General IGCSE History

What was the Boom

The ‘boom’ is the name given to the dynamic growth of the American

economy in the decade after the First World War.

In the 1920s American businesses grew more quickly than ever before. They

found faster and cheaper ways of making goods than ever before. As production

went up prices came down so ordinary people bought more household goods

than ever before: millions of fridges and cars were sold; hundreds of millions of

nylon stockings.

Many families bought new houses in the suburbs of America’s rapidly

growing cities. And with money to spare they spent more on leisure – so

the music, radio, cinema industries and even sport were booming.

Company profits were booming and confidence was booming too.

Business leaders were prepared to take risks and ordinary people were

too. Banks had money to spare so they invested it in the stock market or

lent it to ordinary Americans to do so. The value of stocks and shares

went up and up.

The Government built more roads than ever before. More homes were supplied

with electricity and phone lines than ever before. There was more building

being done in the boom years of the 1920s than ever before. And, as if to

symbolise the massive confidence of the time, cities built higher skyscrapers

than ever before.

It seemed that everything was going up, up, up!

This may all sound too good to be true – and it was! The whole system

came crashing down with a bang in 1929

USA - industrial strength

The USA was a vast country, rich in natural resources. It had a growing

population (123 million by 1923). Most of this population was living in

towns and cities. They were working in industry and commerce, usually

earning higher wages than in farming. So these new town dwellers became

an important market for the USA’s new industries. Most US companies had

no need to export outside the USA, and most US companies had access to

the raw materials they needed in the USA.

By the time of the First World War, the USA led the world in most areas of

industry. It had massive steel, coal and textile industries. It was the leading

oil producer. It was foremost in developing new technology such as motor cars,

telephones and electric lighting. In fact, electricity and electrical goods were a

key factor in the USA’s economic boom. Other new industries such as chemicals

were also growing fast. The USA’s new film industry already led the world.

The managers of these industries were increasingly skilled and professional,

and they were selling more and more of their products not just in the USA

but in Europe, Latin America and the Far East.

American agriculture had become the most efficient and productive in

the world. In 1914, most Americans would have confidently stated that

American agriculture and industry were going from strength to strength.

The First World War

The Americans tried hard to stay out of the fighting in the First World War.

But throughout the war they lent money to the Allies, and sold arms and

munitions to Britain and France. They sold massive amounts of foodstuffs as

well. This one-way trade gave American industry a real boost. In addition,

while the European powers slugged it out in France, the Americans were able

to take over Europe’s trade around the world. American exports to the areas

controlled by European colonial powers increased during the war.

There were other benefits as well. Before the war Germany had one of the

world’s most successful chemicals industries. The war stopped it in its

tracks. By the end of the war the USA had far outstripped Germany in the

supply of chemical products. Explosives manufacture during the war also

stimulated a range of by-products which became new American industries

in their own right. Plastics and other new materials were produced.

Aircraft technology was improved during the First World War. From 1918 these

developments were applied to civilian uses. In 1918 there were virtually no

civilian airlines. By 1930 the new aircraft companies flew 162,000 flights a year.

Historians have called the growth and change at this time the USA’s second

industrial revolution. The war actually helped rather than hindered the ‘revolution’.

When the USA joined the fighting it was not in the war long enough for

it to drain American resources in the way it drained Europe’s. There was a

downturn in the USA when war industries readjusted to peacetime, but it was

only a blip. By 1922 the American economy was growing fast once again.

US systems of government

US system of government

■ The federal system: The USA’s

federal system means that all

the individual states look after

their own internal affairs (such

as education). Questions that

concern all of the states (such

as making treaties with other

countries) are dealt with by

Federal (National) Government in

Washington D.C.

■ The Constitution: The Constitution

lays out how the government is

supposed to operate and what it is

allowed to do.

■ The president: He (or she) is the

single most important politician in

the USA.The president is elected

every four years. However,

the Constitution of the USA is

designed to stop one individual

from becoming too powerful.

Congress and the Supreme Court

both act as ‘watchdogs’, checking

how the president behaves.

