The 1920s: Mixed Economic Development

Mixed Economic Development Politics took a back seat to the economy in the 1920s Economics in the 1920s: Began with brief post-war recession (1921) Included lengthy period of prosperity (1922-1928) Ended with the worst economic disaster in U.S. history (Oct. 1929) In the boom years: Unemployment below 4% Standards of living improved Indoor plumbing, central heating, electricity became commonplace in homes Real income increased substantially

Mixed Economic Development 40% of families had incomes in the poverty range Struggled to live on less than $1,500 a year Farmers did not share in the booming economy

Causes of Business Prosperity: Industrial Productivity Manufacturing process made more efficient by improving methods of mass production 1914: Henry Ford implements the assembly line to manufacture his vehicles Workers remained in one place, performed the same task daily (specialization) End of 1920s: most major industries adopted the use of the assembly line Huge gains in productivity

Causes of Business Prosperity: Energy Technologies Oil and electricity were increasingly used to power factories Oil also provided gasoline for the rapidly increasing number of automobiles 1930: Oil accounted for 23% of U.S. energy Factories and new appliances in homes resulted in a 300% increase in electrical generation over the decade

Causes of Business Prosperity: Government Policy Government at all levels favored big businesses Corporate tax cuts Little to no regulation of trusts Large tax cuts for higher income Americans FEDs relaxed regulation then tightened the money supply at the wrong time

A Consumer Economy Electricity in homes resulted in the purchase of new consumer appliances Automobiles were being sold by the millions Horse-and-buggy travel a thing of the past Businesses used new, more aggressive advertising techniques Stores increased sales by allowing customers to buy on credit Included a greater variety of products which threatened smaller neighborhood stores

Impact of the Automobile Changed society more than anything in the 1920s 1929: 26.5 million automobiles registered versus 1.2 million in 1913 Average of nearly one car per American family Production of the automobile replaced the railroads as the key promoter of economic growth Industries like steel, glass, rubber, gasoline, and highway construction all depended on the automobile industry Affected social life: Traveling and shopping for pleasure, commuting to work, dating New problems: Traffic jams, pollution, deaths/injuries in car wrecks

Farm Problems Farmers only experienced prosperity between the years of 1916-1918 Wartime demand in Europe and wartime policies in the U.S. kept crop prices artificially high After the war, crop prices dropped and farmers who borrowed heavily during the war were now in debt New technologies (chemical fertilizers, gas-powered tractors) increased productivity but this only increased farmers’ debts More and more crops were being produced- extra surplus meant even lower prices for crops

Labor Problems Wages rose, but the union membership declined over 20% Most union efforts at strikes failed during this decade Most companies kept an open shop policy Only hired nonunion workers Some companies began to practice welfare capitalism Improved benefits and higher wages to discourage joining unions Southern companies used militias and local mobs to violently resist unionization in the textile industry

? Give a very brief timeline of the economy in the 1920s Describe how economic development was “mixed” How is Henry Ford connected to increased industrial productivity of this era? What two sources of energy were increasingly used to power factories and homes? How did government policies affect the economy in the 1920s? How did electricity change the daily lives of Americans? Why did farmers only enjoy prosperity during the wartime years of 1916-1918? How did new technologies actually hurt farmers during this time? What was an open shop policy? What was welfare capitalism?