Unit 3: The Years of Prosperity, 1919-29

  • Find out about the key features of properity and the reasons for it
  • discover the impact of government policies on economy
  • determine the extent of prosperity
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Urbanisation

For the first time in history people more people were living in Urban areas than in the country (according to 1920's cenus), Areas were classed as urban if it has a population bigger than 2,500. Chicago-had a populatio of over 2million, New York-population over 5million.

Drive to build taller skyscraprs e.g Chrysler Building 319 metres. The black population of New York grew from 91,709 in 1910 to 327,706 in 1930 many concentrated in the area of Harlem.

Furthermore, there was a spread of suberbia, in the suburbs the qualties of facilities had improved dramatically E.g 51% of people had flushing toilets, lighting access rose from 35%-68% adn central heating rose from 1%-42%

Clash between Urban north and Rural traditional south further tensions grew between races.

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Growth in the production of Goods

Because there was a higher concentration of population inn urba areas this allowed more people to access electrical consumer goods that became the bench mark of American prosperity.

By 1930 85% of homes in cities had access to electricity , which in turn led to the productiono of more electrical consumer goods such as :

  • Vacuum Cleaners (which 30% of homes had in 1930)
  • Washing Machines 24% of families owned in 1930
  • Electrical refridgeratures owned by 8%

However most of rural America did not have access to electricity it wasnt until 1950s that rural parts of America had access to their own power supply.

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Stimulant to consumption

The 1920's soon became the age of full on advertising campaigns with the first national campaign for "Persodent toothpaste" linked to the Amos 'n' Andy show. Companies were soon spending $3 billion a year on advertising their products.

Mail order catalogues made it easier for people living in the rural areas of the country to get their hands on popular commodities and Sears opening their first department store in Chicago 1925.

One of the most important advances was the introduction of Consumer credit, which started in the motor industry. In order to buy a car in cash American families would have to save up for approximately 5 years, however with the introduction of consumer goods, customers could buy now and pay later. If customers defaulted on a loan then financiers could reposses one of their commodities.

 By 1930's 60% of furniture and 75% of all radios were bought on hire purchase schemes

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Development of entertainment

These new areas of entertainement were a key part of the 1920's prosperity as it  provided jobs, stimulated stock market and the investement boom.  Although heavily dependant on technological advances the "Roaring 20's" were characterised by increase of leisurely time pursuits .

The first radio station to recievea license to broadcast was KDKA IN 1920, by 1922 there were 556 radio stations broadcasting to 3 million radio sets.

The birth of modern cinema began with D.W Griffiths film The Birth of  a Nation in 1915. By 1920 there was approximately 20,000 cinemas until every town in USA had their own " picture palace".  By 1930's 100million cinema tickets were being sold, 1000 films were being made each year. Cinema helped shape a modern identity throughout the united states , it helped to meld together millions of immigrants into US citizens sharing values and a sense of humour.

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Reasons for 1920's prosperity!

  • The advancement of technology and the manufacture of technological goods.
  • Rise in skilled workers and US engineers "drove the economy forward"
  • Mass production through the use of assembly lines where the manufacture of products was standardised which meant that there was a greater economics of sale and there was no need for crafts men . Furthermore the use of  scientific management.
  • One consequence of greater effiency in production was that in the 1920's the was almost a doubling of USA's industrial output even though the size of the workforce didnt not significantly increase.
  • During WW1 many manufacturing industries accepted 48 hour work week. Unemployment averaged only 3.3% between 1923 and 1929.
  • Real annual earnings of non farm members rose between 1919 and 1929  by 23%
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Henry Ford significance

  • Fords adoption of the assembly line greatly increased factory efficientcy and dramatically reduced the cost of making a car. Prices dropped from $850 in 1908 to $360  by1916  producing more than 9,000 cars a day
  • Ford increased the pay of his workers in 1914 to $5 an 8 hour working day and introduced a profit sharing scheme
  • Ford began to retrain workers who were trained to avade the cost of training new employees , as previously their tasks were repetitive so there was a high turnover of workers
  • By creating better working conditions Ford took away any reason for unions as their wages were so high
  • Between 1914-1916 the detriot factory profits doubled to $60 million
  • By 1921 Ford was producing 60% of all cars sold
  • Ford planned to own all the raw materials in producing his model T , at its peak the River Rouge factory employed over 100,000 workers.
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Economic Impact of motor car industry

  • In 1918 there were 8 million regestered cars on the road by 1920 there were 9 million registered , by 1929 there was near 27 million cars.
  • The car industry had a knock on effect on other industries which the car relied on to be produced for example: 15% of steel output went into cars, 80% of rubber and 75% of glass went into cars
  • Stimulated fuel stations
  • Increased mobility meant that more roads needed to be built, the amount of roads across the nation rose from 387,000 miles in 1921 to 662,000 in 1929
  • By 1929 10% of the workforce were involved in either  car manufacture or in the other industries that were stimulated by it
  • The car industry brought along with it the growth of consumer credit as not everyone could afford cars outright.
  • HOWEVER!- Not all industries benefitted from the car industry boom, the Agriculture industry was depressed as the car industry led to over production , for example less people used horses as transport which meant that the demand for farmers who grow the "fodder" that feed the horses fell.
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Was Ford the key player in the prosperity of the 2

