prosperity, depression, and the new deal. 1920s economy and advertising “mass production is only...

Prosperity, Depression, and the New Deal

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

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?

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

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!!

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

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

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

The Politics of Prosperity

President Warren G. Harding, 1920 - 1923President Calvin Coolidge, 1923 - 1928

“The chief business of the American people is business…The man who builds a factory builds a temple.” President Coolidge

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?”

Stock Prices, Round #1

Kroger 80 RCA 80 Mammoth Oil 120 City Corp. 110 Durant Motors 70 Midland Power 120 K & P Railroad 120 Tel-Tone 150

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


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


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

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

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

The Dust Bowl: Nature’s Cruel Blow

President Herbert Hoover, 1929 - 1933

Quaker upbringing in Iowa and Oregon

Stanford educated

Humanitarian hero of World War I

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

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

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

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?

prosperity, depression, and the new deal. 1920s economy and advertising “mass production is only...

Documents

prices of stocks

stock market

automobile ownership

day workers

percentage increase

workers incomes

average workers wage

average american