Download - The 1920s Economic Boom
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A Business BoomA Business BoomCh. 14.2Ch. 14.2
PP. 491-497PP. 491-497
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Key TermsKey Terms
• Consumer economyConsumer economy
• Installment planInstallment plan
• Gross national productGross national product
• Henry Ford/Model THenry Ford/Model T
• Assembly lineAssembly line
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Key QuestionsKey Questions
①① What is a “consumer economy” & what What is a “consumer economy” & what conditions made this possible in the ‘20s?conditions made this possible in the ‘20s?
②② How were Henry Ford & the automobile so How were Henry Ford & the automobile so important to the 1920s?important to the 1920s?
③③ Which groups of people benefited from the Which groups of people benefited from the economic boom? Who was bypassed by the economic boom? Who was bypassed by the boom?boom?
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U.S. EconomyU.S. Economy
• Dip after shift away from war-time productionDip after shift away from war-time production
• Incomes rose after 1920 thoughIncomes rose after 1920 though• Between 1914 & 1926 incomes rose 28%Between 1914 & 1926 incomes rose 28%
• Development of Development of consumer economyconsumer economy• One that depends on a large amount of One that depends on a large amount of
consumer spendingconsumer spending
• Why a shift from thrift?Why a shift from thrift?• Higher wages, clever ads, new products, credit-Higher wages, clever ads, new products, credit-
spendingspending
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Buying on creditBuying on credit
• Installment planInstallment plan-Paying partial payments at -Paying partial payments at set intervals; typically w/ interestset intervals; typically w/ interest
• Fueled consumer spendingFueled consumer spending
• 60% of all cars; 70% of furniture; 80% of 60% of all cars; 70% of furniture; 80% of vacuum cleaners; 90% of washing machinesvacuum cleaners; 90% of washing machines
• Paid in cash beforePaid in cash before
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Electric powerElectric power
• Electricity becomes Electricity becomes cheap & widely cheap & widely availableavailable
• Less popular in rural Less popular in rural areasareas• Costly to run power Costly to run power
lineslines
• General Electric General Electric became one of the became one of the world’s largest world’s largest companiescompanies
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AdvertisingAdvertising
• New ads talked less New ads talked less about product; more about product; more about how product about how product would improve your lifewould improve your life
• Used celebrities; could Used celebrities; could be stylish/like a movie be stylish/like a movie starstar
• Persuasive/Used Persuasive/Used psychologypsychology
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AdvertisingAdvertising
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Rise in productivityRise in productivity
• Gross National Gross National ProductProduct-Total value of -Total value of goods & services a goods & services a country producescountry produces
• American GNP had to American GNP had to rise in order to meet rise in order to meet consumer demandconsumer demand
• From 1921-1929 the From 1921-1929 the GNP grew at an GNP grew at an average rate of 6%average rate of 6%
• Had been ~1% in 1910sHad been ~1% in 1910s
• New technology & new New technology & new management methodsmanagement methods
• Increased efficiencyIncreased efficiency
• Increased worker Increased worker outputoutput
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Ford & the AutoFord & the Auto
• 1896—Henry Ford perfected his 1896—Henry Ford perfected his “quadricycle”“quadricycle”
• 1903—Founded his own company1903—Founded his own company
• 1908—Sold 30K Model Ts1908—Sold 30K Model Ts
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Ford & the AutoFord & the Auto
• Ford hoped to Ford hoped to “democratize the “democratize the automobile” (make it automobile” (make it more affordable)more affordable)
• Assembly lineAssembly line--manufacturing process manufacturing process in which each worker in which each worker does one specialized does one specialized task in the construction task in the construction of a final productof a final product
• Ford made the assembly Ford made the assembly line more efficientline more efficient
• Repetitive, tedious, Repetitive, tedious, strain on workersstrain on workers
• Created a Model T Created a Model T every 24 secondsevery 24 seconds
• Ford produced half of Ford produced half of the world’s cars the world’s cars between 1908 & 1927 between 1908 & 1927 (15 million)(15 million)
• As production rose As production rose costs droppedcosts dropped
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Ford & the autoFord & the auto
• Model T only came in Model T only came in one color—blackone color—black
• Model T replaced by Model T replaced by model T in 1927model T in 1927
• Used vertical Used vertical consolidation to consolidation to maximize profitsmaximize profits• Ford owned ore mines, Ford owned ore mines,
forests, railroads, ships,forests, railroads, ships,
• *see map on p. 495*see map on p. 495
Cost of Model T
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Ford A Complex Ford A Complex BusinessmanBusinessman