■ Congress: Congress is made

up of the Senate and the House

of Representatives. The main

functions of Congress are to

pass laws, which are sometimes

proposed by the president, and

to agree government taxes and

spending.

■ The Supreme Court: This is made

up of judges, who are usually

very experienced lawyers.

Their main task is to make sure

that American governments

do not misuse their power or

pass unfair laws. They have

the power to say that a law is

unconstitutional (against the

Constitution), which usually

means that they feel the law

would harm American citizens.

■ Parties: There are two main

political parties, the Republicans

and the Democrats. In the 1920s

and 1930s, the Republicans were

stronger in the industrial north of

the USA while the Democrats had

more support in the south. On the

whole, Republicans in the 1920s

and 1930s preferred government

to stay out of people’s lives if

possible. The Democrats were

more prepared to intervene in

everyday life.

republican policies

A third factor behind the boom was the policies of the Republican Party.

From 1920 to 1932 all the US presidents were Republican, and Republicans

also dominated Congress. Here are some of their beliefs.

1 Laissez-faire

Republicans believed that government

should interfere as little as possible

in the everyday lives of the people.

This attitude is called ‘laissez-faire’. In

their view, the job of the president

was to leave businesspeople alone

to do their job. That was where

prosperity came from.

This was closely related to their belief

in ‘rugged individualism’. They admired

the way Americans were strong and got

on with solving their own problems.

2 Protective tariffs

The Republicans believed in import

tariffs which made it expensive to

import foreign goods. For example, in

1922 Harding introduce the Fordney–

McCumber tariff which made imported

food expensive in the USA. These tariffs

protected businesses against foreign

competition and allowed American

companies to grow even more rapidly.

3 Low taxation

The Republicans kept taxation as

low as possible. This brought some

benefits to ordinary working people,

but it brought even more to the very

wealthy. The Republican thinking was

that if people kept their own money,

they would spend it on American

goods and wealthy people would

reinvest their money in industries.

4 Powerful trusts

Trusts were huge super-corporations,

which dominated industry. Woodrow

Wilson and the Democrats had fought

against trusts because they believed it

was unhealthy for men such as Carnegie

(steel) and Rockefeller (oil) to have

almost complete control of one vital

sector of industry. The Republicans

allowed the trusts to do what they

wanted, believing that the ‘captains of

industry’ knew better than politicians

did about what was good for the USA.

republican presidents

President Warren Harding

(In office: 1921–23)

Famous quote

‘Return to normalcy’, which meant he wanted to return to traditional American

ideas after the First World War.

Economic policies

Following the post-war depression between 1920 and 1921, Harding passed a number of

measures to help the economy. In 1921, Harding’s Treasury Secretary, Andrew Mellon,

convinced Congress to cut income tax for both higher and lower earners. The effect was the

start of economic recovery as wages, profits and productivity increased. Harding removed

many government regulations that had been in place during the war. He cut government

spending from 6.5 per cent to 3.5 per cent. In 1921 he signed the Federal Highway Act, which

saw $160 million of investment in highways. This created many jobs within the road building

industry. Most importantly, in 1922 he signed the Fordney-McCumber Tariff Act. This Act

protected US industry and made foreign goods more expensive. As a result of his economic

successes, Harding is viewed by many economists as laying the foundations of the boom.

Profile

President Calvin Coolidge

(In office: 1923–29)

Famous quote

‘After all, the chief business of the American people is business’, which meant he

promoted consumerism and the creation of personal wealth.

Economic policies

Coolidge continued with the same economic policies as Harding. In 1924 he passed the

Revenue Act which cut income tax for a further two million Americans. After two more

tax cuts in 1926 and 1928, only the wealthiest two per cent of taxpayers paid income tax!

Coolidge was also a firm believer in laissez-faire policies. In 1926 he vetoed (rejected) a

bill to set up a farm board that would buy surplus produce from farmers. Since the end of

the war, farmers had been struggling economically. According to Coolidge, agriculture,

‘must stand on an independent business basis.’ This meant he did not believe it was the

government’s job to help them. He also believed in modernising agriculture which would

later lead to overproduction and economic problems in the 1930s.

