The USA in the 1920s and 1930s

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The USA in the 1920s and 1930s

American in the 1920 was in the middle of an enormous economic boom. The boom was dominated by ‘new’ industries, like cars, chemical, electricity and electrical products.

Factors which caused the rise in prosperity in the USA in the 1920s:

America was rich in natural resources such as oil and fertile land. Paul Kennedy says ‘The USA seemed to have all the economic advantages which some of the other powers possessed in party, but none of their disadvantages. It was huge, but the vast distances were shortened by some 400,000km of railway in 1914. The sheer size of the area under cultivation, the efficiency of its farm machinery, the decreasing costs of transport (because of railways and steamships) made American wheat, corn, pork, beef and other products cheaper than any in Europe. American firms were equal to or better than any in the world,; and they enjoyed an enormous domestic market, which their European rivals did not. In industry and agriculture and communications there was both efficiency and size.’

Unemployment was 4% after the war - very low. Real wages rose 11% more than inflation so people could afford goods and luxuries and they were up 40% since 1914. The percentage of households with inside flush lavatories rose from 20% to 51% between 1920 and 1930. Homes with radios rose from 40%; homes with vacuum cleaners from 9 to 30%; homes with washing machines from 8 to 24%. By 1920 33% of homes were supplies with electricity and in 1929 this had risen to nearly 70%. Wages were higher for many skilled workers in the new industries. These were the Americans who could afford motor cars and the new luxury gadgets. From 1921 to 1929, they saw their wages rise by as much as 35-40% for skilled workers and around 14% for industrial workers. Hire purchase starting to be available. Ford and General Motors had organisations geared to lending for cars. By 1929 around $7bn worth of goods were sold on credit - 75% of cars and 50% of major household appliances were purchased in this way.

Banks profited from the First World War with its huge loans to allies which they had to repay with interest. This enabled them to have the money to lend to people to start up businesses or even, later on, to buy shares in companies. Thanks to the availability of money, lending was cheap (low interest rates). The Federal Reserve extended credit of $45.3bn 1921 and $73bn in 1929.

The government did not interfere in business and abolished many regulations. President Harding coined the phrase ‘back to normalcy’. Like many Americans he wanted to turn away from Europe and concentrate on allowing American business and industry as much freedom as possible. President Coolidge invented the slogan ‘the business of America is business’. He once said ‘The man who builds a factory builds a temple. The man who works there worships there.’ Hoover was a firm believer in ‘laissez-faire’ and ‘rugged individualism’. He believed that the government should not interfere in business. The whole government structure was therefore geared to creating and upholding a climate in which business could flourish. The Wall Street Journal, a newspaper devoted to business and finance, said ‘Never before, here or anywhere else, had the government been to completely fused with business’. The Treasury Secretary to Coolidge and later Hoover, Andrew Mellon believed that wealth trickles down and so it was important to enable the rich to continue making money. In 1925 the Revenue Act was passed, which lowered some taxes and abolished others. In all there were tax rebates of around 43.5bn. Low taxes allowed business owners to invest some of their profits in expanding the business. Also gave the middle classes and upper classes plenty of money to buy what they wanted. Lots of money was available for investment. Tariffs like the Fordney-McCumber tariff introduced by President Harding’s Treasury Secretary meant that the budget surplus rose, so enabling the government to lower taxes. Also protected American industry from foreign goods and persuaded Americans to buy goods produced at home. (In the long term it had bad effects, such as retaliatory tariffs.)

New methods of production, mass production techniques/moving assembly lines. Division of labour meant that each worker did one task. This was begun by Ford in 1913.  Henry Ford said in 1925: ‘Work is planned on the drawing board and the operations sub-divided so that each man and each machine do only one thing. The thing is to take the work to the man, not the man to the work.’ To produce a Model T Ford before the mass assembly lines took 12 hours - by splitting the process into separate processes, manufacturing was cut to one hour and 35 minutes.. One car was being produced every10 seconds by the 1920s. Industrial productivity between 1919 and 1929 grew by 72% and with the costs being lowered, so the prices of manufactured goods fell steadily. New management techniques - time and motion and efficiency studies to increase output. There were 89 business schools in the USA by 1928.

Advertising, 1921 radio broadcasting began and radio not only encouraged the purchase of goods, but of radios as well, $2m sold in 1920 and $600m in 1929. By 1922 there were 220 stations and 3m houses had radio (by 1929 this had risen to 9 million). 50m people listened to the Tunney/Dempsey fight in 1927. Commercial production had begun in 1919 and created thousands of new jobs. New jazz and dance music boomed. In 1918 US firms spent about $85.5m on advertising in magazines. This rose to $129.5m in 1920 and $200m in 1929. People who designed advertising worked to find out what methods were the most likely to succeed and psychology professors were roped in to help. Adverts appealed to people’s worries and fantasies. Coolidge once said ‘Advertising makes new thoughts, new desire, new actions.’ Advertising was also encouraged by the growth in newspapers and magazines - tabloids like the Daily News. High pressure salesmanship also developed, such as Bruce Barton and his book, The Man Nobody Knew, who said Jesus was a salesman.

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Shopping. In the cities, giant chain stores opened to stock the new range of goods available - like Bloomingdales. The number of department stores grew from 312 to 1,395 between 1921 and 1929. It was at this time that clothing for women came to be mass produced as manufacturers realised that a certain size would fit many women. Clothing sales went up 427% in the 1920s. The improvements in the truck and road industry meant that goods could be delivered more easily by mail order. People living in remote, country areas could but anything from farm machinery to frying ...

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