A Growing Economy

What is an economic boom?

• A rapid growth in a country’s moneymakingthat leads to increased prosperity.

• The economic boom in America was basedaround consumer goods – luxury itemsthat people wanted to buy but didn’t really need.

On what factors was the economic boom based?

• 1. First World War• 2. USA’s wealth• 3. New industries• 4. Rising wages and stable prices• 5. Government policies• 6. Hire purchase• 7. Weak Unions

First World War

• USA entered late and had no damages to repair• Made $$$ by selling weapons and arms to the

European Allies.• While Europe fought, the USA took over many of

their colonial markets.• US chemical industry replaced the German

industry as world leader• During the war, became the ‘banker to the rest of

the world’

The USA’s wealth

• Rich in raw materials and had much fertileland.

• World’s leading industrial nation.• Population hard working and ambitious.• The early 1900s movement from rural‐‐

and agricultural to urban and industrial.

New Industries• The total production of

American industryincreased by 50% during the 1920s.

• Boom fuelled by a demand for ‘new’consumer goods.

– E.g. washing machines, refrigerators, radios andvacuum cleaners.

• Most significant was the growth in the MOTOR INDUSTRY.

Rising wages and stable prices

• Incomes rose 25% ; prices remained the same orfell.

• Assembly Line and Mass Production – make goodsmore cheaply.

• 1925 Ford were producing a car every 10 seconds• this pushed down prices and made goods more

accessible for ordinary people• Also meant workers could be paid less – unskilled

work, repetitive tasks.

CONSUMER GOODS: PROSPERITY IN THE USA IN THE 1920S

• In just ten years there was a huge increase in production.

• It was a boom in CONSUMER GOODS, that is goods, which people bought and usedthemselves.

GOODSFIGURESOFSALES IN1919*

FIGURESOFSALES IN1929*

%INCREASEOF SALES

CARS 9 million 26 million

289%

TELEPHONES 10 million

20 million

100%

RADIOS 60,000 10 million

1667%

Government Policies

• Laissez faire was economic policy favored by‐government.

• Give Big Business what it wanted.• Businessmen believed low taxes gave people

more money to spend.• Government also introduced tarriffs on foreign

goods coming into America to protect America’s industry.

• 'The business of America is business.‘• 'The man who builds a factory, builds a temple. The man who works

there,• worships there.'• ‐‐ President Coolidge• We in America today are nearer to the financial triumph over poverty

than• ever before in the history of our land. The poor man is vanishing from us.• Under the Republican system, our industrial output has increased as

never• before, and our wages have grown steadily in buying power.• ‐‐ President Hoover, speaking in 1928• During his election campaign, Republicans promised 'a chicken in every

pot and a car in every backyard'.

Credit

• The consumer boom was encouraged by the easy availability of credit.• Consumers could buy the goods with a

small deposit, and then pay the rest off inweekly or monthly installments. 6 out of 10cars were bought this way.

Weak Unions

• The Republican government and business againsttrade unions.

• Employers allowed to use violence to break strikesand to fire union members

• Unions were excluded altogether from auto industry.

• Employers were able to keep wages low and working hours long, at a time when profits were increasing

Result: Confidence

• This confidence led them to spend more, which in turn made the economy grow even faster.

• Americans confident enough to start borrowing money to buy goods. Credit: ‘Buy now, pay later’.• Wall Street boomed (a 'bull' market) with many people buying shares to make a profit. Many new businesses were 'floated' on the stock market.

New Society Consumers‐

• Entertainment industry – Hollywood, CharlieChaplin, the ‘talkies’ and cinemas, jazz clubs

and speakeasies.• Skyscrapers, highways and urban

development.

Advertisement• Advertisers used

persuasion, ploy,seduction andsex appeal tolure buyers.

• How doadvertisements likethese signal a shift inthe culture of theUnited States?

• Have advertiserspushed theboundaries further today?

The Automobile

• Freedoms, luxuries and privacy.

• Automobile Industry provided over 6 million new jobs!

• By 1929, 26 million motor vehicles wereregistered in the U.S. (1 car per 4.9 Americans)

Poverty and Depression

• Not every one shared in the prosperity,however, and there were glaring weaknessesin the American economy in the 1920s.

• However, there is plenty of evidence that allwas not well with the American economy inthe 1920s, and in 1928 the 'boom' began to slow down.

Farmers

• Agriculture suffering.Farm Incomes dropped drastically for several reasons

•World War I meant that Europe couldn’t affordAmerican food exports

Farmers•Canadian wheat producers were growing more grain•Over-production made prices fall.•Dustbowl – over farming led to some areas in the mid

west to become unusable desert.• As a result, millions left for the cities.

Labor

• The booming American economy in the 1920s led PresidentHoover to say:

• “we in America today are nearer to the final triumph overpoverty than ever before in the history of any land”

• But there was still great inequality.– 32% of the wealth went to the richest 5% of people.

-- Only 10% of wealth went to the poorest 42%-- Therefore, close to half of all Americans were toopoor to take part in this consumer good based boom.

Labor: Mass Production = Deskilling

• Deskilling: term used by labor supporters to describe mass production techniques;

• Jobs become more repetitive andboring while alienating workers.

Wages dropped.