People were continuously spending money as quickly as they earned it. The motor industry greatly benefited from the Boom as the amount of car sales, and therefore cars on the roads, rose due to the car becoming some sort of sign of ‘the American dream’ and people began to compete for the best models. This meant the need to build those, cars, roads, roadside diners and advertising as a tertiary industry, created more jobs. Due to peoples need to spend their money Department stores and supermarkets became popular and bigger and better stores were made. Advertising became a large money making industry as new products required publicity in ever increasing competitive markets. People began to compete, in order to have the newest or most expensive product, hoping to keep up with or better their neighbours. People used their money to appear as a higher class in society.
However, the wealth was not evenly distributed. Just under half the population had an income less than $1000 a year, and these people were certainly incapable of affording these new luxuries. The belief of ‘Rugged Individualism’ put forth by President Hoover meant that there was no income support for these people. The once primary industry of America, agriculture, also suffered greatly. And the final sufferers in the Boom were the black Americans who were forced into the worst paying jobs, and given the worst education due to racial prejudice and segregation.
Although the boom profited from the fact that there seemed to be cycle of profit, from people having money to spend, and businesses making more profits and more jobs, and the secondary and tertiary industries helping to create a more affluent society, the new found marketing techniques and modern technologies failed to help the accountants anticipate the fact that inspite of the benefits, there were problems with the economy. Items like radios could only be bought once and the demand for these soon died down. The Boom soon came to a remarkable and abrupt end, in a downward spiral as quickly as it had prospered, to the Wall Street Crash.
Bridie Mc Kie
Although many people profited from the economic boom of the 1920s and grew richer as a result, this was not a rule, as those possessing the potential funds for investment grew richer, the poor sunk to new lows. Agriculture, once the backbone of the US, was one of the main sections of society to loose out largely due to the economic boom.
The end of the war proved to be a big problem for farmers. During the war demand for food and supplies from America was huge. The US was relied on greatly for supplying resources to warring factions. Many farmers, believing that the trading markets had stabilized, assumed that this huge demand for their produce would continue after the war, or at least break to an even profit. They took out loans on property and invested money into new agricultural technology, presuming they would at least make enough profit to pay off the loans. Of course, as the war ended so did the farmers profits. There was no more money, and many of these people fell into debt.
Some of the reasons for farmers losses were what caused other industries to due so well, suggesting it was not the right financial climate for the industry to attempt to share in the boom. Mass-production led to over-production for them, and the market was swamped with produce, which brought prices down thus bringing down profit in exactly the opposite way to the commercial markets bringing in profits. To add to this, falling demand meant that they over-produced even more. Large agricultural businesses, that could afford to take a few losses, and could easily pay off loans either way, crushed the smaller working farms and put them out of business. Cheaper goods and increased competition from Canada and overseas meant that, without a policy of protectionism, they lost out to importers where as the rest of the country was doing so well locally.
The population of rural areas began to drop drastically. Farmers, having given up succeeding in their chosen line of work, moved to prosperous urban areas in the hope of new opportunities and a better life. This meant that there were fewer laborers to work in farm communities.
Average living standards rose in the 1920’s adding another problem to the list for farmers. People began following new trends and stopped moving away from more traditional foodstuffs, and also the discovery of new synthetic fibers meant that the sales rate of cotton dropped drastically.
The prohibition era struck quite a blow to farming communities, as whisky took up a great proportion of the grain produced. When alcohol became illegal the demand in grain dropped resulting in a huge loss of profit and already massive over-production problems.
As small companies are usually the first and most to suffer, so this applied to the farmers. As they were so much weaker they could not cope with the fluctuating needs of the agricultural market. To survive long term, small-scale farmers had to cover their losses, and make a profit. The invention of industrial farming corporations meant that smaller farmers found it difficult to compete with large brand companies. As the smaller farmers could no longer afford to pay off their debts, let alone break even, they were ran out of business, and the conglomerate farmers grew.
Over production was probably the major reason for the failure of farming businesses, as the polar opposite, to the success of commercial markets, due to mass production. There were huge advances in farming technology at the time, making farming quick and easy. As a result of this mass production, prices dropped to rock bottom. Market was flooded and their produce was worth nothing.
