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Economics in the 1920s (1) Period 5
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Economics in the 1920s (1) Period 5

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  • 1. Economics of the 1920’s By: Nicolas Salazar Darren Ranoco Sandy Monicayo
  • 2. Influence of Henry Ford
    • Henry Ford created the model T which was the first car produced for the masses. This caused the automobile to be a necessity for living during these times.
    • It reshaped people’s lives because it allowed them to not be limited geographically so now they could live wherever they wanted, which led to the growing population in the suburbs. This led to the possibilities of a new economic life because Americans were able to go wherever they wanted. The automobile also allowed more employment for the society’s growing population.
    • Henry Ford also perfected the assembly line production method. It helped America create larger quantities of what they were producing faster. This helped America’s economy because of the popularity of consumerism and it also caused America to move away from heavy industry toward the production of these commodities.
  • 3. Influence of Henry Ford (Cont.)
    • The assembly line also raised wages and gave shorter work days to workers.
    • Lastly, Henry Ford’s mass production benefitted other industries as well (oil, steel, rubber) because of the increasing demand of the automobile.
    • Overall, Henry Ford’s contributions helped form America’s new economy.
  • 4. The Agricultural Problem and Labor Unrest
    • Farming - machinery and overproduction led to rapidly falling prices (wheat prices fell from $183. a bushel in 1920 to 38 cents in 1929).   In 1929 average income in of farmers was only 40% of the national average, and many farmers could not afford their mortgage; in 1924 600,000 farmers went bankrupt.   Note also that rural areas did not have electricity, so most country-dwellers were excluded from the consumer boom.
    • Low wage earners - unskilled and casual workers, or the 2 million who were unemployed - could not share in the prosperity.   There were great inequalities of wealth; the top 5% of the population earned 33% of the income, while 60% of Americans earned less than $2000, and that 40% were below the poverty line (notably farmers/ Black Americans/ immigrants).   Only 3% of semi-skilled works owned a car.   
    • Poor Black Americans - 1 million black farm workers lost their jobs in the 1920s.   Black workers in the towns in the north were the lowest paid; the only work they found available were low-paying, menial jobs.   New York's black Harlem district was a severely overcrowded and segregated community, with more than 250,000 citizens crammed into an area 50 blocks long and eight blocks wide.   Many of these people had to sleep in shifts, going to bed when others went off to work.   ‘Rent parties’ were common on Saturday nights, to raise money to pay the landlord on Sunday.
    • Unemployment – new technology was throwing more and more people out of work; the number of unemployed stood at 2 million throughout 1920s.
    • Trade problems - high tariffs were causing other countries to retaliate, as well as reducing the purchasing power of those countries, which made it hard for American companies to export their products abroad.   Farmers, who relied on exporting wheat, were especially hard-hit by this.
  • 5. The Growth of Mass Production
    • A mild recession in 1923 interrupted the pattern of growth, but when it subsided early in 1924 the economy expanded with greater vigor than ever before.
    • The assembly line sparked mass production making production easier and faster for factories to make their products.
    • It stimulated growth in a lot of factories that were related to the auto industry.
    • Industries that were less vulnerable to great economies of scale, proved more resistant to consolidation, and the modernized administrative systems for factories made it easier for them to control many supplementary things and it also made it simpler for them to expand further.
    • Trade association was a national organization created by various members of an industry to encourage coordination in production and marketing techniques.
    • Trade association worked with mass-production industries that had already succeeded in limiting competition through consolidation.
    • The dream of the New Era was to find a way to stabilize the economy so that inflation and depression would never occur again in the event of mass production.
  • 6. Prosperity and Innovation
    • Consumer boom- there was an increase of personal possessions.
    • Innovation in production methods- especially in the motor industry (by 1925 Ford were producing a car every 10 seconds); this pushed down prices and made goods more accessible for ordinary people.
    • Synthetics- the invention of bakelite (the first plastic), cellophane and nylon - and chemicals.
    • Upsurge in car ownership- Especially the Ford Model T; 15 million had been produced by 1927, and the number of Americans owning cars rose from 8 to 23 million.
  • 7. Prosperity and Innovation (Cont.)
    • Consumer durables/electrical goods- The inventions of fridges, washing machines, dishwashers, vacuum cleaners, and record players.
    • Communications revolution- number of telephone doubled and the number of radios increased from 60,000 to 10 million.
    • Entertainment industry- Hollywood, Charlie Chaplin, the ‘talkies’ and cinemas, jazz clubs and speakeasies.
    • Stock market- Wall Street boomed with many people buying shares to make a profit.
    • Skyscrapers, highways, and urban development- America’s infrastructure was booming with the construction of cities, roads, and skyscrapers.