Americas Financial boom
Hire Purchase or Consumerism: As profts increased, so did wages - enables people to buy on credit.
Credit: The loaning of money to people who did not have cash to pay for stuff immediately, could pay in instalments or hire purchase.
Confidence: People had faith in the US economy
Speculation: People were gambling on whether to buy shares
Tariffs: Charges put on foreign goods
Assembly Line: A production line where everyone did one simple job every time
Causes for financial boom:
Laissez faire Position of the USA in the world
Assembly line Advertising
Credit New consumer goods
US stock exchange/market
E.g. 1. Miss Mezzulo's business 'Mezzullos Markers' makes board markers
2. Miss Mezzulo wnats to investors for her business to make it grow
3. Investors (shareholders) give Miss Mezzullo money and in exchange want a part of the company (shares)
4 Miss Mezzullos business expands: Profit geos up, values of business increase.
5. Values of shares geos up
6. Shareholders recieve every year a % of the profits - bit like in dragons den
Growth and value of the stock market rose dramatically in 1928 - 29. Morover the amount of buying and selling of shares grew so much that it was a common occurence for ordinary wokring people to become involved.
Since most companies shares seemed to rise people were prepared to risk their money on buying some, after all thier value was likely to rise. The USA began to speculate. Even is people didnt have the money upfont to pay the full amount, they would make a deposit, borrow to pay the rest and then sell the shares in a couple of weeks once thier value had risen and a profit had been made. This process was called 'buying on the margin'. Up to 25 million americans becaome involved in the freenzy of share dealing.
Causes of Financial boom
Econmic: Natural Resources - wood, oil,iron, coal, minerals and land to power industry and provde raw materials for new industries
New Tech - meant that new producst could be developed such as auto switch boards, glass tubing and concrete mixers and stimulated goods such as refrigerators, vacuum cleaners, radios.
Mass production - production meant that goods could be produced cheaply in huge quantities and speeded up production, improved productivity, which led to profits.
Credit - allowed people to buy goods even if they didnt have the money immeadiately avaliable - kept up demands for industrial products. Firms arrnaged for customers to pay by installment or hire purchase.
Government Policies - (ALSO POLITICAL) Restirctions and regulations gotten rid of, taxes lowered, import tarrifs.
WW1 - US industries grown during the war because they had to supply Europe with all the goods. US industry was a world leader electricity. This stimulated tech advances and american bankers and businessmen invested in Europe.
Electricity - brought development on domestic goods and tech = making Economy grow.
Social: Confidence - meant Americans were willing to invest in new products and new ideas and take risks.
Cheap Labour - provided unskilled, cheep jobs from Germany, Italy, poland, Germany immigrants.
Republican Presidents attitudes and policies
· In the 1920’s all the presidents were Republicans and all had similar political views
· The Presidents were; Warren Harding 1921-23, Calvin Coolidge 1923-29, Herbert Hoover 1929-33
1. Laissez - Faire (leave alone): This means minumun Gov. regulations/rules, the Gov. only to help when asked to. The business of America is business'. If businessman were left alone to make their own decisions, he thought that high profits, more jobs and good wages would be the result.
2. Rugged Individualism: The belief that individuals have responsilbilty from thier own succes - Achieved success by their own hard work. This theory originated from the early Americans and made a new life for themselves through their own efforts.
3. Low Tarrifs: Designed to encourage spending and investment in business.
4. Import Tarrifs(Tax) or Protectionism: In the 1919 the USA returned to the policy of isolationism and therefore tariffs on imported goods, (meaning goods(imports) coming from abroad were expensive) in order to limit the competition from foreign imports, as a result encouraged people to buy american goods.
The new consumer society
The Econonmic boom was partly encourage by the growth of consumerism. This meant the growing demand by many Americains for everyday,often household, goods.
Why was there an increase in demand for consumer goods?
1. Advertsing: - help people find out about products. The advertising industry gew as more and more firms realised the potential of the ad for increasing sales and profits. They used colourful adverts and catchphrases.
2. Hire purchase schemes: made it easier to buy goods on credit.
3. Growth in Female employment: also increased the need for labour saving devivces such as washing machines and vacuum cleaners.
4. Entertainment: The popularity of entertainment meant more and more Americains bought radios and gramaphones
5. Electricity: By 1927 two thirds of americains had electricity = increased demand for electical goods.
6. Wages increased: Between 1923 and 1929 the av. wage rose by 8% = workers had more money to spend on consumer goods.
The cycle of Prosperity
Henry Ford: Model T Ford
Ford Understood that you could make a proft by selling more cars cheeply than a few more expensive.
