The US economy in the late 1920s appeared healthy on the surface as unemployment was low and the stock market soared. However, there were signs of danger below with wealth becoming increasingly concentrated at the top, personal debt rising, and widespread speculation in the stock market. While most Americans expected continued prosperity, the uneven distribution of wealth and increasing risky behavior left the economy vulnerable for a crash.
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
The Roaring Twenties Economy and the Rise of Consumer Spending
1. A Business BoomA Business Boom
Ch. 14.2Ch. 14.2
PP. 491-497PP. 491-497
2. Key TermsKey Terms
• Consumer economyConsumer economy
• Installment planInstallment plan
• Gross national productGross national product
• Henry Ford/Model THenry Ford/Model T
• Assembly lineAssembly line
3. Key QuestionsKey Questions
a.a. What is aWhat is a “consumer economy” & what conditions“consumer economy” & what conditions
made this possible in the ‘20s?made this possible in the ‘20s?
b.b. How were Henry Ford & the automobile soHow were Henry Ford & the automobile so
important to the 1920s?important to the 1920s?
c.c. Which groups of people benefited from the economicWhich groups of people benefited from the economic
boom? Who was bypassed by the boom?boom? Who was bypassed by the boom?
4. U.S. EconomyU.S. Economy
• Dip after shift away from war-time productionDip after shift away from war-time production
• Incomes rose after 1920 thoughIncomes rose after 1920 though
• Between 1914 & 1926 incomes rose 28%Between 1914 & 1926 incomes rose 28%
• Development ofDevelopment of consumer economyconsumer economy
• One that depends on a large amount of consumerOne that depends on a large amount of consumer
spendingspending
• Why a shift from thrift?Why a shift from thrift?
• Higher wages, clever ads, new products, credit-spendingHigher wages, clever ads, new products, credit-spending
5.
6.
7. Buying on creditBuying on credit
• Installment planInstallment plan-Paying partial payments at set-Paying partial payments at set
intervals; typically w/ interestintervals; typically w/ interest
• Fueled consumer spendingFueled consumer spending
• 60% of all cars; 70% of furniture; 80% of vacuum60% of all cars; 70% of furniture; 80% of vacuum
cleaners; 90% of washing machinescleaners; 90% of washing machines
• Paid in cash beforePaid in cash before
8. ElectricElectric
powerpower
• Electricity becomes cheap &Electricity becomes cheap &
widely availablewidely available
• Less popular in rural areasLess popular in rural areas
• Costly to run power linesCostly to run power lines
• Rural Electrification Act,Rural Electrification Act,
19361936
• George NorrisGeorge Norris
• General Electric became oneGeneral Electric became one
of the worldof the world’s largest’s largest
companiescompanies
9.
10. AdvertisingAdvertising
• New ads talked less aboutNew ads talked less about
product; more about howproduct; more about how
product would improve yourproduct would improve your
lifelife
• Used celebrities; could beUsed celebrities; could be
stylish/like a movie starstylish/like a movie star
• Persuasive/Used psychologyPersuasive/Used psychology
12. Rise in productivityRise in productivity
• Gross National ProductGross National Product--
Total value of goods &Total value of goods &
services a country producesservices a country produces
• American GNP had to riseAmerican GNP had to rise
in order to meet consumerin order to meet consumer
demanddemand
• From 1921-1929 the GNPFrom 1921-1929 the GNP
grew at an average rate ofgrew at an average rate of
6%6%
• Had been ~1% in 1910sHad been ~1% in 1910s
• New technology & newNew technology & new
management methodsmanagement methods
• Increased efficiencyIncreased efficiency
• Increased worker outputIncreased worker output
13. Ford & the AutoFord & the Auto
• 1896—Henry Ford perfected his1896—Henry Ford perfected his “quadricycle”“quadricycle”
• 1903—Founded his own company1903—Founded his own company
• 1908—Sold 30K Model Ts1908—Sold 30K Model Ts
14. Ford & the AutoFord & the Auto
• Ford hoped toFord hoped to “democratize“democratize
the automobile” (make itthe automobile” (make it
more affordable)more affordable)
• Assembly lineAssembly line-manufacturing-manufacturing
process in which each workerprocess in which each worker
does one specialized task indoes one specialized task in
the construction of a finalthe construction of a final
productproduct
• Ford made the assembly lineFord made the assembly line
more efficientmore efficient
• Repetitive, tedious, strain onRepetitive, tedious, strain on
workersworkers
• Created a Model T every 24Created a Model T every 24
secondsseconds
• By 1914, whole car in 93By 1914, whole car in 93
minutesminutes
• By 1925, 9-10K/dayBy 1925, 9-10K/day
• Ford produced half of theFord produced half of the
worldworld’s cars between 1908 &’s cars between 1908 &
1927 (15 million)1927 (15 million)
• As production rose costsAs production rose costs
droppeddropped
16. Ford & the autoFord & the auto
• Model T only came in one colorModel T only came in one color
—black—black
• Cheap, as low as $260Cheap, as low as $260
• About 3K todayAbout 3K today