Profile

President Herbert Hoover

(In office: 1929–33)

Famous quote

‘Put a chicken in every cooking pot, and a car in every garage’, which meant the

government was committed to every American sharing in the prosperity.

Economic policies

Hoover was committed to his own brand of laissez-faire policies which he dubbed

‘rugged individualism’. This meant that every American should look after their own

interests without relying on help from the government. His ideas could not have come

at a worse time. Economic growth in the USA had been slowing down since 1927.

Farmers in particular were hard hit by continually falling prices and low incomes.

When the Depression set in during the early 1930s, Hoover did attempt to use the

government to try to help farmers and banks, but never retreated from his core beliefs.

He even introduced a further tariff in 1930 called the Smoot–Hawley Tariff. He was

labelled the ‘do-nothing’ president by opponents and lost the election in 1932. You will

learn more about this in Chapter 10.

New industries - New methods

Through the 1920s new industries and new methods of production were

developed in the USA. The country was able to exploit its vast resources of

raw materials to produce steel, chemicals, glass and machinery. Electricity

was changing America too. Before the First World War industry was still

largely powered by coal. By the 1920s electricity had taken over. In 1918

only a few homes were supplied; by 1929 almost all urban homes had it.

These new industries in turn became the foundation of an enormous boom

in consumer goods. Telephones, radios, vacuum cleaners and washing

machines were mass-produced on a vast scale. mass production methods

meant that huge amounts of goods could be produced much more cheaply

and so more people could afford them.

Things that used to be luxuries were now made cheaper by new inventions

and mass production. For example, silk stockings had once been a luxury

item reserved for the rich. In 1900 only 12,000 pairs had been sold. In the

1920s rayon was invented, which was a cheaper substitute for silk. In 1930,

300 million pairs of stockings were sold to a female population of around

100 million.

The Car

The most important of these new booming industries was the motor-

car or automobile industry. The motor car had only been developed in

the 1890s. The first cars were built by blacksmiths and other skilled

craftsmen. They took a long time to make and were very expensive. In

1900 only 4000 cars were made. Car production was revolutionised by

Henry Ford. In 1913 he set up the world’s first moving

Assembly line, in a giant shed in Detroit. Each worker on

the line had one or two small jobs to do as the skeleton

of the car moved past him. At the beginning of the

line, a skeleton car went in; at the end of the line was

a new car. The most famous of these was the Model

T. More than 15 million were produced between 1908

and 1925. In 1927 they came off the assembly line at a

rate of one every ten seconds. In 1929, 4.8 million cars

were made. In 1925 they cost $290. This was only three

months’ wages for an American factory worker.

By the end of the 1920s the motor industry was the USA’s biggest industry.

As well as employing hundreds of thousands of workers directly, it also kept

workers in other industries in employment. Glass, leather, steel and rubber

were all required to build the new vehicles. Automobiles used up 75 per

cent of US glass production in the 1920s! Petrol was needed to run them.

And a massive army of labourers was busily building roads throughout

the country for these cars to drive on. In fact, road construction was the

biggest single employer in the 1920s.

Owning a car was not just a rich person’s privilege, as it was in Europe.

There was one car to five people in the USA compared with one to 43 in

Britain, and one to 7000 in Russia. The car made it possible for people to

buy a house in the suburbs, which further boosted house building. It also

stimulated the growth of hundreds of other smaller businesses, ranging

from hot-dog stands and advertising billboards to petrol stations and

holiday resorts.

Mass consumption

It is no good producing lots of goods if people don’t buy them. Mass production

requires mass consumption. So, the big industries used sophisticated sales

and marketing techniques to get people to buy their goods. New electrical

companies such as Hoover became household names. They used the latest, most

efficient techniques proposed by the ‘Industrial Efficiency Movement’.

■ Mass nationwide advertising had been used for the first time in the

USA during the war to get Americans to support the war effort. Many of

the advertisers who had learned their skills in wartime propaganda now

set up agencies to sell cars, cigarettes, clothing and other consumer

items. Poster advertisements on billboards, radio advertisements and

travelling salesmen encouraged Americans to spend.

