- In the aftermath of World War I, a period of technologicalinnovation and lenient laws for companies led to economic growthin the USA- New technologies, especially automobiles, moving pictures(movies) and radio proliferated modernity to a large part of thepopulation.
- Social change, especially for women, also took holdduring this period- In 1920, American women gained the right to votefor the first time-But the prosperity of the “boom” was notexperienced equally throughout US society
Causes of Economic Growth:Industrialization & Consumerism- Increased demand for American products began inWWI, and helped American industry grow- Factories began to produce goods more efficientlythrough assembly line practices- As the Americans became more prosperous, aculture of consumerism grew- For the first time in history, middle-class Americanscould purchase expensive consumer goods like carsand home appliances
Causes of Economic Growth: Government Deregulation- Attempts at government intrusion into private business wereconsistently blocked in favor of a “laissez-faire” economicpolicy- Corporations were encouraged to grow without restriction,often forming trusts and eliminating competition- Both the Harding and Coolidge administrations rolled backincome taxes on the wealthy and created tariffs blockingforeign goods from competing with American products- In the later part of the decade "buying on margin" entered theAmerican vocabulary, as more and more Americans over-extended themselves to speculate on the soaring stock marketand expanding credit
Changing Values and “The American Dream”- More so in the 1920s than ever before, Americanscame to believe that they had a “right to prosperity”- Whereas older generations valued saving moneyand living simply, during this period, advertising,leftover “war effort” sentiments, and the availabilityof consumer goods proliferated the idea that statusand American identity was related to spendingmoney
Trouble in the Farming Industry- Though there was a massive boom in industry and consumer spendingin the 1920s, other sectors of the economy, like farming and mining,remained stagnant- After World War I, Europe no longer imported as much food from theUnited States- Overproduction due to improved farming technology led to a decreasein the price of crops- About half of Americans (60 million people) lived in rural areas andwere directly effected by hardship in the farming industry- Many rural Americans abandoned farming and moved to cities to seekemployment in factories- Black Americans suffered especially from this downturn, because theywere mostly employed as agricultural laborers
Income Inequality- Though the overall prosperity of the USA grew duringthe Boom, it grew unevenly.- 42% of Americans lived below the poverty line, andcould not pay for essentials like food, clothing andhousing.- Unemployment remained a problem. Though moregoods were produced by the US economy, unemploymentwas the same at the start of the 1920s as it was at thepeak of the Boom in 1929.- Poverty limited consumer purchasing power, andespecially effected blacks, hispanics and immigrants
Growing Cities and Changing Values- As more Americans moved away from small towns, traditionalways of life began to fall out of favor.- Through radio and movies, Americans were exposed to newkinds of music and ideas like jazz and looser sexual morals.- Some conservative groups fought back against these “daring”ideas, creating censorship laws in many states.- Increased availability of contraception, divorce, and jobs gavewomen more freedom than ever before.- In spite of increased freedom, gender discrimination was stillnormal. Women did not achieve equality with men and moststayed in traditional roles.
Prejudice and Intolerance- Groups such as the Klu Klux Klan (KKK) targeted blacks,hispanics, immigrants, communists, Jews and Catholics withintimidation, physical violence and even murder.- The White Supremacy movement was strongest in the Midwestand the South, where white competed for jobs with immigrants andblacks.- White Supremacist propaganda gained favor throughout the UnitedStates, including with President Wilson.- Lynch mobs, which falsely accused minorities of crimes, wereresponsible for many deaths by hanging and cases of falseimprisonment.- Immigrants, Anarchists and Communists were also targets ofdiscrimination and persecution during this period. During the “RedScare” the US kept records on all suspected Communists andcreated immigration quotas.
Plight of Native AmericansDuring the nineteenth century the population of NativeAmericans dropped from 1.5 million to around 250,000 in 1920.The US Government began to take notice of the problem ofdemographic and cultural collapse in Native communities in the1920s.Native Americans suffered extreme poverty, discrimination, andexploitation from businesses who took their land.Native American children were sent to boarding schools andmany lost touch with their language and culture.1924 Native Americans were granted full citizenship of the USA.
Scopes Monkey TrialIn 1925 a Tennessee law prohibiting the instruction of DarwinsTheory of Evolution came under fire in a landmark court case.A teacher named John Scopes deliberately broke the law sothat he would have the opportunity to challenge it in court.The trial was followed closesly by Americans in all parts of thecountry, and symbolized the struggle between progressiveurban people and conservative rural people.Ultimately, though Scopes was convicted of breaking the law,the spectacle of the trial shaped the perspectives of manyAmericans. The Fundamentalists came off looking foolish andthe anti-evolution lobby was dealt a major blow.
Prohibition, Gangsters & CorruptionIn 1920, the powerful temperance movement lead to the adoption of the VolsteadAct, outlawing the sale or consumption of alcohol.The law was difficult to enforce and there was not enough money to makeenforcement a priority, so many illegal sources of alcohol cropped up.Some large breweries stayed in business by bribing or threatening localauthorities. Alcohol was brought across the border from Canada and made innon-professional distilleries called “stills”. The alcohol made in homes and “stills”is called Moonshine, and was often poisonous.Organized crime grew during this period, as Gangsters dominated the businessesof moonshining, smuggling, and running speak-easies (Illegal bars and socialclubs where alcohol could be purchased).Increased organized crime activity was tolerated in some places, like New Yorkand Chicago, because of the power and social clout of mafias, and because ofwidespread corruption and bribery within the police and local government.Prohibition was repealed in 1933, partially for economic reasons, and partiallybecause it was so unpopular.