• Admirable, but had personal failings
• High wages for workersHigh wages for workers
• Attempted to Attempted to “Americanize” his “Americanize” his workersworkers
• Strongly anti-SemiticStrongly anti-Semitic
• Gave to charityGave to charity
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Industrial growthIndustrial growth
• Rise of auto industry Rise of auto industry helped other industrieshelped other industries
• Rubber, gasoline, steelRubber, gasoline, steel
• Auto industry helped Auto industry helped other businessesother businesses
• Gas stations, motels, Gas stations, motels, car dealerships, car dealerships, restaurantsrestaurants
• By 1929, about 3.7 By 1929, about 3.7 million people owed million people owed their jobs to auto their jobs to auto industryindustry
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Industrial growthIndustrial growth
• Aviation industry took Aviation industry took offoff• Built off of success of Built off of success of
Lindbergh & EarhartLindbergh & Earhart
• 11stst domestic airlines domestic airlines
• Passenger & cargoPassenger & cargo
• Big business took off w/ Big business took off w/ laissez-faire policieslaissez-faire policies
• Top 200 companies Top 200 companies value in 1919=$43 value in 1919=$43 billion & in 1929=$81 billion & in 1929=$81 billionbillion
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Bypassed by the boomBypassed by the boom
• Farm prices & demand Farm prices & demand high during WWIhigh during WWI
• Prices drop after WWI Prices drop after WWI as European countries as European countries recoverrecover
• Esp. hogs & wheatEsp. hogs & wheat
• Many farmers were Many farmers were forced to abandon their forced to abandon their workwork
• Wages remained low for Wages remained low for unskilled laborersunskilled laborers
• Railroad companies Railroad companies stalled as trucking took stalled as trucking took offoff
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The Economy in the The Economy in the Late 1920sLate 1920s
Ch. 14.3Ch. 14.3
pp. 498-501pp. 498-501
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Key TermsKey Terms
• Welfare capitalismWelfare capitalism
• SpeculationSpeculation
• Buying on marginBuying on margin
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Key QuestionsKey Questions
①① Why did the economy of the late 1920s Why did the economy of the late 1920s appear healthy to most Americans?appear healthy to most Americans?
②② What danger signs were present in the What danger signs were present in the economy of the lat 1920s?economy of the lat 1920s?
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Election of 1928Election of 1928• Hoover promised to Hoover promised to
keep government out of keep government out of businessbusiness
• Hoped to preserve the Hoped to preserve the American system of American system of “rugged individualism”“rugged individualism”
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Economy appears Economy appears healthyhealthy
• People expected good People expected good times to get better times to get better during Hoover’s 2during Hoover’s 2ndnd termterm
• Stock market soaredStock market soared
• Described by NY Times Described by NY Times as “wonderful as “wonderful prosperity”prosperity”
• Unemployment below Unemployment below 4%4%
• Business success was Business success was almost like religionalmost like religion
• The Man Nobody KnowsThe Man Nobody Knows• Written by ad executive, Written by ad executive,
told of Jesus’ life in told of Jesus’ life in business termsbusiness terms
• ““Everybody Ought to be Everybody Ought to be Rich”Rich”• Article by John RaksobArticle by John Raksob
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Welfare CapitalismWelfare Capitalism
• New approach to New approach to businessbusiness
• Raised wagesRaised wages
• Provided extra benefits Provided extra benefits like paid vacationslike paid vacations
• English classes for English classes for immigrantsimmigrants
• Hoped to strengthen Hoped to strengthen company loyalty & company loyalty & moralemorale
• Union membership Union membership decreaseddecreased
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Economic Danger signsEconomic Danger signs
• Rich getting richerRich getting richer• Uneven wealthUneven wealth• 0.1% of the population 0.1% of the population
had 34% of the country’s had 34% of the country’s total savingstotal savings
• Nearly 80% of all families Nearly 80% of all families had no savingshad no savings
• Taxes had been reduced Taxes had been reduced for the richfor the rich
• Personal debt soared as Personal debt soared as credit spending credit spending increasedincreased• Luxury items seemed Luxury items seemed
affordable to allaffordable to all
• Playing the stock marketPlaying the stock market
• ““Get rich quick” attitudesGet rich quick” attitudes
• Speculation—Making Speculation—Making high risk investments in high risk investments in hopes of a high returnhopes of a high return
• Buying on a margin—Buying on a margin—Purchasing stock for only Purchasing stock for only a fraction of its true costsa fraction of its true costs
• OverproductionOverproduction
• Falling farm pricesFalling farm prices
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Economy appears Economy appears HealthyHealthy
• But….But…. • The Crash is coming…The Crash is coming…