The answer is no, although Ford was signficant to the boom of the 20's he was only seen as the face of prosperity as he added a personal touch throught self publicity

  • By 1929, General Motors overtook Ford Motor's production
  • Clerence Birdseye transforming food industry with new quick refridgeration techniques
  • Adolphe Zukor built up paramount pictures empire eventually controlling one tenth of all US cinemas
  • Sam Insukk, controlled electricity production  in USA, his system was held throughout 34 states and controlled electricity production in 200 companies. Estimated worth $3 billion  in the late 1920s
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Republicans in power 1921-29- Economic Standing

Warren Harding 1921- 23 Calvin Coolidge was president between 1923-28 Secretary of the treasury was Andrew Mellon, Herbert Hoover Secretary of Commerse and sucessor to Coolidge.

Buisness interests:

Both presidents favoured reduced Government intervention in terms of taxation and foreign policy. Coolidge famously said that the "the buisiness of America is business". The rejectiono f the League of Nations show that America was turning back to Isolationism.

Cost of funding the war led to mounting National Debt , government priority was to now reduce this.  They also believed that money should be left in the pockets of the people, therefore the reduction of federal taxes was needed, as it was seen as as drag on insentives.

Union power was thought to haev become a obstacle to profitablity and buisness management.

Decided to take a "Laissez-faire" approach however they accepted that the govt could help the economy through tarrifs and limiting immigration , which would protect American jobs.

Luckily during this period Republicans not only held office but also the house of congress making the passing of legislation easier.

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Taxation

Mellon believed that Taxes should be reduced in order to promote economic growth, he believed that if the rich retained their money then they would use it to open buisness and create jobs:

  • Wartime excess profit tax was repealled, Mellon wanted the maximum income tax to be 25%. This took three cuts  In 1921, 1924, 1925,  achieved the level of desired tax in last cut.
  • As a result of 1920s prosperity the governments income increased whereas the taxes decreased. This increase in govt income in 1920s allowed the National Debt from WW1 to decrease.
  • One of Hardings attempts was to make the govt more efficient and reduce its cost, through the Budget and Accounting act 1921 a bureau of the budget.  This made the president submit an estimate of federal income and expenditure annually.
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Tariffs

Republican politicians feared that higher levels of cheap imports would threaten  economic prosperity. The Underwood-Simmons Tarrif introduced reductions of all tarrifs in 1913, however Republicans introduced 1921 Emergency Tarrif act  and Fordney-McCumber act the year after to curb the cheap appeal of imported goods.

  • The Emergency Tarrif act stated that it owuld put taxes on a range of imported agricultural products, such as wheat from Canada to protect the prices that US farmers would recieve.
  •  The Fordney McCumber Act was much broader, it addressed a range of industrial products as well as food imports.
  • As a result of the controversy caused by the American Valuation Plan which calculated on a products manufacture cost in US, A Tariff Commision was put into place to advice the President on Tarrifs
  • Economic impact:
  • There had been an increase of 11% on selected products however this was far from the desired growth.
  • The raising of tariffs had a knock on effect of causing other countries to raise their tariffs making it difficlut for American produers to sell their goods abroad.
  • It also meant that the price of imported comoditities rose.
  • The price of the equiptment that farmers imported  also rose as well as the Farmers finding it difficult to sell their goods
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Trade Unions

  • Railways handed back to former private owners , instead of government controlled as they wanted to take power away from Unions.
  • in 1922 Federal Government obtained an injunction which quelled a 400,000 strong  picked strike. As a result this strike ended in a failure
  • Conservative Supreme court handed down judgements which favoured management and not unions. E.g.  Chief Justice William Taft ruled that federal law which had put punitive taxes on products manufactured by child labout was unconstitutional.
  • Trade union membership fell in 1920's, in 1920 12% of labour force was in a trade union by 1929 this figure dropped to below %8.
  • Caused by "carrot" such as $5 working day and "sticks" which were the yellow dog contract which meant that you could only work if you agreed not to join a union.
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Government Intervention Agriculture

Republicans refused to adhere to their non-interventionist policy in agriculture as the industry was failing as farmers where competing in a world market.

  • Between 1919-21 value of farm products more than halved form $10 billion to just over $4 billion.
  • Cotton Slumped from 35 cents per pound during WW2 then dropped to 16 cents by 1920
  • Debts and foreclosure on mortgaged farms became common place.
  • Farmers tried to counter-act this by producing more, however all this did was lessen demand thus causing the prices of their produce to drop.
  • Legislation was put into place to try and aid the agricultural section of industry.
  • 1921 Grain Futures Trading Act  was an attempt to precent the manipulation of the grain market
  • 1922 the Capper-Volstead Act  enabled farmers to work together in co-operatives in order to facilitate the production and marketing of produce.
  • 1923 The Intermediate  Credit act established a credit system to channel agricultural loans ato farmers on easier terms.
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