If a person was not able to afford this there was hire purchase in which allowed buying goods with credit and paying later with interest. This led to prosperity as more people were able buy to products and pays the interest which went straight to the American economy.
In the 1920s the government encouraged growth of business by introducing a no interference policy: ‘laissez faire’. This meant that the government won’t interfere with businesses and let them do their primary job to make to money which fed the economy. They also believed in rugged individualism meaning individuals were responsible for own lives and not expecting state to bail them out of their problems.
Cycle for prosperity
SPECULATION ON THE STOCK MARKET
See book for diagram.
Companies could sell on shared on the Stock Exchange in order to raise money for investment. The shares were eagerly bought by investors – who then hoped to sell them at a higher price and so make money for themselves. Therefore, in the 1920s, share prices went up, on average 300%.
Many ordinary Americans started to invest in shares as it seemed an easy way to make money. With more people buying shares, demand was going up, and share prices went up. As investors were convinced the boom would continue, they often bought shares ‘on the margin’ – that is, they borrowed money to pay for their purchase of shares, confident that the money would pay back as the value of shares went up. The banks themselves loaned more money than they actually had in their deposits, confident that loans would pay back before customers wanted to withdraw their savings. The government encouraged this with low tax and the laissez-faire policy.
HOW DID THE BOOM AFFECT THE AMERICAN PEOPLE
ROARING 20s
- Notorious fun
- Wild enjoyment
- Time of rebellion/ liberation from traditional values
WOMEN
- Before women: chaperoned, no makeup, housewives.
- The changing role of women was a result of the work they did during the war.
- The number of working women increased by 25 per cent.
- In 1920, all women were given the right to vote.
- 'Flappers' smoked in public, danced the new dances, and were sexually liberated.
- Women wore clothing more convenient for activity and stopped wearing long skirts and corsets. Cut hair in act of rebellion.
- Divorce was made easier and the number of divorces doubled - women were not content just to stay at home and put up with bad husbands.
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But most women were still housewives and were not as free as their men.
FILM
- Silent movies were popular (Charlie Chaplin) until 1927 when the first ‘talkie’ the ‘Jazz Singer’.
- Going to movies became a national habit as 110 million went to cinemas each week.
- It became a multi-million dollar business.
SPORTS
- Radio stations increased popularity of sports such as baseball, boxing and American football.
- Sports became big money e.g. baseball with its legendary team New York Yankees.
- Some sports stars became heroes like boxer Jack Dempsey.
- With the increase of ownership of cars, it was easier for people to visit matches.
MUSIC (JAZZ)
- It was developed out of ragtime and blues music among black people in the southern parts of the USA. It rapidly spread throughout the USA in 1920s and provided black musicians with a way of gaining self-respect and admiration. Successful artists included Louis Armstrong and Duke Ellington.
- Jazz music spread easily thanks to the radio.
- Became an obsession amongst young people.
- New dances and new styles were created.
DANCING
- New dances were introduced such as the Charleston and the Black Bottom which were popular amongst the Young
- Often dances were sexually suggestive and were frowned upon by the older generation who believed it was ‘corrupting influences on younger people’
ENTERTAINMENT /CLUBS
- The average working week dropped from 47.7% to 44.4% while wages rose 11%. This meant that people had more money and time to spend money to spend on entertainment such as clubs.
- Clubs were laid back and people found them as relief from the stresses of daily life.
- Many people wore little clothes to clothes.
- Many people disagreed with the actions of clubs as it was against bible beliefs such as gambling.
CRAZES
- 1920s were a period of new crazes.
- Couples took part in dance marathons.
- Doing stunts such as climbing buildings.
- Trying to break world records
WHO DID NOT BENEFIT FROM THE BOOM OF THE 1920s
The 1920s were also a time of contrasts, particularly with the tremendously rich to the extreme poor. In 1929, about one-third or the nation riches was owned by only 5% while its wealth was bigger than the next 22 wealthiest countries put together. Many people did benefit from the boom, these people included:
- Farmers
- Workers in older factories
- Immigrants
- Black people
- Native Americans
- Non-Christians
- Poor and unemployed
FARMERs
- Europe started to import less food from USA and put high tariffs on US products in reaction to the Fordney-Mcumber Tariff, 1922 due isolationist atmosphere.
- Completion from other trading countries who sold food at a cheaper price.
- Improved machinery so less men were needed (led to mass unemployment)
- Machinery led to overproduction and with the high tariffs on US products imposed in by trading nations it was harder to sell surplus.
