Reasons for the prosperity of the 1920s
- Created by: nw26
- Created on: 30-12-15 14:02
Urban Development
Large numbers of black migrants from the southern states
Black migrants moving into cities meant that the white population moved into suburbia
1920-30, percentage of families:
§ with inside flushing toilets rose from 20% to 51%
§ with central heating 1% to 42%
§ electric lighting 35% to 68%
Development of consumer production in 1920s meant that standard of living improved (for those who benefited from the boom)
Tension between urban and rural was inevitable
Urban Development
Large numbers of black migrants from the southern states
Black migrants moving into cities meant that the white population moved into suburbia
1920-30, percentage of families:
§ with inside flushing toilets rose from 20% to 51%
§ with central heating 1% to 42%
§ electric lighting 35% to 68%
Development of consumer production in 1920s meant that standard of living improved (for those who benefited from the boom)
Tension between urban and rural was inevitable
Production of consumer goods
85% of homes in cities had accesstoelectricity by 1930
Range of goods became available;
§ Vacuum cleaners, owned by 30% of families
§ Washing machines, owned by 24% of families
§ Refrigerators, owned by 8% of families
The cost of supplying rural US meant that it would take too long for power companies to make a profit
Prices charged for rural communities that did have electricity were at least twice as much as those in the cities
Stimulants to consumption
Advertisement became key in encouraging consumers to buy goods
By 1929, American companies were spending $3 billion a year on advertising – a five-fold increase on the amount spent at the start of the decade
New methods of distribution – Sears Roebuck mail order catalogue began in 1893
Consumer credit began in the motor industry
To buy a car outright with cash it would take the average American five years to save up sufficient funds
Initial payment was put down, then regular payments were made to purchase an item
Credit became an acceptable way to buy expensive goods
By the end of the decade, 60% of all furniture and 75% of all radios were bought on hire purchase schemes
Development of entertainment
New areas of entertainment key in the prosperity of the 1920s – provided jobs, stimulated stock market and investment boom and promoted a feel good factor
Most pursuits dependent on technological advancements (radios and cinema)
By the end of 1922 – 556 radios broadcasting across the US to 3 million radio sets
RCA (Radio Corporation America) founded in 1919 – share price rose by 929% between 1925 and 1929
By 1920 – 20,000 cinemas – the number kept rising until virtually every town in the USA had its own cinema
1920s and 1930s were the heyday of American cinema – 800 to 1000 films being produced each year
By 1930 – 100 million cinema tickets were being sold every week
Reasons for the prosperity of the 1920s
Mass production and scientific management were well embedded by 1917
The 1920s saw a doubling of US industrial output whilst the size of the workforce barley increased
Increase in employment and wages = increase in disposable wealth = increase in demand for goods
Model T was first produced in 1908 – 10,000 sold in the first year
1925 – Ford was still producing more than 9000carsa day($300each)
In 1918, 8 millioncars on the roads in the US
By 1929 there were nearly 27 millioncars in the USA
People were able to travelfurther and more easily – the distance between urban and rural US broke down
Increase in the growth of suburbs as travel became easier
Coolidge as President
Harding had promised a 'return to normalcy'
Coolidge initially felt that he had to keep Harding’s cabinet out of respect
The country was in an economically sound position
Production levels continued to rise: 100% in 1913, 122.2% in 1920, 97.9% in 1921 (a brief slump) and 148% in 1925
Coolidge’s Presidency coincided with the economic prosperity of the period and so his reputation remained undamaged
Business interests
To support business, both Harding and Coolidge favoured limiting government intervention of business
Cost of WW1 had increased the National Debt – became government priority to reduce - debt
Reduction of federal taxes also seen as priority of the Republicans
Money should left in the pockets of the people, not take by a wasteful government in Washington
Feeling that Trade Union power had grown too much during WW1 and restricted good business management and profitability
‘laissez-faire’ policies were adopted when it came to business and the economy
Republicans accepted that the government should assist the economy through tariffs and limiting immigration
Taxation
Taxes had rise between 1916-18 in order to fund the war
Andrew Mellon believed that taxes had to be reduced in order to promote economic growth
If the wealthy retained more of thier income they would use this to create companies which would create new jobs and thus contribute to the economy
Mellon wanted the max. rate of income tax to be 25% - it took three cuts - 1921, 1924 and 1925
Although the level of taxes had been reduced, the government still increased its income due to the prosperity of the period
This showed that by 'getting the government off the back of the people' prosperity would increase
Level of government income reduced the level of national debt
1921 – Budget and Accounting Act – established Bureau of the Budget, the President had to submit to Congress an estimate of federal income and expenditure annually
Tariffs
There were concerns among the Republicans that higher levels of imports would threaten economic prosperity
1921 – Emergency Tariff Act – reintroduced under Harding, it stated there would be taxes on a range of agricultural products in order to protect the prices US farmers would receive
1922 – Fordney-McCumber Tariff – extended tariffs to range of industrial goods and food imports
The American Valuation Plan put forward that the tariff would be calculated on the basis of the cost of the item in the US – this would have increased the level of the tariff for most imports
Tariff Commission set up – President also given power to vary the rates by 50%
Underwood-Simmons Tariff of 1913 – average rate of 27%
Fordney-McCumber Tariff of 1922 – average rate of 38%
Prices rose for American consumers on a range of imported goods
Government intervention of agriculture
After falling prices in the 1880s and 1890s, WW1 witnessed a huge increase in production
After the war, as European production recovered, world prices began to fall again
Value of farm products more than halved from $10 billion to just over $4 billion between 1919 and 1921
Cotton slumped – 35 cents per pound during the war to 16 cents in 1920
Corn fell from wartime high of $1.50 to $0.52 per bushel
Debt and foreclosures by banks on mortgaged farms became commonplace
Farmers increased production in attempt to deal with these problems – this drove prices down even further
Government intervention of agriculture (2)
1921 – Grain Futures Trading Act – attempt to prevent the manipulation of the grain market which was believed to be keeping grain prices artificially low
1922 – Capper-Volstead Act – enabled farmers to work together in order to facilitate the production and marketing of agricultural products
1923 – Intermediate Credit Act – established a credit system to channel agricultural loans to farmers on easier terms than were currently available
1924 – McNary-Haugen bill – proposed that the Federal Government should sell surplus supplies of wheat and corn abroad at the best prices that could be achieved – bill failed to pass Congress in 1924 and 1926
The bill was broadened in 1927 to include cotton and tobacco in an attempt to win over Southern members of Congress – it passed through Congress but was vetoed by Coolidge – he felt it ran contrary to the policy of ‘laissez-faire’
Farmers continued to suffer from falling prices and overproduction
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