• Model T replaced by Model A inModel T replaced by Model A in
1927 after GM surpassed Ford1927 after GM surpassed Ford
salessales
• Now 4 colorsNow 4 colors
• Used vertical consolidation toUsed vertical consolidation to
maximize profitsmaximize profits
• Ford owned ore mines, forests,Ford owned ore mines, forests,
railroads, ships,railroads, ships,
• *see map on p. 495*see map on p. 495
Cost of Model T
17. Ford A ComplexFord A Complex
BusinessmanBusinessman
• Admirable, but had personal failingsAdmirable, but had personal failings
• High wages for workersHigh wages for workers
• Attempted toAttempted to “Americanize”“Americanize”
his workershis workers
• Strongly anti-SemiticStrongly anti-Semitic
• Gave to charityGave to charity
18. Industrial growthIndustrial growth
• Rise of auto industry helpedRise of auto industry helped
other industriesother industries
• Rubber, gasoline, steelRubber, gasoline, steel
• Auto industry helped otherAuto industry helped other
businessesbusinesses
• Gas stations, motels, carGas stations, motels, car
dealerships, restaurantsdealerships, restaurants
• By 1929, about 3.7 millionBy 1929, about 3.7 million
people owed their jobs topeople owed their jobs to
auto industryauto industry
19. Industrial growthIndustrial growth
• Aviation industry took offAviation industry took off
• Built off of success ofBuilt off of success of
Lindbergh & EarhartLindbergh & Earhart
• 11stst
domestic airlinesdomestic airlines
• Passenger & cargoPassenger & cargo
• Big business took off w/Big business took off w/
laissez-faire policieslaissez-faire policies
• Top 200 companies value inTop 200 companies value in
1919=$43 billion & in1919=$43 billion & in
1929=$81 billion1929=$81 billion
20. Bypassed by the boomBypassed by the boom
• Farm prices & demand highFarm prices & demand high
during WWIduring WWI
• Prices drop after WWI asPrices drop after WWI as
European countries recoverEuropean countries recover
• Esp. hogs & wheatEsp. hogs & wheat
• Many farmers were forcedMany farmers were forced
to abandon their workto abandon their work
• Wages remained low forWages remained low for
unskilled laborersunskilled laborers
• Railroad companies stalledRailroad companies stalled
as trucking took offas trucking took off
21. The Economy in theThe Economy in the
Late 1920sLate 1920s
Ch. 14.3Ch. 14.3
pp. 498-501pp. 498-501
22. Key TermsKey Terms
• Welfare capitalismWelfare capitalism
• SpeculationSpeculation
• Buying on marginBuying on margin
23. Key QuestionsKey Questions
a.a. Why did the economy of the late 1920s appearWhy did the economy of the late 1920s appear
healthy to most Americans?healthy to most Americans?
b.b. What danger signs were present in the economy ofWhat danger signs were present in the economy of
the lat 1920s?the lat 1920s?
24. Election of 1928Election of 1928
• Hoover promised to keepHoover promised to keep
government out of businessgovernment out of business
• Hoped to preserve theHoped to preserve the
American system ofAmerican system of
“rugged individualism”“rugged individualism”
25. Economy appearsEconomy appears
healthyhealthy
• People expected good timesPeople expected good times
to get better during Hooverto get better during Hoover’s’s
22ndnd
termterm
• Stock market soaredStock market soared
• Described by NY Times asDescribed by NY Times as
“wonderful prosperity”“wonderful prosperity”
• Unemployment below 4%Unemployment below 4%
• Business success was almostBusiness success was almost
like religionlike religion
• The Man Nobody KnowsThe Man Nobody Knows
• Written by ad executive, toldWritten by ad executive, told
of Jesusof Jesus’ life in business’ life in business
termsterms
• ““Everybody Ought to beEverybody Ought to be
Rich”Rich”
• Article by John RaksobArticle by John Raksob
26. Welfare CapitalismWelfare Capitalism
• New approach to businessNew approach to business
• Raised wagesRaised wages
• Provided extra benefits likeProvided extra benefits like
paid vacationspaid vacations
• English classes forEnglish classes for
immigrantsimmigrants
• Hoped to strengthenHoped to strengthen
company loyalty & moralecompany loyalty & morale
• Union membershipUnion membership
decreaseddecreased
27. Economic DangerEconomic Danger
signssigns
• Rich getting richerRich getting richer
• Uneven wealthUneven wealth
• 0.1% of the population had0.1% of the population had
34% of the country34% of the country’s total’s total
savingssavings
• Nearly 80% of all families hadNearly 80% of all families had
no savingsno savings
• Taxes had been reduced forTaxes had been reduced for
the richthe rich
• Personal debt soared as creditPersonal debt soared as credit
spending increasedspending increased
• Luxury items seemedLuxury items seemed
affordable to allaffordable to all
• Playing the stock marketPlaying the stock market
• ““Get rich quick” attitudesGet rich quick” attitudes
• Speculation—Making highSpeculation—Making high
risk investments in hopes of arisk investments in hopes of a
high returnhigh return
• Buying on a margin—Buying on a margin—
Purchasing stock for only aPurchasing stock for only a
fraction of its true costsfraction of its true costs
• OverproductionOverproduction
• Falling farm pricesFalling farm prices