Some questions to keep in mind:

1. What role did new technology play in shaping the economy of the 1920s? The culture of the 1920s?
2. Compare the relationship between big business and government during the 1920s to that of the Gilded Age.
3. How did the nation's lasting love affair with the automobile affect American society? The American economy?
4. If Ronald Reagan, Herbert Hoover, and Andrew Mellon walked into a bar where a sign stated, "Sorry, our drinks don't trickle down" who would be the first to leave?

The Aftermath of World War I

The decade of the 1920s, or as it was called by its contemporaries, "The New Era," was marked by prosperity and new opportunity in the aftermath of World War I. The war began in Europe in 1914, and the United States entered the fray in 1917. A significant reason for United States involvement in the war was the nation's economic links to the Allied Powers, and especially to Great Britain. Wall Street financial institutions such as the House of Morgan had given loans to Great Britain totaling over $2.3 billion. As a result, Wall Street feared a British defeat even more than Main Street.

Before 1917, American public opinion about the war was generally divided along ethnic lines. Old-stock Americans of Anglo-Saxon heritage were on the side of Britain and France. Americans of German heritage wanted the United States to remain neutral. Many Americans with ties to Eastern Europe, such as Russian and Polish Jews, also supported Germany, which, up to that time, had been more tolerant of religious minorities than either tsarist Russia or the nations of Western Europe.

The United States, still officially neutral, mostly ignored British search and seizure of American ships for two reasons:

1. The German market was not as important as either the French or the British markets.
2. Sales to Britain and France soared from $825 million in 1914 to $3.2 billion in 1916.

By 1915, President Wilson, while preaching peace, had begun to gear up for warfare, expanding the United States army and navy. Because of increased German submarine attacks on American ships, America entered the war on the side of the Allies in 1917, and almost immediately tipped the balance in their favor. In full retreat, Germany asked for an armistice, which was granted on November 11, 1918. The effect of the war on Germany, France, Great Britain, and Russia was devastating, both to their economies and in the loss of human life. America, on the other hand, came out of the war relatively unscathed. American soldiers (called "doughboys" because the large buttons on their uniforms resembled a deep-fried bread of the same name) returned home in May 1919 to ticker-tape parades and the promise of a prosperous decade.

Of course, there were problems as well. The transition from a war-time to a peace-time economy caused economic dislocation for industrial workers, loss of income for farmers, and renewed racism and nativism against African-Americans and foreign immigrants. Many Americans, however, reveled in the new culture of consumerism.

The Politics of Prosperity

In search of prosperity, Americans elected three Republican Presidents during this decade. Each of these men promised to promote the politics of prosperity:

The Business Boom of the 1920s

On the whole, the United States economy experienced steady growth and expansion during the 1920s. Three factors fueled this economic growth:

1. Machines
2. Factories
3. The Process of Standardized Mass Production

This upward spiral continued until 1929. There were five main sources of the 1920s economic boom:

1. Effect of WWI on technology.
2. Scientific management: "Taylorism"
3. Rapid increase in worker productivity
4. Psychology of consumption
5. Relations between the federal government and big business

1. Effect of WWI on Technology.

During the war, a significant labor shortage, combined with the need for increased production, necessitated new, more efficient methods of production. The War stimulated a number of old industries, such as petroleum and steel, and helped create a host of new industries, such as plastic and rayon production. One measure of these accelerated technological changes is the money spent on new machinery for industry. In 1915, the total annual expenditure was $600 million, which grew to $2.5 billion by 1918.

2. Scientific management known popularly as "Taylorism."

We've already discussed "Taylorism" in Lecture 11, with its mathematical formula for labor, streamlining of tasks, and increase in production. In the 1920s, American industries implemented scientific management on a grand scale, pouring millions of dollars into industrial research.

3. Rapid increase in worker productivity.

As scientific management and new technology increased worker productivity, workers earned higher wages and became better consumers. A new innovation appeared: the installment plan, which encouraged Americans to build up debt in order to buy consumer goods.

• Radio
  

  The first commercial radio station went on the air in the 1920s in Pittsburgh, while the first public radio station opened on the campus of the University of Wisconsin. By 1922, 3 million American households had radios, and purchases of receivers had increased by 2,500%, giving the industry annual sales of $850 million by 1929.

