Topic 4 - boom bust recovery Flashcards
post-war depression
immediately after, US economy entered brief depression
war production stopped manufacturing and producing crops for war-torn Europe and USA
Farmers after WW1
urged to produce more wheat and given subsidies to do so
loans to buy machinery and farmland
fewer workers needed (unemployment)
during war made profit
after - produced too much and prices fell
Boll Weevil caused 21% drop in cotton production by 1921
Industry after war
strikes 1919 and 20
increased unemployment (5 million 1921)
older industries in decline (e.g., rust belt)
e.g., coal industries lost out to other fuels (1900 coal 90% energy supplies
1930-60%)
government reaction following war
republican laissez faire
US isolationist tariffs led other countries to retaliate by putting tariffs on American goods (reducing American exports)
thought depression would solve itself
Boom in 1920s
USA came out of post war depression and hit a boom cycle
1921-29 average income went up 30%
more income and disposable wealth - increase in demands for goods
profits rose - average 60% by 1929
unemployment low - below 2%
people bought on credit - simple to buy more expensive goods
mass production in 1920s
mass production and assembly lines made more efficient (stages broken down)
Ford most effective example - mass produced goods produced more quickly and cheaply
cost of car fell 60% due to assembly line
car industry boomed (1929 - 326 million cars)
encouraged through road building - allowing for better transport
(increased demand for materials e.g., metal, rubber, glass)
new management techniques
‘scientific management’ ideas (set out by Frederek Taylor) used by some employers (e.g., Ford)
by 1925 - Ford making car every 10 seconds
made workers as effective as the assembly line itself - trained harshly in doing specific tasks
advised good wages and creating good working conditions (Ford paid $5)
benefitted only if they fit into system
federal policies - 1920s
while gov generally avoided intervention, kept some wartime subsidies to farmers in place and cut taxes for businesses to encourage people to ‘Buy American’
deregulation
high tariffs (1922 Fordney McCumber)
lower tax - more money invested towards tax
Hire purchase and loans
credit cards popular
people began buying homes on mortgage
by 1929 - consumer debt rose to $7.6 billion
by end of decade people borrowed 10% of income (double that of 1920)
consumer goods - fridges (by 1929 almost all urban homes had electricity)
entertainment 1920s
boom in cinema
people spending disposable income on leisure
by 1928 - 17,000 cinemas
building new homes and great buildings (e.g., empire state building)
the stock market - 1920s
price of shares rose rapidly
boom cycle known as bull market (prices keep going up)
people investing borrowed money (buying on margin)
federal reserve - set up in 1913 to regulate banking
bust
demand began to fall - production wasnt cut enough
by 1927 - unemployment rising
laissez faire
Federal reserve earlier attempts to control boom by tightening money supply made depression worse
wall street crash
stocks began to dip considerable 23rd
20% first 2 weeks (turning point)
next day nearly market fell by another 20% in a day
bear market replaced bull (prices falling)
crisis meeting held - 6 largest banks to spend $30 million to help stabilise market (was hopeless)
29th
16 million shares sold - stock prices collapsed completely
13 million unemployed by 1933
$40 billion lost due to drop in share prices
Hoover and recovery
laissez faire
too late moved to government intervention - unwanted change
Agricultural marketing act
national credit corporation
hawley smoot tariff
Roosevelt and recovery
banking act
federal agencies began to reestablish confidence
1937 Wegner-Steagall housing act - federal housing administration overseeing slum clearance and create houses for low-income families
agricultural adjustment act - provided subsides so farmers could produce less
