Prosperity in the 1920s

The boom in the 1920s in the USA

Aims of the lesson

By the end of this lesson you will• Understand what we mean by mass

production• Evaluate its influence on US industry in

the 1920s• Understand what we mean by the cycle of

prosperity• Evaluate the importance of government

action and credit in the boom

Background

• 1920s the USA experienced an economic boom

• Most but not all shared in it• Lots of raw materials• Helped by WW1 – America

benefitted more than any other country

• Protection also helped the US economy

Mass production

• Easy idea – huge factories

• Each worker had a specific job – division on labour

• Products were put together on a production line – quicker

• Specialisation of parts

• Made products quicker and cheaper to make

Henry Ford

• First to use mass production techniques on his cars

• Model T – a car for families• Tin Lizzy – nickname• Each one was identical• 1911 – cost $1200• 1920 – cost $295• His ideas spread to other

businesses

Effects and cycle of prosperity

• Helped other industries to grow – steel, glass, rubber etc

• More roads and petrol stations

• People were buying new gadgets because they cost less

• Cycle of prosperity – more jobs, more money, more production, cheaper goods

• Never ending prosperity.

Government policy

• Republican government helped the boom• Laisses faire – non intervention in industry• No controls on businesses• Lower taxes on wages and profits• Gave people more money to spend• Hire purchase – buy now, pay later• Mail order and advertising – put pressure

on people to buy

Confidence

• In the 1920s people began to feel more confident about the future

• Encouraged people to spend their money buying shares

• Could be done using credit – buying on the margin

• Share prices went up year after year• Seemed like the good times were here to

stay