· The Fords were affordable for the average American family and wasn’t only for rich people
· It made travelling to work easier especially farmers
· It sales grew especially because of hire purchase
· It increased business of other industries because the materials it used e.g. rubber
· It’s business ideas like Mass Production, conveyer belts and mechanical devices that helped to boom the economy.
· It created unskilled jobs due to the Assembly line and made production quicker
- Encouraged people to travel the USA.
- By 1920s, 1 car was turned out every 10 secs. 15 million cars had been built by production ended in 1928.
Groups and sectors which did not boom
· 60% of the population were underneath the poverty line and could not afford to buy new consumer products
· The development in machinery took the jobs of people working in the industry i.e. coal miners and textile workers
· By 1928 nearly half of all farmers were living in poverty
· In 1924 alone 600,000 farmers lost their farms
· Not many people who had been living in the rural areas of America had seen any wealth
Groups and sectors which did not boom: Black Ameri
· Because black people suffered racism from the whites they were taken advantage of especially in the south
· Rent for them was high
· They were paid low wages
· ‘Last to be hired, first to be fired’
· Because black Americans ancestors were slaves, most of them worked in farms owned by white people and lived in great poverty
· Segregation made life hard for blacks as people received different facilities dependant on their colour, the blacks would get the worse: education, housing facilities and transport – they were not allowed to have the same privileges as whites
Groups and sectors which did not boom: Farmers
· Farmers had been over producing since World War One – they used to be able to sell their surplus to Europe but after the war they could grow for themselves. There was also stiff competition from canada, Australia and argentina who were supplying a vast amount of grain to the world market.
· They had been producing too much crops and couldn’t sell them,
· They went to banks to borrow money as prices fell
· Soon they fell into debt and had to sell their farms and leave, some even became Sharecroppers – a tenant farmer who gave a share of his crops to rent. In 1924 alone 600,000 farmers went bankrupt
· Farmers went wandering around America for work and became known as hobos.
Short term reasons for the end of the boom
American industry booms, prices of shares move up
·However in 1928 shares did not rise as much, this was because companies weren't selling as many goods so their profits fell.
Fever people were willing to buy their shares and there was a drop in confidence in the market.
This was a warning but when prices started to rise again greed took over and speculation recurred.
Republicains stuck thier policies and Investors sell their shares at higher prices and make huge profits
·More people invested in shares therefore increasing the prices of shares
· People bought ‘on the margin’ because it was easier to borrow money due to the large amount of credit that Americans had access to
Prices made an all time high in the summer of 1929, but;
Experts warned that the Industry was over producing and trade was not doing well and povety was high. Soon companies would start to make less profit and therr value and value of shares would be less =
The Economy will collapse.
Groups and sectors which did not boom: new immigra
NEW IMMIGRANTS: Also got discriminated against. A large number worked in construction where there was a building boom but the steady supply of cheap immigrant meant that wages were kept low Unemployment rates among new immigrant's remained high throughout the whole decade.
TRADE UNIONS: 1920s marked a period of decline. Union membership and activities fell because;
Economic prosperity led to stable prices, The Republican Gov. were against TU, Employers were allowed to use violence to break upstrikes and refuse to employ union members - were excluded altogether from the car industry.
E.g. Coal Industry: Gas and electricity were more widely used, more foreign competitions especially from poland. A great number of mines were shut down and many miners made redundant.
Railroad Industry: declined after hugh growth of the car industry.
Textile Industry: The lowering of the tarrifs on wood and cotton in 1913 meant that it faced stiff competition from abroad, faced the challenge of a new product - rayon - far cheaper to make that cotton and wool and was less work, changes is womens fashion - much shorter dresses - only needed a third of the material in comparison to 1914 before the war.
Short term reasons for the end of the boom continu
LOSS OF CONFIDENCE
· Experts were the first to start selling the shares and people lost their confidence as well and followed the experts by selling their shares as well.
AVAILABILITY OF EASY CREDIT
This practice was further encouraged by the easy credit policies on the part of theFederal Reserve board. This worked well as long as prices were rising , but when they started to fall, 75% of the purchase price of shares was borrowed = artificially high prices.
