Economic Prosperity

Friday November 15, 2013Main Idea: The United States experienced

stunning economic growth during the 1920s

Andrew Mellon and Economic Prosperity

• Secretary of the Treasury under Harding, Coolidge, and Hoover– Chief architect of economic

policy in the 1920s– Policies encouraged growth

and led to a stock market boom

– Three goals: balance the budget, reduce govt debt, cut taxes

The Mellon Program

• Govt spending cut from 6.4 billion to 3 billion in 7 years

• Debt Reduction– Refinanced WWI debt to lower

the interest– Persuaded the Fed to lower its

interest rates as well– Increased tax revenue from the

nation’s economic boom– Debt reduced by 7 billion from

1921-9

Mellon Program Cont.

• Reduced taxes– High taxes reduced the money

available for private investment and prevented business expansion

– High tax rates reduced the amount of money the govt collected

– Supply-side economics - lower taxes = more govt revenue• Businesses and consumers spend

and invest extra money causing the economy to grow

• Americans earn more money • Govt collects more taxes at a lower

tax rate

• Tax Rate before Mellon: 4-73%• Tax Rate in 1928: 0.5-25%

Hoover’s Cooperative Individualism

• Secretary of Commerce Hoover balanced govt regulation with cooperative individualism– Encouraged manufacturers and distributors to

form their own trade associations which would share information with the federal govt

– Goal: reduce costs and promote economic efficiency

• Expanded Bureau of Foreign and Domestic Commerce– Find new markets and business opportunities

for American companies• Established

– Bureau of Aviation– Federal Radio Commission

Foreign Policy• Isolationism -

Americans wanted to be left alone to pursue prosperity

• US was too powerful and economically interconnected with other nations to retreat into isolationism

• US promoted peace through agreements with individual countries rather than through the League

Dawes Plan• Allies owed US 10 billion at the end of WWI• US needed Europe to be economically

stable to buy US exports and repay war debts

• 1924 Charles G Dawes (banker/diplomat) made a treaty with France, Britain, and Germany– American banks would make loans to the

Germans that would enable them to meet their reparations payments

– Britain and France would accept less in reparations and pay more on war debts

– Thus, Europe became more indebted to American banks

Kellogg-Briand Pact

• Pact between 14 nations outlawing war– Signed August 27,

1928– 62 nations signed

eventually

Today’s Activity

• Using the notes on your table (or pp. 514-520), answer the following questions in your notebook:– List inventions used during the 1920s– How did Henry Ford affect auto production?– How did automobiles affect life?– What roles did Glenn Curtiss and Charles Lindbergh play in

aviation?– Why did companies advertise in the 1920s?

REMEMBER TO BE WORKING ON YOUR REVIEW FOR 11/22/13