Topic 5, Lesson 3: What caused the 1920s Boom?

Topic 5, Lesson 3: What caused the 1920s Boom?

Henry Ford and the Model T Ford

• When did Henry Ford found the Ford Motor Company?

• When was the Model-T Ford introduced by Henry Ford?

• What was the nickname given to the Model-T Ford?

• How did Henry Ford make the cost of his Model-T affordable?

• How much did a Model-T Ford cost in 1909?

• How had this price changed by 1920?

• Henry Ford founded Ford Motor Company in 1903.

• In 1908, Ford introduced the Model T. Ford

• Nicknamed “the Tin Lizzie”

• Henry Ford made the cost of his Model-T Ford affordable by:

- standardising his car parts: This meant that all the Model-T Fords manufactured were the same colour. Henry Ford said himself (You could have) “any colour as long as it was black”

- use of the Assembly Line: Ford was inspired by the Chicago Meat Packing industry

- mass production: this approach was adopted by other companies who produced consumer goods

• Price of Model-T in 1909: $1200

• Price of Model-T in 1920: $295

Topic 5, Lesson 3: What caused the 1920s Boom?

Wider Impact of the Car Industry

• Which other industries benefitted from the expansion of the car industry?

• How did Henry Ford meet the needs of his workers when they reported that working on an Assembly Line was boring and monotonous?

Other industries that benefitted from the expansion of the car industry:

• Steel

• Leather (65% of all leather was used by the car industry)

• Glass (75% of all glass was used by the car industry)

• Rubber

• Oil

• $1 billion a year was being spent on road construction by 1920

Workers reported that working on the Assembly Line was boring and monotonous.

So, Henry Ford announced that he would double wages to $5 a day in 1914. This was far higher than what other companies were paying for the equivalent work.

Ford also reduced the length of the working day to 8 hours so there could be a 3rd shift introduced which allowed the factory to operate 24 hours a day.

Topic 5, Lesson 3: What caused the 1920s Boom?

Republican Government Policies

• Andrew Mellon

What governmental position did he hold/

What was his philosophy?

• Laissez-faire

What was it?

How did this benefit big businesses?

• Rugged Individualism

Where did it originate?

• Protectionism

What was it?

Give an example of an act that was passed in the 1920s that supported protectionism

• Andrew Mellon

Treasury secretary (equivalent of Chancellor of the Exchequer)

Influenced 1920s republican presidents

His philosophy was one of debt reduction, tax reduction and a balanced budget

• Laissez-Faire

The only role for government was to help businesses when asked

Low taxes

Few regulations

Meant that businesses were able to chose profits without fear of interference

• Rugged Individualism

Originated with early Americans who moved west

People achieved success with their own hard work

• Protectionism

Republican governments placed tariffs on imported goods to limit competition from foreign imports

e.g. Fordney-McCumber Tariff Act (1922):

• Raised import duties on goods coming into the US to the highest level ever, thus protecting American industry and encouraging Americans to buy home-produced goods

Topic 5, Lesson 3: What caused the 1920s Boom?

Technological Change

• What technological advancement has been determined fundamental to change in the 1920s?

• Give statistics to support answer

• What other technological advancements were there in the 1920s?

The development of electricity was fundamental to technological advancements in the early 20th century.

• America’s consumption of electricity doubled in the 1920s

• By 1929, 70% of American homes had electricity

• electricity provided a cheaper, more reliable and more flexible form of power

• electricity stimulated the production of other associated goods such as refrigerators, vacuum cleaners and radios

Plastics such as Bakelite were developed and used in household products

New materials enabled the construction of new types of buildings. Skylines of the great cities were transformed by skyscrapers.

Topic 5, Lesson 3: What caused the 1920s Boom?

New Business Methods

Corporations in America expanded rapidly during the 1920s.

• By 1929, what percentage of the nation’s wealth did the largest 200 corporations possess?

• How did this change business methods that were being used?

Give a statistic to show the growth of business schools during the 1920a.