The final blow to the farming community was the competition from outside traders. Canada became highly efficient at production, and was trading successfully with Europe. This meant that the US lost the European market.
Europe was still in debt to the US as a result of the war, however, Republican parties increased the tariffs sinking Europe deeper into debt. There was no way Europe could buy US products now, so they completely lost that market.
There may be no single reason for the loss of farmers during the economic boom, although some probably contributed more than others. Basically a fatal combination of factors meant that whilst farmers were producing more efficiently than ever before, demand sunk to new lows. Instead of stockpiling products to stabilize the market they tried to sell their products as quickly as possible and ended up flooding the market. This meant that more and more farmers were sucked into a cycle of debt, basically the farmer’s loss was the polar opposite of the commercial retailer’s gain. Perhaps farmers were simply in a vulnerable position, wherein they could not afford to stand alone, and as the business began to fall some intervention would have seemed sensible, but this was of course frowned upon by the Republican party. As the rest of the country enjoyed the prosperity that was spurred on by World War 1, the farmers were still reeling from it.
Bridie Mc Kie
There was a substantial increase in prosperity for the American economy during the 1920’s. The general public had a new found confidence in their countries affairs, often found during peace time, and felt safe in spending their money on recreational activities and consumer goods such as fridges, cars and radios or film entertainment as they enjoyed their new found wealth. The boom itself was a culmination of a number of contributing factors, which are all intrinsically linked. The short-term factors were triggers of the boom, creating a self-generating cycle of profit, in particular mass production. The long-term factors, such as surplus money acquired due to world war one, created the perfect climate for economic change, but neither propelled, nor made it inevitable. In my opinion the most prominent cause for the boom was mass production, however even this links in with other reasons for the prosperity, and thus no single answer can be isolated as the sole cause for the boom.
As America joined World War One quite late it had not suffered much loss in comparison with other countries and had and excess of money. This money was freely available to invest in the boom after the war. $3,500million worth of goods was exported during the war and $1,500mill of this was ammunitions and chemicals, from Germany originally. Germany was previously very successful in industry and had dominated many of these markets, but during the war America had proceeded to take over as an impartial supplier to both sides, making a greater profit selling to countries with economic sanctions against them. In addition to this they monopolized the British and colonial businesses and made a huge profit. Like other factors, this factor was reciprocal, creating a cause and effect condition, increasing success tenfold. It helped suscitate the boom as more workers were employed to work in the chemical and arms industries, and the suppliers to these industries. These workers were paid more, and consequentially had a larger disposable income to spend on consumer goods and the like – a result of new technology and mass production.
World war one most likely increased confidence as it left them feeling self-reliant. They were willing to agree to invest the excess money made from the war in new technologies and mass production, confident that they would make the right choices, allowing these areas growth. After world war one republican beliefs became more popular and people thought that there should be more freedom in business. Also, during the war there was no substantial damage to natural resources, leaving these to be used during the boom where other countries were still reeling from this damage. Techniques used in propaganda during the war were later applied to new found advertising and marketing tools, thus the effects of world war one also link to this.
Republican government policies, very much in favor of capitalism and success in business, were also cause for the boom. As businesses were left very much unfettered from government interference. Calvin Coolidge was of the opinion that “the chief business of the American people is business”. He was a strong believer in the free market, and also believed that in order for profit to continue to increase, the rich must continue to make money, to continue to invest in the marketplace. Industrial expansion meant more job opportunities, thus allowing the poor more money also. Or so capitalism is meant to work. The government entered into a policy of laissez-faire i.e. the economy is left to balance and attend to itself, and then began prosperity.
Three other policies were initiated in order to maintain the economy: tax reductions, fewer regulations and high tariffs.
Taxes were significantly lowered a few times from 1924 to 1928 from 65% to 25%. These reductions were mostly beneficial to the wealthy. Reduced tax ensured the rich had money to invest directly into industry, and that the average American would have money to spend on consumer goods.
Fewer regulations and fewer personnel to enforce these rules on businesses meant that the Federal Trade Commission was unable to operate effectively. This meant businesses were left to fend for themselves and many businesses grew into large successful conglomerates. These businesses regurgitated profit back into the economy.
