USA in depth study - The boom

History 2024

What is meant by the term ‘boom’?

The dynamic growth of the American economy in the decade after WWI, where the Americans believed in isolationism. They found faster and cheaper ways of making goods, so production went up and prices came down.

How were new industries a factor behind the boom?

The USA was rich in natural resources and raw materials, and the USA led t he world in most areas of industry. It was most developed in motor cars, telephones, electric lighting, chemicals, and electric lighting.

How did America benefit from WWI?

The US lent money to allies, selling foodstuffs to Britain and France.
The manufacturing of explosives during the war stimulated a range of by-products such as plastics. America soon became more advanced than Germany.
Aircraft technology was improved. In 1918 there were no civilian airlines, but by 1930 new aircraft companies flew 162,000 flights a year.
The US joined the war not long enough for the war to drain American resources, and they were also far away from conflict so suffered no war damage.

What was the Laissez-Faire?

Republicans believed that the government should interfere as little as possible and to leave businessmen to do their jobs, related to their belief in rugged individualism.

What are protective tariffs?

Import tariffs made it expensive to import goods. This protected the economy and businesses against foreign competitors and allowed American businesses to grow even more rapidly. These tariffs created a monopoly with no outside competition.

Give and example of a protective tariff

The Forndey-McCumber tariff was introduced by Warren Harding in 1922 to make imported food even more expensive.

How did low taxation contribute to the Boom?

Taxes were kept as low as possible, so if people could keep their own money they could invest their money in industries and further boost the economy. However, this led to no funds for the government (e.g healthcare) and benefited the rich more than the poor

How did powerful trusts contribute to the economic boom?

Woodrow Wilson and Democrats fought against trusts as they believed it was unhealthy for men such as Carnegie and Rockefeller to have almost complete control of one vital sector of industry. The Republicans allowed the trusts to do what they wanted, believeing that the ‘captains of industry’ knew better than politicians about what was good for the USA

What new industries came to America in the 1920’s?

Steel, chemicals, glass, machinery, and electricity were produced from the large resource of raw materials. Telephones, radios, vacuum cleaners and washing machines were mass-produced, so goods could be produced more cheaply and so more people could afford them

Give an example of how silk became more accesible

Silk stockings had once been a luxury item. In 1900 only 12,000 pairs had been sold, but in 1920’s a cheaper substitute for silk, rayon, was invented and in 1930 300 million pairs of stockings were sold to a female population of around 100 million

The car

By 1900 only 4000 cars were made. Henry Ford set up the world’s first moving production line in 1913, and every 10 seconds a new car was produced due to its efficiency in 1927. More than 15 million cars were produced between 1908 and 1925. In 1929, 4.8 million cars were made, and in 1925 they cost $290 which was only three months’ wages for an American factory worker, from $1200 before.

Number of people who owned cars in the US compared to the others?

One car to five people in the USA, compared to one to 43 in Britain and one to 7000 in Russia. It stimulated the growth of hundreds of other smaller businesses, such as hot dog stands and advertising bill boards to petrol stations and holiday resorts as it made it possible for people to buy a house in the suburbs.

What principles was Ford’s method of Mass Production based on?

1. Standardisation

2. Division of Labour

3. Assembly line

   Ford’s Model T was most popular in America, and by the mid 1920’s one out of every two cars sold was a Model T. It meant that other machines could be made more cheaply, like tractors and combine harvesters, which meant farmers could produce more food. By 1929 there were over 10 million radios in American and 20 million telephones.

What was the scheme set up to promote consumerism?

If people did not have the money to buy things, the “Buy now, pay later” hire purchase scheme was promoted. Eight out of ten radios and six of of ten cars were bought on credit.

How much did wages rise?

Between 1923 and 1929 the average wage rose by 8% which allowed workers to buy new consumer luxuries.

What were muckraking journals and why did they decline by 1914?

Muckraking journals like McClure’s exposed business and political corruption. Cheap printing and ad funding cut prices, boosting readership from 10,000 to 500,000. By 1914, readers lost interest and advertisers opposed reform content.

How did media and advertising reflect U.S. culture after WWI?