How did Fredrick Taylor’s work influence the business methods used during 1920s America?

During the 1920s, there was a significant growth in huge corporations that made use of more scientific business methods.

• By 1929, the largest 200 corporations possessed 20% of the nation’s wealth

Corporations dominated industry

Management science led to the development of different management roles such as specialisms in production, design, marketing and accounts.

• There was a significant growth of business schools with as many as 89 by 1928 training 67,000 students

• New scientific theories were put into practise. Particularly the work of Fredrick Taylor.

He promoted greater efficiency in business and industry in his book ‘The Principles of Scientific Management’

His ideas underpinned the use of Assembly Lines, especially in the car industry.

Topic 5, Lesson 3: What caused the 1920s Boom?

Consumerism

• By 1927, what proportion of American homes had electricity?

• How did this proportion change by 1929?

• How did the introduction of electricity change the use of electrical goods?

• What devices changed the lives of women?

• How did average wages change between 1923 and 1929?

By 1927, two-thirds of US homes had electricity.

By 1929, this figure had increased to 70% of all US homes.

The growth of electrical power encouraged a much more widespread use of electrical goods.

Consumption of other energy sources such as oil and gas also increased.

Growth in female employment also increased.

Labour-saving devices such as washing machines and vacuum cleaners

Hire purchase schemes made it easier to buy goods on credit.

Between 1923 and 1929, the average wage rose by 8%.

Topic 5, Lesson 3: What caused the 1920s Boom?

Mass Marketing and Advertising

• Companies began hiring which type of professionals to design campaigns? Why would they do this? Give an example.

• What did the Kansas City Journal claim about the link between advertising and mass production? How did these two factors contribute toward the 1920s American economy?

• By 1929, how much were companies spending on advertising? How did this compare to 1914?

• How many cinemas were there in the US by 1928?

• How many radio stations were there in America by 1929?

Companies began hiring psychologists to design campaigns and target specific groups such as young women.

For Example: Lucky Strike encouraged women to smoke in public with their cigarettes marketed as “Torches of freedom”

To fuel the boom, it was necessary for people to buy new things frequently.

The Kansas City Journal was hardly exaggerating when it wrote ‘Advertising and mass production are the twin cylinders that keep the motor of modern business in motion’

By 1929, companies were spending $3 billion annually on advertising. This was 5 times more than in 1914.

By 1928, there were 17,000 cinemas in the United States.

By 1929, there were 618 radio stations throughout the US with an audience estimated at 50 million.

Topic 5, Lesson 3: What caused the 1920s Boom?

Credit

• How did the availability of credit impact the number of people who were able to buy consumer goods during the 1920s?

• What proportion of American goods sold in the 1920s were paid for using hire purchase schemes?

• What is hire purchase?

The increased availability of credit during the 1920s made it much easier for people to buy goods (even if they did not have the finances to pay for the goods immediately).

About half the goods sold in the 1920s were paid for using hire purchase schemes.

Hire purchase involved a ‘buy now, pay later’ plan with instalment schemes.

Topic 5, Lesson 3: What caused the 1920s Boom?

Stock Market Boom (buying-on-the-margin)

• What trend could be seen regarding share buying during the 1920s?

• How many shares were traded in 1926? How many shares were traded in 1927?

• How many Americans were estimated to have become involved in the ‘frenzy’ of share dealing in the last years of the decade?

The amount of buying and selling of shares grew substantially until it was a common occurrence for ordinary working people.

Most companies’ shares seemed to rise during the 1920s. Even if people did not have enough money to pay the full amount, they would make an initial deposit, borrow to pay the rest and sell the shares in a couple of weeks when their value had increased.

The number of shares traded in 1926 was about 451 million.

In 1927, this figure rose to 577 million.

Up to 25 million Americans became involved in the ‘frenzy’ of share dealing in the last years of the decade.

Topic 5, Lesson 3: What caused the 1920s Boom?

The Cycle of Prosperity