A2 History: American economy 1917-1929

A2 History: American economy 1917-1929

1. WORLD WAR ONE (1914-1918)

   • 1917: Woodrow Wilson made the decision for the U.S to enter
     • previously involved: allies/trade links (GB + FR)
     • POSITIVES INTERNATIONALLY > INTERNALLY
       • BENEFITS
         • Economic propserity
           • 1912-1916: trade increased from $2bil to $6bil in value
           • New York became the financial capital
           • 39% industrial growth 1916-1918
           • 1.3 new million jobs created
           • unemployment near 0%
           • real wages grew 20%
           • working conditions improved, unions strengthened
         • European trade links
           • went from a debtor to a creditor
           • $10bil in assets abroad
           • By 1918, loaned $11.2bil to allies
       • NEGATIVES
         • SELECTIVE SERVICE ACT 1914: demanded conscription
         • 112,500 died in battle
         • 16th ammendment gave congress the power to levy taxes
         • LIBERTY BONDS: allowed the government to borrow from the population, to then trade bonds as they see fit- TENSIONS
         • ESPIONAGE ACT AND SEDITION ACT restricted personal freedoms
         • extreme patriotism led to intolerance of immigrants
           • anti-German feel aided propaganda movements
         • temporary introduction of prohibition led to decreased trade
   • 1917: ESPIONAGE ACT- fines and imprisonment for interfering with the recruitment of troops
   • prohibition first introduced for the duration of the war
     • purchasing alcohol was seen as aiding German war efforts
       • Germans: big alcohol producers
   • 1918: SEDITION ACT- extended ESPIONAGE ACT to cover a broader range of offences
     • including expressing negative opinions of the war efforts

2. PRE 1917 CONTEXT

   • US had the largest economy
   • CIVIL WAR (1860's) sought to abolish slavery, SOUTH were against it, NORTH won
     • ethnic neighbourhoods emerged (enclaves)
     • racial tensions
     • economic prosperity
     • democratic popularity
     • population doubled
     • pull factors
   • transport development

3. MOTOR INDUSTRY

   • FORD
     • Model T
       • durable, all black,reliable, cheap to make
       • made motors a necessary good, no longer a luxary
       • upon the introduction of the assembly line, production costs reduced from $900-$500
     • economies of scale, division of labour, specialisation,
     • ASSEMBLY LINE
       • quicker production, specialisation
       • 1920: 1.25mil cars produced p/a
       • 1925: 1 car produced every 10 seconds
       • 1929: 7% of all employed worked in the motor industry
         • temporarily closed a plant in Detroit to retool for a new plant (model A) laying off 60,000 workers, contributing to a short recession
         • began to lose his market, competetitors showed variety, comfort and style
     • 24hr days
       • 3rd shift
     • FORDISM: mass production, selling in bulk
       • supply always exceeded demand, Ford was slow to learn, wasted goods and supply
     • Henry Ford
   • Ford, Chrysler, General Motors
     • difficult for independent companies to survive unless they produced specialised goods for the 3 main companies
   • automobile revolution
   • Detroit, motor city (MO TOWN)
   • replaced horse drawn carriages
   • FEDERAL HIGHWAY ACT (1921) gave the responsibility of road building to the central government
     • rate of 10,000 miles of road p/a by 1929
     • in 1920, only 1% of 3 mil miles of road were suitable for cars
     • 23mil cars on the road by 1929
     • vital links for business
   • IMPACTS
     • ECONOMY PROSPERED
       • increased trade
       • employment
       • change in infrastructure
       • new industry
       • living standards
       • American dream
       • fast production
     • CHANGE IN LAND USE
       • roads suffered
       • trucks
       • population movements
       • suburbs
       • motels
       • road deaths 20,000 p/a during 1920s
     • CULTURE CHANGE
       • leisure
       • commuting
       • dropped church attendance
       • taxi services
       • social leveller

4. CONSUMERISM

   • people increasingly living in urban areas, census designated any areas with a population less than 2,500 an urban area
   • large cities rapidly growing
     • New York: >5mil
     • Chicago topped 2mil
   • 15% people living in a city with a greater population than 0.5mil
   • cities were increasingly becoming home to black americans
     • migrated from the South, to places such as Harlem
     • in the 1920s, over 118,000 white Americans left Harlem and over 87,000 black Americans arrived
   • between 1920 and 1930 families with...
     • inside flush toilets rose from 20% to 50%
     • central heating rose 41&
     • electric lighting rose from 35% to 68%

5. INVESTMENT AND THE STOCK MARKET

   • Speculation
     • looking at patterns of shares, selling if the speculation is a loss, investing further if its going to be a gain
     • viewed as a get rich quick scheme
       • risky
   • on average, company profits increased by 80% in the US
   • Dividends were a bonus for shareholders
     • increased to 65%
   • appealled to desperate people who were struggling
   • shares bought on the margin required a 10% deposit and a bank loan
     • PROBLEM!!! Only enhanced the debt and struggle
   • Stockbrokers
     • 1919: $3.5bil
     • 1929: $8.5bil
     • Loans in value
   • encouraged investment, gained people money in the short term
     • risky
     • lost people money both in the short term and in the long term
     • made an unpredictable economy more tumultous