The Stock Market Crash of 1929The 1929 crash brought the Roaring Twenties shuddering to ahalt.The Wall Street Crash of 1929 (October 1929) was the mostdevastating stock market crash in the history of the United States.The crash signaled the beginning of the 10-year Great Depressionthat affected all Western industrialized countries.As a result of the crash, the market lost over $30 billion in thespace of two days. By 1932, the stock market had lost 89% of itsvalue.The decline in stock prices caused bankruptcies and severemacroeconomic difficulties including contraction of credit,business closures, firing of workers, bank failures, decline of themoney supply. This increased unemployment and decreasedconsumer spending.
Causes of the Great Depression in the USAIt is widely agreed upon that the Stock Market Crash began a chain-reactionwhich ultimately led to the most devastating economic situation of the 20thCentury, the Great Depression.During the Crash of 1929 preceding the Great Depression, margin requirementswere only 10%. Brokerage firms, in other words, would lend $9 for every $1 aninvestor had deposited. When the market fell, brokers called in these loans,which could not be paid back. Banks began to fail as debtors defaulted on debtand depositors attempted to withdraw their deposits all at once triggeringmultiple bank runs.In the face of bad loans and worsening future prospects, the surviving banksbecame even more conservative in their lending. This caused businesses tostop growing, their worth fell, and bankruptcy increased. Productivity, trade andemployment all fell, which caused a loss of confidence throughout the US &Europe. People began to hoard money instead of giving it to banks, and thecycle worsened.
The Gold Standard, Loans, and the European DepressionDuring World War I, many European nations abandoned the gold standard, forcedby the enormous costs of the war, which resulted in inflation.Because of the huge reparations that Germany had to pay France, Germany begana credit-fueled period of growth in order to export and sell enough abroad to gaingold to pay back reparations. The U.S., as the worlds gold sink, loaned money toGermany to industrialize, which was then the basis for Germany paying backFrance, and France paying back loans to the U.K. and U.S. This arrangement wascalled the Dawes Plan.Following the war, most nations returned to the gold standard at the pre-war goldprice (deflating their currencies), in part, because they hoped to recover the samevalue in gold that they had lent, and in part because the prevailing opinion at thetime was that deflation was not a danger.For the next decade, the problem of deflation plagued Europe, as deflation erodesthe price of commodities while increasing the real value of debt.Furthermore, after the Great Crash of 1929, European nations found it much moredifficult to borrow money from the U.S. At the same time, high U.S. tariffs weremaking it much more difficult for them to sell their goods in U.S. markets. Withoutany source of revenue from foreign exchange to repay their loans, they began todefault.
Consequences of the Depression in the USThe Great Depression was a time of massive poverty andunemployment. Urban workers struggled to feed themselves andtheir children, whereas farmers struggled to sell their crops.Many people were forced out of their homes and jobs and becamemigrants, searching for work and food anywhere they could find it.During the first three years of the Great Depression, underHoover, very little was done to help those in need. The few socialprograms that existed did not have the resources to helpeveryone.In the Great Plains of the US, the Dust Bowl ravaged farmlandand forced farmers to migrate away from the central states to thecoast seeking work.
Roosevelts Election and the New DealHoover was regarded as a “do-nothing” president because of his lack ofresponse to the Great Depression. In 1932, the Democrats won a great politicalvictory, gaining control of the Presidency and Congress.In the first 100 days of Roosevelts presidency, he created initiatives to restoreAmerican confidence in banks and the economy. The most important reformswere the passage of the Emergency Banking Act, the creation of the SEC(Securities & Exchange Commission), and the “Alphabet Agencies”. Theseagencies used government money to support public development projects andcreate jobs.Roosevelt followed a Keynesian economic philosophy, as opposed to Hooversbelief in Supply Side economics. The debate about the merits of thesephilosophies continues today.Over the next two terms of his presidency Roosevelt continued to push forwardwith more New Deal programs, including the Tennessee Valley Authority, theWagner Act (which firmed up the role of unions), and the creation of the SocialSecurity administration, which created a system of pensions for Americanworkers and paid benefits to the disabled and unemployed.
The Legacy of the New DealDuring Roosevelts presidency many criticisms were leveled againstthe New Deal, both that the government had done too much to helpstruggling citizens, and that the government had done too little.Republican opponents of Roosevelts policies accused him of unfairlyrobbing from the rich, and creating socialist policies.A Republican-led Supreme Court challenged Roosevelts laws, untilRoosevelt unsucessfully tried to have the justices replaced.After his clash with the Supreme Court and the heavy criticism of hisopponents during the election, Roosevelt began to scale back NewDeal spending in the late Thirties.This caused a minor recession, and the United States economy wasnot fully restored until the beginning of the Second World War.
Recommendations on where to learn more about the GreatDepressionMusic:Woody Guthries Recordings for the Library of CongressMovies:O Brother, Where Art Thou?Bonnie and ClydeThe Grapes of WrathTo Kill a MockingbirdMr. Smith Goes to WashingtonBooks:Of Mice and Men
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