History roaring 20s

The USA entered the First World War in 1917 with American soldiers fighting on the western front. President Woodrow Wilson played an important role at the peace talks. His fourteen points of 1918 were, in theory, the basis for the peace settlement. He was also responsible for setting up the League of Nations.

Most Americans were not keen on the League of Nations.

• They did not want their country involved in disputes taking place far away.
• They believed the USA would have to bear the cost of keeping peace.

The American president was a democrat but the rival party, the republicans, controlled congress. They were opposed to the League of Nations and refused to join. Wilson lost the presidential election of 1920 to he republican warren Harding. Harding fought the election with the slogan ‘American first’. He talked of the need to return to ‘normalcy’, a word he had invented to convey the idea of getting life back to normal, as it was before the war. In addition, the league was intended to uphold the terms of the treaty of Versailles. Since the USA did not join the league, it meant that in practice Americans had opted out of taking any responsibility for the terms of the treaty.

Therefore, the USA started the 1920s politically isolated from Europe, with no treaty commitments. This policy was also taken into foreign trade and immigration.

Throughout the 1930s, republican presidents were in power, and they implemented republican policies. President Harding’s key policies were isolation, tariffs and low taxes to help business grow, and to give workers money to spend. When Harding died suddenly in 1923, Vice-President Coolidge succeeded him and followed the same policies.

The American government made sure that foreign goods did not compete with home-produced goods. In 1922, congress passed the Fordney-McCumber tariff.

• This put a tariff (tax) on foreign goods and made them more expensive than the same American products.
• The policy was intended to protect American industry and worked well in the 1920s. it helped create the ‘boom’ conditions.
• The tariff was not so effective in the long term as it encouraged foreign governments to retaliate and put tariffs on American goods.

1. The background: the USA before the 1920 

The USA’s industry and farming had grown steadily since the 1860s.

• The country had huge resources (coal, iron, timber, oil).
• It had a growing population, many of them immigrants willing to work hard.
• Railways, mining and manufacturing were all strong.

In the early years of the First World War, American businesses profited from the war in Europe.

• American industries supplied arms and equipment.
• American firms were able to take over much of the export business of the European powers while they were caught up in the fighting.

The First World War made the USA wealthy and confident. Americans felt they were doing well. It also made them isolationist. They did not want to be dragged into Europe’s wars.

2. Mass production techniques

In the 1920s, the profits of many American companies rose enormously. More goods were produced more quickly and cheaply because of new mass-production techniques.

The assembly line had been pioneered by Henry ford before the First World War. He founded the ford motor company in 1903, and by 1914 was beginning to use a moving assembly line. Workers could specialise in one part of the process of car manufacture. This meant that:

• A car could be produced in nearly one tenth of the time previously taken
• The price of cars came down
• Wages for production-line workers went up.

The motor industry was the single most important industry in the USA. More and more people could afford to buy cars, and by 1930 there were 30m million in the USA. This huge level of demand stimulated other industries (for example, metal, rubber and electrical industries). Indeed, the jobs of four million people depended on the motor industry, directly or indirectly.

Because of mass production methods, industrial production almost doubled during the 1920s without any increase in the size of the workforce. The textiles industry was changing with the introduction of synthetic materials such as rayon. The demand for electric power escalated and by the end of the 1920s electricity supply was organised in large regional grids for much of the USA.

The construction industry boomed, with the rapid growth in the number and size of skyscrapers in cities such as New York. The empire state building was regarded as one of the wonders of the modern world.

3. Consumer industries and advertising

The biggest boom came in the industries making consumer goods – goods for ordinary families to buy. Sales of household goods, such as vacuum cleaners and washing machines, boosted the electrical industry.

There was a huge increase in advertising with the development of mail-order catalogues, as well as billboards, newspapers and the growing medium of radio. Advertising, credit and hire purchase made it easy to spend. Wages for many Americans rose, and there was a feeling of confidence.

Sales benefited enormously in the 1920s from the use of hire purchase – people paying a deposit and then paying off the rest in instalments. This was helped by the relatively low rates of interest charged by banks. The explosion in consumer demand helped factories expand, which in turn meant more jobs were available. The economy was booming!

Many people bought shares in companies as investments. With increasing demand, the prices of shares went up and up. People believed that their value would continue to rise, and were therefore willing to borrow money from banks in order to buy shares, often using their house as a guarantee. Banks themselves were willing to lend more than they actually had, confident that with rising share prices values would go up sufficiently before investors wanted to withdraw their savings. (This is called buying shares ‘on the margin’).

The republican governments of the 1920s believed in two main policies:

• Laissez-faire – interfering in business as little as possible
• Rugged individualism – believing that individuals were responsible for their own lives.