Long Term Reasons for the end of the boom
· Fewer products were being sold
· This was due to the over production, where Americans produced more goods than they could afford to buy
· Sells fell and boss cut prices and wages - if this didn’t work they would sack workers
· More people lost their jobs, fewer workers with less money to buy goods and factories cut costs
FALLING DEMAND FOR CONSUMER GOODS
· The unequal distribution of wealth meant that not everyone had shared the financial boom in the 1920’s
· Almost 50% of American families had an income of less than $2000 a year ($2000 was the minimum needed to survive) - These people were could not afford to buy the new consumer goods
· They couldn’t sell surplus products to other countries, especially in Europe. Some European countries owed America huge amounts of money (especially during WW1) and were struggling with the repayments.
· Selling abroad declined due to many foreign governments responding to tariffs by doing the same with American goods
Long Term Reasons for the end of the boom continue
THE BOOM IN LAND AND PROPERTY VALUES
· The value of land and property had a dramatic rise
· Some people in the State of Florida witnessed a sharp rise in land values, so they borrowed heavily to do so, because they believed that they could keep the property for a short time, then selling it when the prices rose
· In 1926, the prices fell sharply in Florida and it left many homeowners in negative equity
· The warning that the US government economy was in danger because property they owned was worth substantially less than what they originally paid for it
Wall Street Crash and its immediate effects
Sat 19th Oct – Shareholders being to panic: 3.5 million shares were brought and sold. Prices fall
· Mon 21st Oct – Over 6 million shares change hands. Prices fall than rise in the afternoon. There are still buyers on the market
· Tue 22nd Oct – Prices slightly recovering
· Wed 23rd Oct – 3 million shares sold in the last hour of trading, Margin buyers are told to find more cash.
· ‘Black’ Thursday: 13 million shares sold, no buyers – PANIC
· Friday 25th Oct – Top bankers decide to support the market, prices steadied
· Sat 26th Oct – President Hoover assures all Americans that the panic is over and that business banking will soon recover.
· Mon 28th Oct – Massive selling. Dramatic falls in prices, 3 million shares sold in the last hour of trading, 9 million sold in total, Banks stop supporting prices
· Tue 29th Oct – Worst day every on the stock market: 16 million shares have been traded
· Shares have lost value, Many shareholders lost everything. Suicide reported.
Wall Street Crash and its immediate effects contin
THE IMPACT OF THE WALL STREET CRASH
· End of 1929 over 2.5 million unemployed – however this only amounted to 5% of the work force.
· Confidence died, those who had money were unwilling to spend, unemployment rose as fewer and fewer goods were sold – sales were halved.
· Factories closed, people stopped buying.
Suddenly the USA became the land of unemployment – tramps, bread queues and soup kitchens, people evicted from their homes – hobos - Hoovervilles (Shanty towns, homeless people went to live, they couldn’t afford homes) created because of lack of money
Effects for the country and people from the next decade:
- Thousands of people who had saved in banks were bankrupted
- Workforces laid off
- Credit collapsed and loans were taken in
- Those banks that survived were unwilling to make further loans
Farmers: Farmers went bankrupt, could not sell produce, Drought, Demonstrated in towns carrying placards attacking the president ‘In Hoover we trusted, now we are busted’
Social Changes in the USA 1920's: Movies
In 1910 there were more than 8000 cinemas.- Movie industry welll established
By 1926 this rose to 17,000 and four years later: (1930) 303,000 cinemas.
By the end of WW1 cinemas was the most popular entertainment, reasons for this:
- More leisure time - people had more time and money
- Cheap prices - tickets as low a 5 cents - affordable
- Attraction of the stars - sex appeal, fashions
- Improved transport meant cinemas were very accessible
- Films were interesting and a form of escapism - cowboys, historical romances, adventures
- Initial novelty of the technolgy
Untill 1927 movies were silent and instead accompained by live musicians and sound effects. Some even provided a commentry.
Gradually the cinemas improved thier facilities in order to atrract more people - luxourious seats, mighty organs or even full orchestra.
Social Changes in the USA 1920's: Movie stars
With an annual output in the 1920s 0f about 800 films there was always something for the film- goer to see - Comedies of Charlie Chaplin and Buster Keaton and the romances of Clara Bow and the adventures of Douglous Fairbanks. Westerns and bibical stories were also popular.
Charlie chaplin: Born in London but moved to America to pursue his acting career. His trademark was a tight jacket, floppy shoes, bowler hat and a bamboo cane. His most famous film was ‘The Little Tramp’. In 1917 he signed an 8 film contract which was worht $1 million.
