1. Prosperity, Depression, and the New Deal

2. 1920s Economy and Advertising “Mass production is only possible where there is mass demand. Mass demand has been created almost entirely through the development of advertising. …” President Calvin Coolidge, 1926

3. 1920s Economic Prosperity Industry *Percentage Increase, 1922-28 Industrial Production: 70% Gross National Product (value of total goods and services produced): 40% Output per factory man hour: 75% Corporate Profits: 62% (1923-1929) Standard of Living * Percentage Increase, 1923 – 1929 Homes with Electricity: 30% Telephone Ownership and Use: 54% Home Ownership: 25% Automobile Ownership: 150% Workers *Percentage Increase, 1923-29 Worker's Incomes: 11% Average Work Week: -4% In what general ways did the economy change in the 1920's? What changes in the average worker's wage, output, and work day length do you notice? What effects did this have on the average American?

4. 1920s Economic Prosperity Unemployment remained low and prices for consumer goods remained stable  people had $ to spend on affordable goods Availability of electric power Telephones, radios, and electric appliances

5. Henry Ford and the Automobile Industry Mass production and moving assembly line  affordable car for the masses, the Model T $290 in 1927 ($2900 today) Ford paid workers $5 a day  workers could afford to buy cars themselves  increased demand for cars 1903: Ford made 1700 cars in 3 different styles 1914: Ford made 286,770 cars in ONE style 1925: Ford made 1 car every 10 seconds!!

6. 1924 Advertisement for a Ford Model T – “available in any color so long as it is black”

7. The Automobile Industry The automobile industry drove the 1920s economy Road construction, gasoline/service stations, oil, and motel industries all profited Job creation Led the way in installment plan buying – “buy now and pay later” Encouraged consumer spending and increased consumer debt  created artificial demand Superficial and temporary prosperity

8. The Politics of Prosperity Republican Party dominated the 1920s and encouraged business growth Cut taxes on wealthy  unequal distribution of wealth Opposed labor unions  wages remained low Cut federal spending; believed in a balanced budget Laissez-faire approach High protective tariffs  promote American businesses over foreign competition Undid many Progressive Era Reforms

9. The Politics of Prosperity President Warren G. Harding, 1920 - 1923 President Calvin Coolidge, 1923 - 1928 “The chief business of the American people is business…The man who builds a factory builds a temple.” President Coolidge

10. The “Bull” Market, 1920 – 1929 What is “stock?” Why would someone buy stock? Are there risks? How/why are stocks valuable? What determines the prices of stocks and direction of the stock market? What is the “stock market?”

11. Stock Prices, Round #1 Kroger80 RCA80 Mammoth Oil120 City Corp.110 Durant Motors70 Midland Power120 K & P Railroad120 Tel-Tone150

12. Stock Prices, Round #2 Kroger100 RCA110 Mammoth Oil150 City Corp.120 Durant Motors60 Midland Power140 K & P Railroad130 Tel-Tone160

13. Stock Prices, Round #3 Kroger150 RCA130 Mammoth Oil190 City Corp.130 Durant Motors50 Midland Power150 K & P Railroad140 Tel-Tone200

14. Stock Prices, Round #4 Kroger140 RCA180 Mammoth Oil40 City Corp.140 Durant Motors90 Midland Power110 K & P Railroad100 Tel-Tone210

15. Stock Prices, Round #5 Kroger160 RCA190 Mammoth Oil30 City Corp.160 Durant Motors100 Midland Power170 K & P Railroad110 Tel-Tone210

16. Stock Prices, Round #6 Kroger150 RCA220 Mammoth Oil60 City Corp.150 Durant Motors110 Midland Power180 K & P Railroad90 Tel-Tone230

17. Stock Prices, Round #7 Kroger180 RCA270 Mammoth Oil100 City Corp.200 Durant Motors180 Midland Power90 K & P Railroad180 Tel-Tone270

18. Stock Prices, Round #8 Kroger160 RCA280 Mammoth Oil150 City Corp.180 Durant Motors210 Midland Power60 K & P Railroad100 Tel-Tone170

19. Stock Prices, Round #9 Kroger80 RCA50 Mammoth Oil30 City Corp.150 Durant Motors50 Midland Power10 K & P Railroad20 Tel-Tone80

20. Causes of the Great Depression Agricultural Weaknesses – 1920s Falling demand after WWI  decreased farm income Overproduction worsened the situation Increased debts, loss of farms and homes Uneven Distribution of Wealth by 1929 Low wages  workers can’t afford all of the products they produce 70% of American families lived in poverty; 80% had no savings

21. Causes of the Great Depression Struggling Industries Housing, automobile, steel, and RR’s Overuse of credit  consumers cut back on spending by late 1920s Low demand for goods  less production  unemployment  no $ to spend  less demand Poor Fiscal Policies by the Federal Government Not enough $ in circulation  no $ to spend High interest rates  difficult to borrow $ Republicans tried to balance the budget by raising income taxes  people have less $ to spend

22. Causes of the Great Depression International Problems WWI  economic devastation and huge debts in Europe High tariffs worldwide (Hawley Smoot Tariff) contracted trade and decreased international demand by 70% Weaknesses in the Stock Market Inflated stock prices reflected demand and confidence, not actual business value Speculation – “risky business” Buying on margin – works as long as prices go up No laws/regulations

23. The Great Depression Begins SM crash on Tuesday, October 29, 1929 – marked the beginning of the GD 16.4 million shares sold; $30 billion lost by November Bank Failures Investors default on loans  bank reserves fall and savings lost Federal Reserve failed to loan $ to banks “Runs on banks” 9,000 out of 25,000 banks in nation close by 1933 Unemployment = 25% by 1933

24. Run on NYC Bank – American Union Bank closed on June 30, 1931

25. The Dust Bowl: Nature’s Cruel Blow

26. President Herbert Hoover, 1929 - 1933 Quaker upbringing in Iowa and Oregon Stanford educated Humanitarian hero of World War I

27. Hoover’s Philosophies Traditionally Republican = limited role for the government in the economy 1920s prosperity was the result of Republican policies and would return if the economy was left alone Did not support direct government aid to the American people Feared they would become dependent on the government; “rugged individualism” Encouraged volunteer efforts to combat the GD Voluntary wage freezes by businesses Private charities to fight homelessness and other needs

28. Hoover’s Actions Public Works Projects Roads, dams, etc (Boulder Dam) Use government $ to fund private companies Provide jobs, but workers not paid by the government Reconstruction Finance Corporation Provide government loans to banks, RR’s, big businesses to keep them going and encourage expansion “Trickle-down” method  higher wages and jobs Failed because not enough $ was available (no tax increases by Hoover) Despite failures, Hoover actually did more than any previous president and laid a foundation for FDR’s New Deal

29. Hoover’s Actions From bad to worse… The Bonus Army (1932) WWI vets marched to Washington DC to demand early payments of promised bonus  Congress refused in June Hoover initially supported their presence, but then used the US Army to forcefully evict remaining protestors 100 veterans injured and Hoover’s reputation destroyed

30. Hoover’s Assessment Faced an unprecedented economic crisis – What lessons could he have been expected to have learned and used from the past? Too principled and idealistic? Should he have compromised on his beliefs? He has been blamed for the GD – Fair? Accurate? Importance of personality for a politician? “Relatability” factor?