- All this led to farmers becoming very poor
In the 1920s 6 million rural Americans were forced out of their land due to poverty. This meant that many had to migrate to neighbouring states where there was little demand for their farm labour. Famers were badly affected as factories such as rayon factories were making all the money opposed to cotton farmers and farmers had sell their land as they had no other option. Farming prices generally went down, e.g. wheat in 1919 cost $2.10 whereas in 1929 it cost $1.05 per pound.
WORKERS IN OLD FACTORIES
These workers did not benefit from the boom as they suffered from foreign completion, new industries like opposed to oil for electricity. Many factories also could not compete with cheap labour the newer factories had.
There was a strike amongst older factories in 1928 as male workers earned $18 and women earned half that in a week while at the time $48 dollars per week was considered the minimum wage for a decent standard of living.
POOR AND UNEMPLOYED
During the 1920s, 42% of Americans were under the poverty line. Unemployment was major as 5% were unemployed at the peak of the boom and with the large amount of goods available with less people buying them; this meant that goods had to be sold cheaper in a bid to get more people to buy goods. As less people demanded goods because of poverty, it was not good for the cycle of prosperity as it leads it to come to a halt.
IMMIGRANTS
Before 1919, the USA had an open door policy of immigration which allowed any immigrant to enter the USA and live here, many immigrants were Europeans escaping the war and many viewed America as the land of dreams. America became a melting pot for immigrants. But by 1917, the US government rethought this policy because they though immigrants were their people’s ‘job’. The government passed a law stating that immigrants have to take a literacy test before they can come in. This encouraged Western Europeans because many people were either able to speak English or pay to learn it.
By 1921, an immigration law was passed which limited the flow of immigrants to USA which stated the number of immigrants coming should not exceed 3% of the number of existing immigrants in 1910 (Emergency Quota Act). This favoured people who already have immigrants from their country already in USA.
In 1924, further restrictions on immigration were put in place in the form of National Origins Act. The 3% was reduced to 2% and the year of residency was moved back to 1890.
Immigrants were often subjected to racism and unemployment in the USA as Americans viewed foreigners as a threat to their jobs.
-See book for details on Sacco and Vanzetti case
The Sacco and Vanzetti Case is a prime example of American prejudice. Many Americans feared that Europeans were trying to revolutionise America to follow to follow their views such as anarchism and communism which was ‘Anti-American’. Though this case was unsolved, the case seemed very corrupt as none of the 61 apparent eye witnesses could agree series of events that led to killing of the two guards yet Sacco and Vanzetti were sentenced to the electric car. it was no till 1977, 50 years later after the verdict was declared unjust as judge presiding the case did not agree with their political views. This proves that Europeans were often treated badly in America.
BLACK PEOPLE
Black people were subjected to extreme racism from the hands of the KKK. The aim of the KKK was to gain white supremacy through terrorising and killing black people. They would use parades, public beatings and violent methods such as lynching to intimidate Black people. Klansmen were unpunished for these heinous crimes as governors of states supported them, states such as Oregon and Oklahoma. The membership of the KKK increased in 1920s, with support of political figures. Many people joined the KKK because of the release of the film ‘The Birth of the Nation’ which glorified the KKK as strong and powerful and many people felt threatened by immigrants. The clan was strongest in the south as they had lost the Civil War to North who helped immigrants to gain independence. This caused much more resentment to immigrants.
Black did also face improvement in treatment in 1920s:
Positives
- North better jobs
- Black middle class grew
- Most shops run by blacks
- Internationally famous black people
- Allowed to take part in politics
- Ended segregation
PROHIBITION
Prohibition in America was the banning of Alcohol or any other ‘’intoxicating’’ substances, it was introduce by the 18th amendment and was enforced in 1920, this prohibited the manufacture and the selling of alcohol (liquors). Many groups such as the Anti-Saloon league campaigned for prohibition and gained support from many the powerful e.g. leading industries as they thought that workers who didn’t drink would be more reliable. However it was not a complete success.
Many people went to many extents to break the law such as smuggling alcohol or creating their own alcohol, such illegal alcohol was called moonshine. Many saw this as a business opportunity to make ‘’easy money’’ so they invested in creating illegal hidden bars selling moonshine alcohol, they were often called speakeasies. The seller of alcohol was called a bootlegger. As many people started to join the trade, competition arose, which to violence. Most owners of the speakeasies were clever and ruthless gangsters such as Dan O’Banion or more famously Al Capone. Al Capone was a gang leader in Chicago built his alcohol empire on a huge network people behind the scenes. This some of these people behind the scenes were people he employed to eliminate his competition for example the most infamous incident was the St Valentine's Day massacre in 1929 where Capone’s men murdered 7 henchmen of his rival Bugsy Moran by posing in a false police car, meanwhile Capone was reportedly in beach in Florida. This is just one example of how prohibition leads to the sudden soar of crime.