During the 1920s, the stock market boomed. On average, share prices went up 300 per cent.

During the 1920s, films became a national obsession. Millions of Americans went to the cinema each week to watch new stars such as Buster Keaton and Charlie Chaplin. Hollywood became the centre of a multi-million dollar industry. At the sane time, jazz music became a craze and the USA became the centre of the world entertainment industry.

Both radio and gramophone records helped jazz music to spread more widely. Radio stations also helped to increase the popularity of sports. Rapidly increasing car ownership helped people to travel to sports fixtures, either as players or spectators. New dances became popular, such as the Charleston, the tango and the black bottom. These were seen as being conflict with more traditional and restrained dances.

There was a huge contrast in the USA in the 1920s between rich and poor. In early 1929, five per cent of the population enjoyed about one-third of the nation’s wealth. However, over half of American families lived below what was accepted as the poverty line.

• Farmers had a hard time in the 1920s. they produced more food than was needed and, as a result, prices fell. This led to reduced incomes, with many farmers unable to keep up their mortgage payments. Some farmers were evicted and others were forced to sell their land.
• African Americans had a similar experience. Almost 1 million lost their jobs in the 1920s. Many moved to the north where they found lower-paid jobs.

• Not all industries benefited from the boom. For example, the coal industry declined due to competition from new forms of power such as electricity and gas. There were wage cuts and job losses in the coal and cotton industries.
• Many children worked long hours in textile factories and in agriculture for very low wages.

In the decades before the First World War, millions of Europeans and some Asians emigrated to the USA. The country was seen as a ‘melting point’ of nationalities and races. A city such as New York was truly international in appearance and in speech. Many of those from Europe were from the south and east, speaking languages far removed from English and German; they were mostly Catholic; and often had a little education. Therefore, there were growing fears about the consequences of an ‘open’ policy for immigrants, even before the 1920s.

• Immigrants provided cheap labour and therefore created competition for jobs.
• Immigrants might bring new political ideas, such as communism from Russia, which would threaten American democracy.
• There was also racial prejudice ageist those who were not white-skinned and did not originate form northern Europe.
• Recent waves of immigrants were tending to concentrate in ghettos within cities, where crime and violence were high. 

Although slavery had been abolished during the American civil war (1861-65), African Americans did not have equal rights. Segregation was legal in the southern states. In 1896, the US Supreme Court had given legal approval for what became known as Jim Crow Laws – that is, treating African Americans as inferior, to be exploited to whites.

The Ku Klux Klan (KKK) had originally been formed in 1866. Its intension was to terrorise African Americans who had just gained their freedom in the American civil war.

• In 1915, the organisation was re-formed, and attacked Catholics and Jews as well as African Americans =. In the early 1920s it was hugely popular, with 5 million members.
• Many white Americans were afraid of what they saw as the negative consequences of the racial and cultural mix of the USA. Many recent immigrants were from southern and eastern Europe and mostly catholic rather than protestant religion. Many Jews had fled Europe before and during the First World War. This added to the existing fears about African American people diluting what was seen as ‘pure’ American culture. KKK supporters believed that the USA’s greatness was founded on the achievements of WASPS (White Anglo-Saxon Protestants). Other cultures were seen as inferior.

• Klansmen met in secret at night, but sometimes paraded openly during the day, wearing white hoods and white sheets. They intended to terrorise African Americans and other hated groups, such as Jews and Catholics, into accepting inferior status under the control of the WASPs. The ‘imperial wizard’ led the Klan, with a ‘grand dragon’ in charge in each state.
• African American people feared the KKK. They suffered acts of violence, such as being beaten, ***** or even lynched. The courts were on the side of the whites as many police and judges were members of the KKK.

The influence of the KKK decreased in the later 1920s. a well-publicised court case led to one of its leaders being convicted of the kidnap, **** and murder of a woman on a train. Even so, there was still much racism in the USA.

Prohibition: how it was introduced

Some groups were strongly in favour of prohibiting the sale of alcoholic drinks. There was a strong temperance (anti-alcohol) movement in the USA. Some states within the USA had voted for prohibition before the First World War. During the war, there were additional arguments in support.

• Drinking alcohol became associated with absenteeism from work.
• The main beers drunk in the USA were German, and it was said to be unpatriotic to be drinking German beer during the war.

By the end of the war, three-quarters of the states had prohibited the manufacture and sale of alcoholic drinks. With this wide support across the USA, temperance groups pressured the government to introduce prohibition nationwide. This involved passing an amendment to the constitution – the eighteenth amendment.