Magazines shifted from reform to consumerism. Ladies’ Home Journal and Saturday Evening Post (with Rockwell art) became middle-class staples. Time launched in 1923. Ads used movie stars and sports figures to sell products like Coca-Cola, linking buying to success. Tabloids like NY Daily News covered crime and scandals. Books like The Man Nobody Knows portrayed Jesus as a salesman, promoting the "right to prosperity" mindset.

Describe the Boom Cycle

Increased demand for goods

Production increased

More employment

More money available to spend on customer goods

Why was the stock market seen as central to 1920s prosperity?

Stock values rose steadily in the 1920s, especially in 1928–29. Buying and selling shares became common—even ordinary workers invested. It was said “even the shoeshine boy” was dealing in shares, showing how widespread speculation had become.

What was speculation and how did it work in the 1920s?

People bought shares hoping prices would rise, even borrowing money to invest. They paid a deposit (buying “on the margin”), then sold the shares at a profit, repaid the loan, and kept the rest—fueling risky, short-term investing.

How did share trading change in the 1920s?

In 1926, 451 million shares were traded. By 1929, over 1.1 billion shares were sold in a “bull market,” with up to 25 million Americans caught in the frenzy.

What was ‘buying on the margin’ and why was it popular?

Investors borrowed money to buy shares, hoping prices would rise so they could repay the loan and make a profit. High bank interest (7%) and advice from figures like Raskob encouraged speculation.

Why did US farmers struggle in the 1920s?

• Falling income: $22B (1919) → $13B (1928)

• Declining exports: Europe bought less due to poverty & US tariffs

• New competitors: Canada & Argentina

• Over-production: Better machines & fertilisers led to surpluses

• Falling prices: Prices dropped 50% in 1921; many bankruptcies

• Prohibition: Cut demand for wheat/barley used in alcohol production

Why did the coal industry struggle in the 1920s?

• Over-production lowered prices and profits

• Competition from electricity and oil

• Efficient tech meant less coal was needed

  • Strike (1928): Workers paid as little as $9/week for 70 hours

What problems did the textiles, leather, and shoe industries face?

• Not growth markets despite tariffs

• Competition from man-made materials

• Mechanisation replaced skilled jobs

• Low wages and rising unemployment

What happened to workers in older industries during the 1920s?

• Many lost jobs due to mechanisation

• Wages lagged behind company profits

• 42% of Americans lived below the poverty line

• Even employed workers struggled to afford essentials

What were the living and working conditions like for unskilled workers in 1920s Chicago?

Chicago was a hub for steel, meat, and clothing industries, employing many unskilled Polish and Italian immigrants. These jobs were unstable, with seasonal unemployment. Only 3% of semi-skilled workers owned cars (vs. 29% in richer areas). Workers avoided buying large items on credit, saving in case of job loss, though they did buy smaller items like radios on credit. Poor white workers avoided chain stores in middle-class areas, preferring local grocers who offered flexible credit.

Flop cuts

Farming - machinery and overproduction (a wheat bushel from $183 to 38 cents from 1920 to 1929). In 1929 average income of farmers was 40% of national average. 600k farmers went bankrupt in 1924.

Low demand - Overproduction led to lower demand. Cycle of depression

Poor Americans - 60% of Americans lived below the poverty line, 3% of semi-skilled workers actually owned a car. Unsustainable boom. 1 million African American farm workers lost their jobs, overcrowded and segregated community in New York’s black Harlem district with more than 250k citizens in small areas. ‘Rent parties’ were on Saturday nights to raise money to pay to landlord on Sunday

Cartels, trusts and monopolies - They ‘fixed the market’ and kept prices high and wages low. The Senate Committee set up after 1929 to investigate the Crash found that throughout the late 1920’s there was corruption and ‘insider trading’ between banks and brokers.

Unemployment - New technology caused unemployment to rise. 2 million throughout 1920’s

Trade Problems - Many countries retaliated against the US’s economic isolationism and introduced their own tariffs. US imports from Europe fell from $390m in 1929 to $1,334 in 1930

Speculation - “over-saturated/heating” market due to speculation. 600,000 speculators by 1929 and borrowed up to 90% of shares worth (buying on the margin) and borrowed 9 billion for speculating in 1929 and brokers’ loans trebled 1926-9

Unstable and firms floated shares for things that did not exist, but people bought them anyway as they expected profit in the ‘bull market’. Corruption and dishonesty.