1920’s - weeblyimpactushistory.weebly.com/uploads/2/2/9/0/22909232/economics_… · people is...
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1920’sEconomics & Politics
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President Harding • “Return to
Normalcy” – (life before WWI)
• "America first" – campaign
encouraged
industrialization
• Teapot Dome
Scandal
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Coolidge President
• Harding died of
heart-attack
• Coolidge
finished
Harding’s
election
• Ran for the
next term
(1924) and won
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Laissez
Faire
Economics
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Laissez-Faire Economics
• “Chief business of American
people is business”
• Fueled economic boom of 1920’s
• Wouldn’t even assist flood victims
–He said that government had no duty
to protect citizens “against the
hazards of the elements”
–Drew criticism from those who saw it
as a failure to take action
Click on the quote for a video clip
about business in the 1920s.
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Kellogg-Briand Pact
• Coolidge wanted peace and
stability without getting involved in
international affairs (Isolationism)
• Allowed Secretary of State, Frank
B. Kellogg, to make all foreign-
policy decisions
• Made pact with 15 nations –
pledged not to use the threat of war
in their dealings with one another
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Election of 1928
• Coolidge “I do not choose to
run for President in 1928”
• Republican: Herbert Hoover
(Protestant/against prohibition)
• Democrat: Alfred E. Smith
(Catholic/supported
prohibition)
• Hoover wins by 6 million votes
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Consumer Economy• 1914-1926: Wages rose over 28%
• # of millionaires doubled
• Economy depended on large
amounts of spending
Increased
Spending
Increased
WagesIncreased
Profits
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Consumer Economy
• Traditionally = only
bought what they
needed
• What sparked
increased
purchasing?
–Higher wages, clever
ads, new products,
lower costs, and
availability of creditClick on the image for a video clip about new technologies in the 1920s.
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Consumer Economy
• Buying on Credit
–needed to make new expensive, large products easier to buy
–Need/want for modern convenience –Advertising
• Electric Power: all new technologies required electricity
–Rise from 16% to 63%
–Increase in availability; Still not in the country
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Consumer Economy
• Advertising: created because
producers faced real
competition mass-media
advertising
• Productivity: rise in GNP
(Gross National Product)
–Value of goods and services a
country produces
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Ford & the Automobile• 1st made in Germany (1880’s)
• 1892-1920: 8 million
• 1920’s: 15 million
• Increase production/purchasing due
to Ford’s efficient use of the
assembly line
• Assembly line reduced costs and
allowed price to drop
• Vertical consolidation: owned all
phases of production
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Gas Stations appear in 1913
Auto industry spurred many other industries
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Industrial Growth
• Automobile created new
industries and jobs
–Oil, Rubber, Glass, Steel, and
Leather
–Gas stations, garages, motels
“motor hotels,” car dealerships,
campgrounds and restaurants
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Bypassed by Boom• Most Americans enjoyed prosperity
• Unskilled laborers, African
Americans and immigrants
remained poor
–Wages and working conditions did
not change
–Farmers lost foreign markets after
WWI
–During good times farmers bought on
credit many couldn’t pay back loans
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The end of The 1920’s
Factors leading to the
Stock Market Crash of 1929
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Economy Appears Healthy• 1925 – Market value of all stocks = $27 bil.
1928 – Market value of all stocks = $38 bil.
1929 – Market value of all stocks = $87 bil.
• People had unusually high confidence in the
business world during the 1920’s
• Welfare Capitalism: new approach to labor
relation
– A way to prevent strikes and keep productivity
high
– Offered health plans, paid vacations, rec.
programs and English classes for immigrants
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Economic Danger Signs• Rich got richer
• 71% of the population’s avg. income was
less than $2,500
• 0.1% of the population’s avg. income was
more than $100,000
• 80% of the population had no savings
PROBLEM: Most people are in debt “up
to their eyeballs” because of the availability
of credit
They honestly believed that they could
count on future income to cover their debt.
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Playing the Stock Market
• “Get rich quick” attitude
• Rise in stock market prices led to
widespread speculation
– Practice of making high risk investments
in hopes of getting huge returns
• Repeat of the Gold Rush
– Newspapers reported of ordinary
people/small investors making fortunes
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Warning! Warning!
• Many small investors entered the market, often spending their life savings
• Buying on the margin
– Allowed investors to purchase a stock for only a fraction of its price (10-50%) and borrow the rest
–Broker charged high interest rates and could demand the money at any time
–If the stock went up, they could “sell high” and pay off interest and loan while making big profits
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More Problems
• Too many goods, Too little
demand
–Many companies were
overstocked – held more goods
than consumers would buy
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Signals of Trouble Ahead
• Uneven wealth
• Rising debt
• Stock speculation
• Overproduction
• Hardships of farmers and
workers