prosperity, depression, and the new deal. 1920s economy and advertising “mass production is only...
TRANSCRIPT
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
Stock Prices, Round #2
Kroger 100 RCA 110 Mammoth Oil 150 City Corp. 120 Durant Motors 60 Midland Power 140 K & P Railroad 130 Tel-Tone 160
Stock Prices, Round #3
Kroger 150 RCA 130 Mammoth Oil 190 City Corp. 130 Durant Motors 50 Midland Power 150 K & P Railroad 140 Tel-Tone 200
Stock Prices, Round #4
Kroger 140 RCA 180 Mammoth Oil 40 City Corp. 140 Durant Motors 90 Midland Power 110 K & P Railroad 100 Tel-Tone 210
Stock Prices, Round #5
Kroger 160 RCA 190 Mammoth Oil 30 City Corp. 160 Durant Motors 100 Midland Power 170 K & P Railroad 110 Tel-Tone 210
Stock Prices, Round #6
Kroger 150 RCA 220 Mammoth Oil 60 City Corp. 150 Durant Motors 110 Midland Power 180 K & P Railroad 90 Tel-Tone 230
Stock Prices, Round #7
Kroger 180 RCA 270 Mammoth Oil 100 City Corp. 200 Durant Motors 180 Midland Power 90 K & P Railroad 180 Tel-Tone 270
Stock Prices, Round #8
Kroger 160 RCA 280 Mammoth Oil 150 City Corp. 180 Durant Motors 210 Midland Power 60 K & P Railroad 100 Tel-Tone 170
Stock Prices, Round #9
Kroger 80 RCA 50 Mammoth Oil 30 City Corp. 150 Durant Motors 50 Midland Power 10 K & P Railroad 20 Tel-Tone 80
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
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
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
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?