Significance of the Boom

Assess the significance of the economic boom of the 1920s in the USA

The positive impact of the 'Roaring Twenties'
Economic growth

The American economy grew dramatically. Its Gross National Product (GNP) increased from $78 billion to $103 billion.
Output in the USA doubled in the 1920s.

Prosperity for businessmen and industrialists

Many businesses made huge profits.
The number of people filing income tax returns for earning more than $1 million a year rose from 65 to 513.
Among the big winners included owners of new industries, such as the chemical, electrical and automobile industries.
There was a building boom as more and more factories, office blocks, showrooms and roads were needed. This was the age of the skyscraper because companies wanted to demonstrate their power and importance by building the tallest.

Industrial techniques revolutionised

Use of assembly lines, standardisation of components and efficient management systems modernised industrial production. New materials led to cheap, attractive goods.

Increased employment

Unemployment dropped from 11.9 million in 1921 to 3.2 million in 1929.
It was easy for white people to find jobs on the new assembly lines and they were better paid than workers in the textile factories. For example, Henry Ford paid $5 dollars per day, double the pay in the traditional industries.
By 1929, 25 per cent more females were employed, which meant that amost 10.6 million women worked outside the home.

Development of a consumer society

American became the first major consumer society with demand for goods rising by 20 per cent.
Mass production meant vast quantities of cheap goods in a wide range of materials were readily available in chain-stores and from mail order firms.
Sophisticated advertising fuelled the demand for these new products and electricity powered new gadgets, such as refrigerators, washing machines and vacuum cleaners.
Travel became popular. By 1928, 1 in 6 Americans had cars and the number of airline passengers grew from less than 6000 in 1926 to approximately 173,000 in 1929.

Social change (Improvement)

There was a clear link between prosperity and social change.
The increase in wealth led to the construction of schools and public buildings. Many rich industrialists donated generously to charities. Some set up their own orphanages and hospitals.
Migration from the rural areas in the Midwest and the south to the industrial cities of the north and east increased, especially among black Americans.
People became more confident in and proud of America.

Greater independence and opportunities for middle class women

As middle class women became better off they enjoyed greater freedom.
They were able to live independently for the first time and often rejected the values of their parents.
Many became flappers who wore make-up and shorter skirts, smoked and drank in public and went to speakeasies.
They also worked in a wider range of jobs. Previously they had been factory workers and nurses. Now they became clerks, telephonists, typists and secretaries.
Labour-saving devices, such as electric water heaters and vacuum cleaners, meant they had more free time to develop hobbies.

Development of popular entertainment

Technological advances led to the development of popular culture. Especially important were cinemas and radios.
In 1919, 60,000 radios were sold, but by 1929 sales had risen to 10 million. There was a similar growth in sales of telephone equipment, from 10 million in 1915 to 20 million in 1930.

Not everyone shared in the boom

Wealth was unevenly distributed - For many Americans, the 1920s was a decade of poverty. More than 60 per cent of Americans lived on / just below the poverty line.
Farming - machinery and overproduction led to rapidly falling prices (wheat prices fell from $183. a bushel in 1920 to 38 cents ain 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 - e.g. 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.
Traditional Industries - overproduction of coal (which was being replaced by oil and gas) led to mine closure and falling wages. In 1929 a coal miners wage was barely a third of the national average income. There were also problems in the textiles industry (where 'flapper' fashions were reducing the amount of cloth used to make clothes).
Generally, groups such as farmers, black Americans, immigrants, workers in the traditional industries and working class women did not enjoy the prosperity of the 'Roaring Twenties'.
Cartels, trusts and monopolies - ‘fixed the market’ and tried to keep prices high and wages low.
Unemployment – new technology was throwing more and more people out of work; the number of unemployed stood at 2 million throughout 1920s.

Lead to over confidence

So great was over-confidence that people were even buying shares in imaginary companies. Many were buying shares ‘at the margin’ (a person could get a loan of up to 90% to buy shares) expecting to make enough profit to repay the loan when the shares were resold - brokers’ loans almost trebled 1926-9. All this threatened disaster if share prices ever stopped rising.

Problems with mass production

workers became bored with the monotonous work;
factory owners were often anti-union and encouraged strong-armed tactics against their members;
the factories bred racism. Some owners had a whites-only policy. For most of the 1920s Henry Ford’s newspaper, The Dearborn Independent, spread anti-Semitism;
mechanisation led to unemployment as well as to employment;
some people blamed the car for increased crime and a moral decline in the young.

Protective tariffs led to 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.

What conclusions to draw? Consider the following two quotes - which one 'sits' more comfortably with you in assessing the signifcance of the 1902s boom?

"In the USA too much wealth had fallen into too few hands, with the result that consumers were unable to buy all the goods produced. The trouble came to a head mainly because of the easy credit policies of the Federal Reserve Board, which favoured the rich. Its effects were so profound and so prolonged because the government did not fully understand what was happening or what to do about it." John A. Garraty, The American Nation (1979)

"We in America today are nearer to the financial triumph over poverty than ever before in the history of our land. The poor man is vanishing from us. Under the Republican system, our industrial output has increased as never before, and our wages have grown steadily in buying power." President Hoover, speaking in 1928 During his election campaign