■ There was a huge growth in the number of mail-order companies. People

across America, especially in remote areas, could buy the new consumer

goods from catalogues. In 1928 nearly one-third of Americans bought

goods from Sears, Roebuck and Company catalogue. This greatly

expanded the market for products.

■ Even if they did not have the money, people could borrow it easily. Or

they could take advantage of the new ‘Buy now, pay later’ hire purchase

schemes. Eight out of ten radios and six out of ten cars were bought on

credit. Before the war, people expected to save up until they could afford

something. Now they could buy on credit.

■ A brand-new kind of shop emerged – the chain store – the same shop

selling the same products all across the USA, such as Woolworth’s and

American Store

A state of mind

The 1920s saw a change in attitude for many Americans as the economy started

to recover. In the post-war depression, thrift – being careful with money and

saving – was seen as a good quality. But as the economy of the 1920s picked

up, Americans became more confident. They began to spend more on consumer

goods and entertainment, and they placed a high value on owning things. This

confidence was supported by the Republican policies of laissez-faire and low

taxation (see page 288). America became a consumer society.

This confidence was also apparent in the way banks lent money to businesses

and consumers, as banks were confident they would see debts paid back with

interest. Companies expanded and invested in new machinery and technology,

and as consumer demand increased, profits soared. Consumers bought more

goods on credit and many borrowed from banks to buy shares in companies.

Between 1920 and 1929, stocks in the major companies quadrupled in value.

Confidence is vital to any economic boom, and in the 1920s there was a huge

amount of confidence in the American stock market.

Problems in the farming industry

While many Americans were enjoying the boom, farmers most

definitely were not. Total US farm income dropped from $22

billion in 1919 to just $13 billion in 1928. There were a number

of reasons why farming had such problems.

■ Declining exports: After the war, Europe imported far

less food from the USA. This was partly because Europe

was poor, and it was partly a response to US tariffs which

stopped Europe from exporting to the USA (see page 290).

■ New competitors: Farmers were also struggling against

competition from the highly efficient Canadian and

Argentinian wheat producers. All of this came at a time

when the population of the USA was actually falling and

there were fewer mouths to feed.

■ Over-production: Underlying all these problems was over-

production. From 1900 to 1920, while farming was doing

well, more and more land was being farmed. Improved

machinery, especially the combine harvester, and improved

fertilisers made US agriculture extremely efficient. The

result was that by 1920 it was producing surpluses of wheat

which nobody wanted.

■ Falling prices: Prices plummeted as desperate farmers tried

to sell their produce. In 1921 alone, most farm prices fell

by 50 per cent. Hundreds of rural banks collapsed in the

1920s and there were five times as many farm bankruptcies

as there had been in the 1900s and 1910s.

■ Prohibition: In 1920 Prohibition was introduced across the USA. The

alcohol industry was a major consumer of American wheat and barley.

Demand for these resources fell as a result.

Not all farmers were affected by these problems. Rich Americans wanted

fresh vegetables and fruit throughout the year. Shipments of lettuce to the

cities, for example, rose from 14,000 crates in 1920 to 52,000 in 1928. But

for most farmers the 1920s were a time of hardship.

This was a serious issue. About half of all Americans lived in rural areas,

mostly working on farms or in businesses that sold goods to farmers.

Problems in farming therefore directly affected more than 60 million

Americans.

Six million rural Americans, mainly farm labourers, were forced off the land

in the 1920s. Many of these were unskilled workers who migrated to the

cities, where there was little demand for their labour. African Americans

were particularly badly hit. They had always done the least skilled jobs in

the rural areas. As they lost their jobs on the farms, three-quarters of a

million of them became unemployed.

It is no surprise that farming communities were the fiercest critics of the

‘laissez-faire’ policies of the Republican Party.

Why didnt traditional industries prosper

You have already seen how the farmers – a very large group in American

society – did not share in the prosperity of the 1920s. But they were not

alone. Workers in many older industries did not benefit much either.

The coal industry was a big employer but it began to struggle. First, like

farming there was over-production. This reduced the price of coal and

therefore profits. At the same time coal power was losing out to new power

sources like electricity and oil. Although electricity producers used coal to

generate electricity, the new generating technology was highly efficient so

it did not need much coal to produce a lot of energy. Manufacturers were

either switching to electricity or oil, or used more efficient machinery

which used less coal. The same pattern could be seen in homes where

improved boilers gave users the same amount of heat with less coal.