The Fordney-Mc Cumber act, passed in 1922, raised tariffs to cover differences on foreign and domestic costs. This meant that the domestic products were ensured safety at least, and were likely to become the most dominant brands. This obviously had a negative effect on foreign trade, however demand for local goods remained high. America continued to increase profit margins, thanks to this rather crude business move, which would later help to destroy the economy in the Wall Street crash. However, for the present time Americans continued to make a profit as American resources were used in the making of sellable goods.
These conglomerates invested readily into the plentiful US resources and exploit them on an extremely large-scale proportion. The largest of these corporations possessed 20% of the nations wealth. Due to a lack of regulation, these large scale companies were able to ignore certain rules, and turn over a profit, which due to the magnitude of their business, created a profit on such a larger scale than other companies and were then able to control the whole industrial line, from the raw materials down to the final product. They were able to monopolize the smaller businessman, and gained reputations as heroes, spurring on the boom.
America was fortunate enough to have the ability to become self-sufficient due to an almost indispensable supply of natural resources. These included oil in Texas, coal in Illinois and a large supply of wood. This meant it was unnecessary for America to be reliant on outside sources. This meant that this self-sustaining economy continued to contain profit, merely growing larger and larger. The natural resources needed refining and this created more jobs which otherwise would have been given to foreign countries. As products could be produced for a smaller fee this meant that more products could be produced thus leading to mass production. Natural resources can also be linked to confidence as it helped in job market growth, and also can be connected to world war one, as the sale of natural resources to warring countries helped increase profits of the time.
Advances in marketing techniques were introduced, such as advertising. Big industries used sophisticated techniques to bring in record-breaking sales. Previously, nation wide advertising had only been used in propaganda. Many consultants at the time learnt their skills from the very same wartime propaganda and set up their own advertising companies. And so another industry was born. Advertising led to great consumerism, as people competed to have the best or most expensive products. As new inventions and technology meant communication was even more widespread, in radio or cinema for example, this meant that the adverts were circulated everywhere. Producers quickly realised the value of advertising space on films, and companies began to realise that a good ad campaign could make or break their sales. Advertising links to mass production, as it was the very same adverts that convinced people to buy the mass-market brand named goods. It can also be linked to confidence in that with a particular product, the consumer also bought into a particular image, and as long as they spent the money on the goods they felt confident in themselves and the image.
Advances in modern technology at the time, as well as surplus money from world war one, are what made mass production possible. Technological advances in industry meant huge change, in quantity and quality of goods available. The technological change to have the most significant impact in the 1920s was most likely the conveyor belt. This revolutionised the assembly line, making more, efficiently. A boom in new innovations such as materials like plastic and polyester meant that more money could be invested in the invention of new technologies, electricity being a major breakthrough, greatly increasing productivity in business.
The invention of electricity and the conveyor belt meant that goods were produced more efficiently, and people grew more confident with the new technology as it became more popular.
A new system of credit spurred on the boom, even when the money was not there to fuel it. People were able to buy goods and then pay for them on a later date. 70% of cars and half of all major appliances were bought on credit enabling people to buy things they otherwise never could have afforded. Of course this landed a great number of people in severe debt, but this was not realised until the Wall Street crash, and before that creditors marveled at their ingenuity. The 1920s was a time built on optimism and money that essentially was not there, and therefore as money obviously eventually leeched the economy collapsed. Credit of course again extended markets for mass marketed goods.
Mass production created the most substantial change in economy to the United States. However as mentioned before, this was only possible due to a number of perfectly timed successes and innovations, and the right climate for economic change. The motor industry is the leading strongest example of mass production in the 1920s. Henry Ford’s model T car revolutionised the motor industry, provided cheap and attainable cars to the masses. He introduced his moving assembly line in 1914 and the price of the model t came down from $950 to $500. By 1920 Ford produced 1,250,000 cars per year. Mass production created a boom in other countries struggling to keep up with the competition. This created price wars and even cheaper goods. The largest industry in the US, it stimulated others to use mass production resulting in even cheaper goods and greater profit. Becoming self-generating.
I think the reason that the economic boom peaked at such a high profit, is because of mass production. Granted, had mass production not have been readily available, the boom still would have most likely occurred, however it would not have been quite so successful or self generating. It was in fact the ‘centrifugal force’ of the economic boom of the 1920s.