Many Americans celebrated the banning of ‘the demon drink’, and expected that it would help to reduce social abuses such as family neglect. Those against prohibition accepted that the law had been passed, but did not necessarily intend to obey it.

Prohibition: problems of enforcement

Prohibition was not a success because it was impossible to enforce.

• The alcohol trade was driven underground.
• Bootleggers made large amounts of money smuggling alcohol into the USA.
• There was still much illegal brewing of alcohol – moonshine – within the USA.
• Speakeasies (illegal bars) opened up and sold beer and other drinks.

• The government appointed prohibition agents, but they were far too few in number.
• Two of the agents, Izzy Einstein and Moe Smith, gained a reputation for wearing elaborate disguises. They raided 3000 speakeasies in the first half of the 1920s.

Prohibition and crime

Gangs of criminals began to run bootlegging schemes and other forms of crime (gambling, drugs, prostitution) like a business. The gangs would sometimes fight each other for control of the trade. They controlled the speakeasies by running protection rackets, and the police dares not intervene.

The most notorious gang leader was Al Capone. He virtually controlled the city of Chicago by bribing the mayor and other politicians. He employed nearly 1000 men, many of them with guns. Violence was used when it was considered necessary, and over 200 murders have been linked to gang activities. The most famous massacre was in 1929 when some of Al Capone’s gang gunned down six members of the rival Bugs Moran gang (the St Valentine’s Day massacre).

The end of prohibition

After the Wall Street Crash and with high unemployment and much misery, it was easier to argue for the end of prohibition – the end of the ‘noble experiment’. One effect of ending prohibition would be the creation of jobs. In the 1932 presidential election campaign F.D. Roosevelt promised to repeal; the law. This involved congress passing another amendment to the constitution, the twenty-first, and it came into effect in 1933.

Many young people gained more freedom in the 1920s. this was partly a result of more transport being available and having more money to spend, however, it also reflected a change in attitudes among the younger generation.

The group that attracted particular attention was the flappers. These young ladies wore short skirts, had short hair, put on make-up, and sis what were considered to be outrageous things, such as smoking in public and dancing the tango and the Charleston. The older generations, especially those living in rural areas of the USA, were shocked by these developments.

Historians can identify long- and short-term causes of the collapse in 1929, the longer-term causes stem from the weakness and underlying problems of the American economy during the 1920s.

Long-term causes

• Over-production in agriculture drove prices down.
• Over-production in consumer goods did the same, and once families had bought thee goods (for example, refrigerators), they did not need more.
• Lack of credit control meant that investors were encouraged to speculate and rely on share prices continuing to rise. There was a lack of regulation to control business activities.
• The effects of the tariff policy, where America restricted imports by high tariffs, encouraged other countries o retaliate – this made it difficult for the USA to export surplus goods.

• The unequal distribution of wealth, with over half the population having very limited ability to make purchases or invest, reduced the size of the American marker.

Short-term causes

Short-term causes related to shares. Many ordinary Americans bought shares in companies. Normally this is good for business. However, in the USA in the 1920s the rush to buy shares caused problems.

• Many people bought and sold share to make quick profits instead of keeping their money invested in the same businesses for some time. They were speculators, not investors.
• Companies were forced by shareholders to pay out profits to shareholders rather than reinvesting the profits.
• Americans borrowed money on credit to buy their shares.

These kind of share dealing depended on confidence that share prices would continue to rise. Once people started worrying about the long-term weaknesses in the American economy, disaster struck. In September 1929, the prices of shares began to edge down – slowly to start with- but people soon began to realise that the shares they owned were worth less than the loans they had used to buy them in the first place. All of a sudden, everyone tried to get rid of their share, selling them for less and less. The worst day was ‘Black Tuesday’, 29 October 1929. As a result, share prices collapsed.

The effects of the crash were disastrous.

• Many individuals were bankrupt – they could not pay back the loans they used to buy their (now worthless) shares.
• Some homeowners lost their homes as they could not pay their mortgages.
• Even some of those who had savings lost their money when banks collapsed.
• Many farmers suffered a similar fate as banks tried to get back their loans.

The confidence of individuals was shattered. Many faced unemployment, and those in work faced reduced hours and wages. They tightened their belts and stopped spending.

Big institutions also suffered.

• About 11000 banks stopped trading between 1929 and 1933.
• At the same time, demand for goods of all types fell.
• As a result, production fell and so did wages and jobs.

Unemployment rose dramatically. Most Americans blamed Hoover for the crash, even though this was unfair as he had only just become president and had merely continued the policies of previous republican governments under presidents Harding and Coolidge. However, Hoover did anger many people by his insistence at first that the situation was not too serious – ‘prosperity is just around the corner’.