Other industries such as leather, textiles and shoe-making also struggled. They

were protected from competition with foreign imports by tariffs. However,

they were not growth markets. They also suffered from competition from

industries which used new man-made materials and were often mechanised.

In the traditional industries generally growth was slow and profits were gradually

declining. Workers in these industries lost their jobs as processes became

increasingly mechanised. Skilled workers struggled to compete against both

machinery and cheap labour in the southern states. Even if workers in these

industries did get a pay rise, their wages did not increase at the same rate as

company profits or dividends paid to shareholders (see Figure 7).

In 1928 there was a strike in the coal industry in North Carolina, where the

male workers were paid only $18 and women $9 for a 70-hour week, at a time

when $48 per week was considered to be the minimum required for a decent

life. In fact, for the majority of Americans wages remained well below that

figure. It has been estimated that 42 per cent of Americans lived below the

poverty line – they did not have the money needed to pay for essentials such

as food, clothing, housing and heating for their families.

Unemployment

What’s more, throughout this period unemployment remained a problem. The

growth in industry in the 1920s did not create many new jobs. Industries

were growing by electrifying or mechanising production. The same number of

people (around 5 per cent) were unemployed at the peak of the boom in 1929

as in 1920. Yet the amount of goods produced had doubled. These millions

of unemployed Americans were not sharing in the boom. They included many

poor whites, but an even greater proportion of African American and Hispanic

people and other members of the USA’s large immigrant communities.

The plight of the poor was desperate for the individuals concerned. But

it was also damaging to American industry. The boom of the 1920s was

a consumer-led boom, which means that it was led by ordinary families

buying things for their homes. But with so many families too poor to buy

such goods, the demand for them was likely to begin to tail off. However,

Republican policy remained not to interfere, and this included doing

nothing about unemployment or poverty.

Case study : chicago in the 1920’s

Chicago was one of America’s biggest cities. It was the centre of the steel,

meat and clothing industries, which employed many unskilled workers. Such

industries had busy and slack periods. In slack periods the workers would

be ‘seasonally unemployed’. Many of these workers were Polish or Italian

immigrants, or African American migrants from the southern United States.

How far did they share in the prosperity of the 1920s?

■ Only 3 per cent of semi-skilled workers owned a car. Compare that with

richer areas where 29 per cent owned a car.

■ Workers in Chicago didn’t like to buy large items on credit. They

preferred to save for when they might not have a job. Many bought

smaller items on credit, such as radios.

■ The poor white Americans did not use the new chain stores which had

revolutionised shopping in the 1920s. Nearly all of them were in middle-

class districts. Poorer white industrial workers preferred to shop at the

local grocer’s where the owner was more flexible and gave them credit.

Town V Country

In 1920, for the first time in American history, more Americans lived in towns

and cities than in the country. People flocked to them from all over the USA.

The growing city with its imposing skyline of skyscrapers was one of the most

powerful symbols of 1920s USA.

Throughout the 1920s there was tension between rural USA and urban USA.

Certain rural states, particularly in the South, fought a rearguard action

against the ‘evil’ effects of the city throughout the 1920s, as you will see

on page 298.

Entertainement : Radio

Almost everyone in the USA listened to the radio. Most households had

their own set. In poorer districts where not all people could afford a radio,

they shared. By 1930 there was one radio for every two to three households

in the poorer districts of Chicago. The choice of programmes grew quickly.

In August 1921 there was only one licensed radio station in America. By

the end of 1922 there were 508 of them. By 1929 the new network NBC was

making $150 million a year.

Entertainment : Jazz

The radio gave much greater access to new music. Jazz music became

an obsession among young people. African Americans who moved from

the country to the cities had brought jazz and blues music with them.

Blues music was particularly popular among African Americans, while jazz

captured the imagination of both white and African American youth.