Clara Bow: Was mostly known for her role in ‘It Girl’ and was later known as the ‘It Girl’. She starred in 14 films in one year. She married cowboy actor Rex Bull in 1931 and conceived 2 children with him. Clara died from a heart attack in 1965.
Rudlof Valentino: The first male star to be sold on sex appeal - many women faint at the sight of him. He died in 1926 and more than 100,000 of his fans lined the streets for his funeral. Rioting even broke out. Several people killed themselves on the hearing of his death. His most famous film was 'The Sheik'
Social Changes in the USA 1920's: Movies - Talkies
· The first ‘talkie’ or movie with talking and sound was released in the USA and was called ‘The Jazz Singer’ starring Al Jolson in 1927.
· As more talkies developed the audience figures increased to an all time high – 100 million sold every week by 1930.
· Silent movies stars lost their jobs because they didn’t have the right voice
· By the end of the 1920s there were several famous film studious – Warner Brothers.
· In 1928, Hollywood introduced its own academy award scheme in the form of the ‘Oscars’.
· Hollywood: Movie palaces (the four major film companies had studios there), glamorous, actresses and infamous clubs sprung up in the area, to meet demands of stars who found their homes there(many movie stars moved to Los angeles) - Charlie chaplin and Buster Keaton both lived in the area.
However Hollywood and the film industry porvocked criticism for those who believe movies were lowering morals of American society, Blaming Hollywood for the Blatent use of Sex symbols such as Clara Bow and Rudolf Valentino. Hollywood responded by setting up the Hays code.
The development of popular music/culture
The 1920’s had become the ‘Jazz Age’
· Jazz originated from black slaves who were encouraged to sing to increase production. They used washboards, cans, pickaxes and percussion. Originally the music had various names inc. ‘blues’, ‘rag’ and ‘boogie-woogie’. However these words were taken from black sexual slang and white people disapproved of their use – therefore renamed Jazz.
· Some condemned jazz as another sign of decline in moral standards. Some cities including New York and Cleveland banned public performances of jazz in dance halls
· Jazz became the great attraction of the night clubs and speakeasies.
· It became popular for its upbeat style, new dance crazes
· Black Americans benefitted hugely from the outburst of jazz music as both black and white people liked it
· Middle class young white women especially flappers were the ones who took advantage and embraced the new music
· White musicians were quick to imitate jazz music because they saw the popularity and success of it across different races and genders. Duke Ellington - composed music, played the piano and a jazz bandleader and Louis Armstrong - promoted a style of music called 'swing'. This was the basis of all his jazz, swing was quick and attractive to young people, were famous jazz both players.
Social Changes: Radio and Gramaphone
· The first radio station was Station KDKA beginning in 1920. By 1930 there were 600+ radio stations in the USA. 40% of US homes had a radio set – mass production lowered the cost of buying them.
· Radio enabled people to listen to sporting events, music(e.g. Jazz), news and advertisements
· The first national radio network was the National Broadcasting Company (NBC) (1926) then a year later was followed by Columbia Broadcasting System (CBS)
· Radio became the main source of family entertainment. It created sporting hero’s such as boxer Jack Dempsey and basketball player Babe Ruth – it made events accessible to people who could not afford to attend.
· By the end of the 1920’s (50 million people had radios) there was a dramatic increase in political and social awareness among the population
· The gramophone
The Gramaphone industry grew rapidly after 1900 peaking in 1921 with sales of $106 million
· By 1922, the radio destroyed the market because it offered free music over air waves and sales fell throughout the entire decade
Social Changes: Speakeasies and Dancing
Speakeasies are the result of prohibition in 1920. They were drinking clubs which were run bu gangsters.
Entertainment in the sepakeasies were often provided by black americans playing Jazz. Speakeasies allowed white and blacks to mingle socically for the first time, this and the widespread belief that jazz incited sexual activity caused large numbers of people to oppose jazz whenever possible.
Gang bosses opened fancy clubs with dancers and the hottest bands.
Dancing before WW1 was slow and formal but there was a more carefree approach in the 1920s. One of the most well known was the Charleston. It had a breathtaking pace and sudden shifting rythms.
Other popular dancing was the black bottom, the vampire, shimmy, turkey trot,chicken scratch etc. Many of these dances shocked the older generation and many considered them immortal and scandlaous.