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American Economic Boom

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									Why did America boom in
      the 1920s?
      A very brief set of notes…
What is an economic boom?   Why did it happen?    Did everyone benefit?




             Why did America boom in
                   the 1920s?
         This presentation will look at 3 main areas:

                  • What is an economic boom?
                  • Why did it happen?
                  • Did everyone benefit from it?

         To return to the start click the logo.
What is an economic boom?   Why did it happen?   Did everyone benefit?




       What is an economic boom?
   • A rapid growth in a country’s money
     making that leads to increased
     prosperity (wealth).
   • The economic boom in America was
     based around consumer goods –
     luxury items that people wanted to
     buy but didn’t really need.
What is an economic boom?    Why did it happen?        Did everyone benefit?



      Examples of consumer goods
   Cars                     9 million in          26 million in
                            1919                  1929
   Radios                   60,000 in             10 million in
                            1920                  1929
   Telephones               10 million in         20 million in
                            1915                  1930

        Other consumer goods included: nylon stockings and fridges
What is an economic boom?   Why did it happen?   Did everyone benefit?




           Why did America boom?

   • Industrial Strength
   • World War One
   • New Ideas and Industries
   • Republican Policies
   • Confidence
What is an economic boom?   Why did it happen?   Did everyone benefit?




                 Industrial Strength

        America had large natural resources:
        • Oil – Texas
        • Coal – Kentucky
        • Iron – Chicago
        America had good agriculture (farming):
        • Cattle ranching – Colorado
What is an economic boom?   Why did it happen?   Did everyone benefit?




                      World War One
        • American industry had profited by selling war
          goods to Britain and France
        • The disruption to British and French industry
          allowed America to become the world’s leading
          exporter
        • America only joined the war in 1917 so had not
          suffered so badly – in contrast, by 1918 Britain
          owed the USA £900 million.
What is an economic boom?    Why did it happen?        Did everyone benefit?




         New Ideas and Industries
    The 1920s saw a dramatic change in American industry, for example:

        • Henry Ford ran the Ford Motor Company. It made the most
          famous car of the 1920s the Model ‘T’ Ford.
        • It was slow, ugly and nick named the ‘Tin Lizzie’.
        • However, by 1929 they were making more than 1 car a minute
          at the Red River plant. It was successful because it was cheap.
        • Mass Production – every part was standardised (only one colour
          and choice of engine), the cars were put together on a
          production line. The cars were moved along while workers did
          simple repetitive tasks, for example you might put on wheels
          all day. This unskilled workers could be paid less.
        • Mass production was cheap and quick.
What is an economic boom?   Why did it happen?             Did everyone benefit?




                  Cycle of Prosperity
                             More cars
                             were made
                                                                     petrol
          More parts                                                stations
         were needed
                                                     New             motels
                                                 opportunities
steel
                                                                      road
      Other industries                                               building
glass      grew
                                More
  leather                    people had
                                jobs
        rubber
What is an economic boom?    Why did it happen?        Did everyone benefit?



                   Republican Policies
   To be President in the 1920s was to be a Republican. Some of the
   policies followed by Harding, Coolidge and Hoover were:

       • Laissez Faire – French phrase meaning leave to do.
         Republicans believed that if government did not interfere
         in people’s lives then they would be free to make money.
       • Tariffs – taxes placed on imported goods so that there
         was less competition for US businesses
       • Low Taxes – so people had more money to spend, for
         example on consumer goods. Republicans believed this
         would help the economy grow.
       • Trusts – large companies were allowed to control whole
         industries. For example, Carnegie controlled the steel
         industry. It was believed that this would lead to them
         becoming more successful and efficient.
What is an economic boom?    Why did it happen?         Did everyone benefit?



                            Confidence
   All of these factors (reasons) helped make Americans feel more
   confident. This confidence led them to spend more, which in turn
   made the economy grow even faster.

   Americans in the 1920s were confident enough to start borrowing
   money to buy goods. Companies increasingly offered ‘hire
   purchase’ where consumers could ‘buy now, pay later’. For
   example, you could hire a car for a long period of time, once you
   had paid enough money the car would become yours.
What is an economic boom?       Why did it happen?            Did everyone benefit?



       Did everyone benefit from the
                  boom?
   The simple answer is no. In the 1920s nearly half of all Americans lived
   in rural areas (the countryside). During this time agriculture (farming)
   was actually suffering.

   Farm Incomes dropped from: $22 billion in 1919 to $13 billion in 1928

   There were several reasons for this:
   •Tariffs reduced trade with other countries
   •World War One meant that Europe couldn’t afford American food
   exports
   •Canadian wheat producers were growing more grain
   •Over production made prices fall.
   •Dustbowl – over farming led to some areas in the mid west to become
   unusable desert.

   As a result, millions left for the cities. For the first time, more
   Americans were living in cities than in the countryside.
What is an economic boom?     Why did it happen?          Did everyone benefit?



       Did everyone benefit from the
                  boom?
   The booming American economy in the 1920s led President Hoover to
   say:
        “we in America today are nearer to the final
        triumph over poverty than ever before in the
        history of any land”
        $     10%                                         32%
                         
                                                           
                         

        But there was still great inequality. 32% of the wealth went to the
        richest 5% of people. Only 10% of wealth went to the poorest
        42% of people. Therefore, nearly half of all Americans were too
        poor to take part in this consumer good based boom.

								
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