Economics of the 1920s
NEW INVENTIONS PROMOTE PROSPERITY CONSUMER REVOLUTION!
Electrical transformers By 1930, 70% of American households had electricity Electric household devices radios, washing machines, irons, vacuum cleaners, etc…
New car technology ~ FORD! improvements in mass production led to cheaper prices assembly line the automobile changes America (p. 327)
New sales techniques at retail stores Installment plan (buying on credit) Planned obsolescence Adding new features to a product that will go out of popularity in a short time, prompting the consumer to purchase the newer version Use of advertising
She was a beautiful girl and talented too. She had the advantage of education and better clothes than most girls of her set. She possessed that culture and poise that travel brings. Yet in the one pursuit that stands foremost in the mind of every girl and woman – marriage – she was a failure. ~ Listerine Ad
YOUR TURN! DRAW AN ADVERTISEMENT FOR THE FORD MODEL T. BE SURE TO USE PSYCHOLOGICAL METHODS (I.E. PROPAGANDA METHODS!) TO SELL THE PRODUCT.
BUSINESS IS BOOMING = HIRE MORE WORKERS = WORKERS BUY PRODUCTS =BUSINESSES DO BETTER Great sense of security…
“Have you an automobile yet?” “No, I talked it over with John and he felt we could not afford one.” “Mr. Budge who lives in your town has one and they are not as well off as you are.” “Yes, I know. Their second installment came due, and they had no money to pay it.” “What did they do? Lose the car?”
“No, they got the money and paid the installment.” “How did they get the money?” “They sold the cook-stove.” “How could they get along without a cook-stove?” “They didn’t. They bought another on the installment plan.” ~ In the time of Silent Cal
PERSONAL DEBT OUT-PACED INCOME 2 ½ TIMES By 1928, 2/3 of all furniture, phonographs, washing machines on were on credit
If everybody was buying on credit, then the “prosperity” was only ‘imagined’!!
HALF …NEARLY HALF OF AMERICANS LIVED BELOW POVERTY LEVEL In 1929, 60% of the nation’s wealth was owned by 2% of Americans…
PLUS… Not every business prospered
Industries in serious trouble Railroad Competition from trucks, cars, buses Textiles Foreign competition Fashion (less yardage) Coal mining Increased use of oil, natural gas, hydro. power Agriculture Overproduction + decreased demand
AND THEN THERE WAS THE STOCK MARKET…
GOAL OF ALL BUSINESS: Not just a profit, but MORE profit! How? By expanding! What does a company need to expand? MONEY!!! (i.e. Capital)
How can a business get money needed for expansion? 1. Bank loans 2. Loans from investors by selling stocks
Stock Market~ How does it work!? Investors buy stock shares – essentially a loan to the company in order for it to expand When the business grows (hopefully!), investors can sell stock for a profit or keep it and receive dividends
Why did the stock market grow in the 20s? Increased consumer demand after WWI Businesses expanded to meet increased demand To expand, businesses needed capital for more raw materials, facilities, machines, and workers Investors wanted to profit from this business expansion and bought stocks
“BULL MARKET” All of this led to a “BULL MARKET” – when stock market prices are on the rise
How much money can we make!!??
# of Shares ___Value of Stock Shares Total Value of Stock Profit/Loss March 3, 1928 $95 March 20, 1928$178 June 12, 1928$155 Dec 31, 1928$420 Nov 13, 1929??
1. HOW DID THE CAR INDUSTRY AFFECT AMERICAN ATTITUDES AND/OR VALUES? 2. EXPLAIN HOW ADVERTISING BECAME MORE OF A PSYCHOLOGICAL APPEAL TO THE CONSUMER, RATHER THAN JUST INFORMATIONAL IN TERMS OF PRODUCT AND PRICE. 3. IDENTIFY TWO POTENTIAL SIGNS OF WEAKNESS, OR “CLOUDS ON THE HORIZON,” IN THE ECONOMY OF THE 1920S. Quickwrite