Capone got away with his crimes as he had control of a network of officials and even had control of mayor in Chicago. Such corruption was not just from political figures but also the law enforcement team. Prohibition was enforced by prohibition agents who arrest offenders and throw away any alcohol found in the process. There were not many prohibition agents- only 1,500 in 1920 and US boundaries was too large for them to cover. They were paid meagre fees for there work so most were easily bribed with money or free alcohol by bootleggers in order for them to keep quiet. Without law enforcers, prohibition seemed useless as practically everyone was breaking the law.
Prohibition was an overall disaster as crime and corruption increased dramatically leaving people living in fear and many live were lost caught between gang wars and once things went underground no laws surrounded it. Thus by the early 1930s US Congress passed the 21st amendment which abolished prohibition.
WHAT WERE THE CAUSES OF DEPRESSION
There were 5 main reasons for the Great Depression. These were: poverty on the midst of plenty (unequal distribution of wealth), overproduction, problems of farmers, trade problems, speculation of the stock market.
POVERTY AMONGST THE MIDST OF PLENTY
By 1929, 60% of American families earned less than $200 a year which was less than the minimum required for a decent standard of living. Also 1/3 of personal income was earned by the to 5% of the population. This meant only the minority were wealthy whereas the majority of population were living under the breadline. This was a problem as many poorer people could not pay for basic necessities and with less people buying goods, this disrupts cycle of prosperity.
OVERPRODUCTION
Mass-production methods meant that goods could be quickly produced in large amounts. However, the markets became saturated. Once Americans had bought their cars, radios, vacuums etc the demand for consumer goods fell. Factories were forced to produce fewer goods and this meant cutting back on workforce, which meant that fewer people could afford to buy consumer goods as they were unemployed and with this huge amount of surplus, this also disrupted the cycle.
PROBLEMS FOR FARMERS
Farmer produced more crops as they felt the consumer confidence was positive enough to help boost their income. But this not happen as it this plan ended up lowering crop prices because people were not able to buy thus leading to a large amount of surplus. This led to unemployment as many farmers and workers became unemployed. This led to the Great Depression as no money was going back to economy.
TRADE PROBLEMS
The US government put tariffs on foreign goods to encourage citizens to ‘to go American’ buy American goods. A disadvantage of this policy was that foreign countries began to do the same. This led to the Depression because they could not afford to pay high tariffs to get rid of high surplus and Americans could not consume all the extra foods etc.
THIS LED TO CYCLE OF DEPRESSION
SPECULATION ON THE STOCK MARKET
See book for further details
The Wall Street Crash, October 1929
When Herbert Hoover, the successful Republican candidate, became President in March 1929 the economy was still booming. Hoover had promised a continuation of the boom - 'a chicken in every pot' and boasted that, 'We in America today are nearer to the final triumph over poverty than ever before. The poor man is vanishing from among us.'
Within six months the situation was totally different. In June 1929, the effects of overproduction were felt as some industries cut back on production. In September, some investors began to worry about prices and warned that a crash would happen at some time. This led to some people selling their shares, but during September the stock market recovered. The banks helped to restore stability by buying up vast numbers of shares.
Share prices plummeted
However, in late October panic set in and, on 24 October, 13 million shares were sold on the Wall Street Stock Exchange in New York. The banks could no longer intervene by buying on this huge scale. In succeeding days, not only were millions of shares sold, but their prices plummeted as well. No one wanted to buy. By 29 October, investors sold their shares for whatever they could get.
The effects were dramatic:
- Big investors lost heavily. The Vanderbilt family lost $40 million.
- Smaller investors had often borrowed money from banks with their homes as security. Banks could now repossess their homes and evict those living there.
- Some investors committed suicide.
- Over 100,000 companies went bankrupt in the period 1929-33.
- Many banks went out of business as they could not repay their investors.
- Unemployment rose to 12 million by 1932. Many homeless built temporary shelters in parks. These 'homes' acquired the nickname of Hoovervilles.
The Republican government under Herbert Hoover was taken by surprise. Hoover assumed at first that prosperity would soon return -'Prosperity is just around the corner'. But then he was forced to try to help the economy by cutting taxes, for example, and by providing soup kitchens for the unemployed and homeless. The Great Depression set in and became worse in 1931 and 1932.