Such was the power of jazz music that the 1920s became known as the Jazz

Age. Along with jazz went new dances such as the Charleston, and new

styles of behaviour which were summed up in the image of the flapper, a

woman who wore short dresses and make-up and who smoked in public. One

writer said that the ideal flapper was ‘expensive and about nineteen’.

The older generation saw jazz and everything associated with it as a

corrupting influence on the young people of the USA. The newspapers and

Entertainment : Sport

Sport was another boom area. Baseball became a big money sport with

legendary teams like the New York Yankees and Boston Red Sox. Baseball

stars like Babe Ruth became national figures. Boxing was also a very

popular sport, with heroes like world heavyweight champion Jack Dempsey.

Millions of Americans listened to sporting events on the radio.

Entertainment : Cinema

In a small suburb outside Los Angeles, called hollywood, a major film

industry was developing. All-year-round sunshine meant that the studios

could produce large numbers of films or ‘movies’. New stars like Charlie

Chaplin and Buster Keaton made audiences roar with laughter, while

Douglas Fairbanks thrilled them in daring adventure films. Until 1927 all

movies were silent. In 1927 the first ‘talkie’ was made.

During the 1920s movies became a multi-billion dollar business and it was

estimated that, by the end of the decade, a hundred million cinema tickets

were being sold each week. Even the poor joined the movie craze. Working

people in Chicago spent more than half of their leisure budget on movies.

Even those who were so poor that they were getting Mothers’ Aid Assistance

went often. It only cost ten or twenty cents to see a movie.

Morals

In a small suburb outside Los Angeles, called hollywood, a major film

industry was developing. All-year-round sunshine meant that the studios

could produce large numbers of films or ‘movies’. New stars like Charlie

Chaplin and Buster Keaton made audiences roar with laughter, while

Douglas Fairbanks thrilled them in daring adventure films. Until 1927 all

movies were silent. In 1927 the first ‘talkie’ was made.

During the 1920s movies became a multi-billion dollar business and it was

estimated that, by the end of the decade, a hundred million cinema tickets

were being sold each week. Even the poor joined the movie craze. Working

people in Chicago spent more than half of their leisure budget on movies.

Even those who were so poor that they were getting Mothers’ Aid Assistance

went often. It only cost ten or twenty cents to see a movie.

Morals

Source 5 reflects the gulf which many people felt had opened up in moral

attitudes. In the generation before the war, sex had still been a taboo

subject. After the war it became a major concern of tabloid newspapers,

Hollywood films, and everyday conversation. Scott Fitzgerald, one of a

celebrated new group of young American writers who had served in the

First World War, said: ‘None of the mothers had any idea how casually their

daughters were accustomed to be kissed.’

The cinema quickly discovered the selling power of sex. The first cinema

star to be sold on sex appeal was Theda Bara who, without any acting

talent, made a string of wildly successful films with titles like Forbidden

Path and When a Woman Sins. Clara Bow was sold as the ‘It’ girl. Everybody

knew that ‘It’ meant ‘sex’. Hollywood turned out dozens of films a month

about ‘It’, such as Up in Mabel’s Room, Her Purchase Price and A Shocking

Night. Male stars too, such as Rudolph Valentino, were presented as sex

symbols. Women were said to faint at the very sight of him as a half-naked

Arab prince in The Sheik (1921).

Today these films would be considered very tame indeed, but at the time

they were considered very daring. The more conservative rural states were

worried by the deluge of sex-obsessed films, and 36 states threatened

to introduce censorship legislation. Hollywood responded with its own

censorship code which ensured that, while films might still be full of sex,

at least the sinful characters were not allowed to get away with it!

Meanwhile, in the real world, contraceptive advice was openly available

for the first time. Sex outside marriage was much more common than in

the past, although probably more people talked about it and went to films

about it than actually did it!

The car + Entertainment

The motor car was one factor that tended to make all the other features of

the 1920s mentioned above more possible. Cars helped the cities to grow

by opening up the suburbs. They carried their owners to and from their

entertainments. Cars carried boyfriends and girlfriends beyond the moral

gaze of their parents and they took Americans to an increasing range of

sporting events, beach holidays, shopping trips, picnics in the country, or

simply on visits to their family and friends.