US Economy 1920-1933

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  • Calvin Coolidge
    • On 2 August 1923, Warren Harding died.
    • Coolidge was duly sworn in by his father, though this action was in fact necessary since Coolidge automatically succeeded Harding.
    • This, however, set the tone for Coolidge's presidency. He liked to be thought of as a man of the people. 
    • Many Americans did not want their government to do much, they believed the prosperity they enjoyed was permanent.
    • Coolidge courted publicity and liked to be photographed in outlandish costumes such as Native American headdress.
    • He was a popular president. 
    • He represented all those Americans who worked to enjoy the prosperity unfettered by government regulation, but still sought to maintain high moral standards in society.
  • Extent of Prosperity
    • The USA had emerged from WW1 as the richest country on earth.
    • Following a brief postwar recession in 1920 and 1921, unemployment never rose above 3.7%.
    • Inflation never rose higher than 1%.
    • Employees were working fewer hours - 44 per week by 1929 as opposed to 47 per week in 1920.
    • Production of industrial goods rose by 50% between 1922 and 1929.
    • GNP stood at $73b in 1920 and $104b in 1929.
    • In 1929, $852b worth of radios were sold.
    • By 1929, 80m worth of cinema tickets were sold weekly.
  • Reasons for Prosperity
    • Government Policies
      • "The chief business of the American people is business." - Coolidge.
      • Both Coolidge and Mellon strongly believed in a free market. 
      • Mellon believed wealth filtered down naturally in society, and the best way to ensure increased living standards for all was to allow the rich to continue to make money to invest in industrial developments.
      • High Tariffs
        • Fordney-McCumber Act raised tariffs to cover the difference between foreign and domestic costs. 
        • This meant that some products duties were so high that domestic producers were given an almost guaranteed market.
      • Tax Reductions
        • Government reduced federal taxes significantly in 1924, 1926 and 1928.
      • Fewer Regulations
        • Businesses were left unhindered to carry on as they saw fit.
        • Laws concerning sharp business practice were often ignored, though the government tended to turn a blind eye.
        • However, where the government did prosecute, the offenders usually won on appeal.
      • Foreign Policy
        • Coolidge avoided intervention in foreign affairs wherever possible. He did not want the USA to be caught up in foreign disputes.
        • However, private investors carried on as they saw fit and tended to prefer profit over more ethical concerns.
    • Technological Advances
      • By 1929 there were 23m cars on the road. 
      • The motor car industry was the largest market for commodities.
      • Long before the 1920s, Ford had begun to use methods of mass production.
      • When Ford introduced the assembly line in 1914, Ford was able to reduce the cost of cars from $900 to $500.
      • By 1920, Ford was producing 1,250,000 cars per year. 
      • By 1925, the price of cars had fallen to $250.
      • When, in 1927, Ford began to lose his share of the market, he closed his factory, laying off 60,000 workers. This was indeed considered a contributory factor towards the 1927 minor recession…

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