
-the recovery was slow and arguably didn’t really take place until WW2. Gov debt rose to finance the New Deal
-Roosevelt’s Agricultural Adjustment Acts paid farmers to produce less to raise prices
Second World War
-WW2 boosted the American economy and, unlike after WW1, this continued
-there was huge demand for consumer goods that people had gone without during the war, making the shift back to civilian production relatively painless
-wages were high, encouraging consumer spending
-the gov acted harshly against strikes - Truman asked Congress to use the army to replace striking railway workers who backed down
-the postwar ‘baby boom’ created massive demand for family products - these children then became consumers themselves. The fertility rate remained high until ‘65
-some farm subsidies continued after the war and demand remained high. exports to war-torn Europe helped
-gov spending rose steadily under Truman’s fair deal policies. servicemen were retrained and given leaving payments, loans, etc. there was not much unemployment among them
inflation and growing affluence
-inflation was the only problem in the postwar economy
-the government had run price controls during the war through the Office of Prince Administration but this closed in ‘46 and prices rose
the suburbs
-the suburbs grew as businesses and institutions moved from city centres
-the ‘56 Highways Act allowed for 41,000 miles of interstate highways
-the booming economy made building attractive for investors like the Levitt Company which built quick and cheap prefabricated homes. More ppl could afford to - and did- buy homes
-suburban living was not shared in by minority groups - Levitt didn’t sell to black buyers. black suburbs were formed
economic changes and shifts
-the USA began to lose its place as the country of technological innovation by the ’50s
-countries like Japan took over formerly American industries by miniaturising goods like radios
-industry shifted from the north and the east to the south and the west due to cheaper land and labour (migrants)
-the development of air conditioning made ppl, as well as businesses, move southwestward as well
-economic policy changed during the ’50s as the gov began to increase the money supply to help meet gov spending
the ’60s
-the USA lost its place as the world’s most important exporter
-the supply of money kept rising but so did inflation
-the balance between the amount of money in circulation and the amount of gold held by the gov was out of balance. Under the Bretton Woods agreement, the dollar was to be backed by gold with other currencies valued against it
-the gov tried to slow increases to the supply of money in’66 but this led to an immediate economic downturn and the gov backed off, putting off problems in the short term but creating them in the long term
the ’70s
-previously, when businesses stopped expanding, wages stopped rising or fell, reducing spending and therefore prices
-during the decade, inflation remained high, economic growth was slow and unemployment was high. This was stagflation
-stagflation occurred because other countries had overtaken the USA in technological development - particularly Japan and Germany
-the gov didn’t really know what to do as stagflation hadn’t been seen before. if it reduced the money supply, the public would react badly. if it left the money supply high, gov debt would be increasing
-living standards were squeezed as inflation remained high but wages stagnated.
-the supply of money isn’t restrained until ‘79 by the federal reserve
-energy problems:
Arab dominated OPEC embargoed the USA in ‘73 because of its support for Israel in the Arab-Israeli War - prices shot up, oil was rationed and a 55mph speed limit was imposed. prices never fell to their pre-crisis levels
-the Iranian revolution in ‘79 led to a panic and ppl rushed to buy fuel and the oil price doubled despite production barely decreasing
the ‘crisis of confidence’
-soaring fuel prices set inflation rising sharply but still unemployment rose. Ppl were scared to spend and businesses were scared to invest
-president Carter addressed the nation in ‘79 and discussed the crisis. he tried to rekindle fdr’s fireside chats but failed and ended up lecturing America about the ‘crisis of confidence’ and austerity
-americans had little confidence in carter’s economic management as their living standards had already dropped - why lower them further under austerity?
-Carter lost the ‘80 presidential election to Ronald Reagan who had very different economic policies
home ownership
-greatly more people owned their own homes in ‘40 than in ‘20
-running water and sanitation were in most homes. those who didn’t have them tended to come from minority groups
-about 80% of homes had electric lighting ‘40
-82% of ppl owned a radio
spending money
-more ppl began to shop in larger chain stores during the ’20s rather than independent ones
-some chains as J.C. Penney operated in every state. they were a unifying factor on American culture
-ppl spent more on food and less eating out during the Great Depression but by ‘40 they were spending less on food and more on eating out
-the household appliance market boomed during the ’20s. most ran on electricity - this was expanded by FDR’s Rural Electrification Administration (REA). once electrified, households bought the same goods as everyone else
-farm workers earned consistently little (most were black)