  Radio broadcasting from the University of Wisconsin Fieldhouse during a basketball game Copyright 1997 State Historical Society of Wisconsin

• Motion pictures
  A fledgling industry before World War I, motion picture production became one of the ten largest industries in the United States during the 1920s. In 1922, theaters sold 40 million tickets a week. By 1929, that number had grown to 100 million a week. One of the capitalists who cashed in on Hollywood was Joseph P. Kennedy, patriarch of the Kennedy's, one of the nation's most influential political families. During eight months in Hollywood, he made $6 million.
• New electric appliances
• A floodtide of new electric appliances lightened the load of the middle-class American housewife: vacuum cleaners, toasters, washing machines, refrigerators. Women became America's greatest consumers, purchasing appliances and other items that would have been considered a luxury just a generation before.
• Automobile industry

  Nowhere was the psychology of consumption more evident than in the automobile industry. Annual automobile production rose from 2 million during the 1920s to 5.5 million in 1929. By the late 1920s, there was one automobile for every five Americans, allowing, theoretically, for every person in the United States to be on the road at the same time.

  Assembly line production of Ford cars at the Ford "Rouge Plant" Copyright 1997 State Historical Society of Wisconsin

  Two factors led to the rising popularity of cars:

  1. Cost-- The price of automobiles declined steadily until the mid-1920s so that many well-paid working families could now afford to purchase a car. The Model T Ford, for example, cost just $290 in 1926.
  2. Credit-- In 1925, Americans made 75% of all automobile purchases on the installment plan.

  1920s Ford Model T

  Copyright 1997 State Historical Society of Wisconsin

  Henry Ford (1863-1947) was the chief figure in this expanding industry. Ford did not invent the automobile, but he did the most to promote the car by developing more efficient and cheaper means of production. He built his first car in his garage in 1896. Symbolic of the American century to come, the door of the shed was too small and he had to remove bricks to make way for the car. Ford is said to have remarked: "Americans can have any kind of car they want, and any color they want, as long as it's a Ford, and as long as it's black."

  Henry Ford (1863-1947), industrialist Copyright 1997 State Historical Society of Wisconsin

  Perceived as a shining model of the American success story, Ford was so trusted by the American public that in 1928, when he announced the development of the new Model A, half a million Americans made a down payment on the car without having seen it, taken it for a test drive, or even known how much it would cost.

  

  The automobile had a huge impact on American life, both economic and social.

  Economic Effects of the Automobile:

  1. Promoted growth of other industries. Especially petroleum, rubber, and steel.
  2. Helped fuel the creation of a national system of highways. Automobiles required better roads. After WWI, federal funds became available for building highways and a major industry was born.
  3. Created new service facilities. Filling stations, garages, and roadside restaurants sprang up across the nation. Motels (the word itself is a blend of 'motor' and 'hotel') catering to the needs of motorists began to replace hotels.

  Social Effects of the Automobile:

  1. Created a more mobile society. Cars broke down the distinctions between urban and rural America. With the automobile came the new tradition of the "Sunday drive," and many city folks got their first chance to tour the rural countryside. Rural Americans, on the other hand, drove into cities to shop and to be entertained.

  2. Broke down the stability of family life. Now it was far easier for individual family members to go their own way.

  3. Broke down traditional morality. Children could escape parental supervision as cars became a sort of "bedroom on wheels."

  In 1929, sociologists Robert and Helen Lynd published, Middletown, a book based on field research done in Muncie, Indiana, in 1924 and 1925. The Lynds explored how industrialization had transformed tradition values and customs in Middle America. They paid particular attention to people's changing attitudes toward the automobile.   They found that people of every income level considered the automobile a necessity rather than an luxury. People were willing to sacrifice food, clothing, and their savings in order to own a car.

5. Relations between the federal government and big business.

American businessmen regained the status of folk hero they had enjoyed in the days before Progressivism. Many Americans began to equate prosperity with progress.

Other popular books painted a different picture. Bruce Barton, a prominent figure in advertising, published, The Man Nobody Knows: A Biography of Jesus, in 1925. Barton presented Jesus as the "founder of modern business" and the apostles as the "greatest sales force in history."

Relationships between businessmen and government had never been closer than they were in the 1920s. Calvin "Silent Cal" Coolidge piped up:

"Wealth is the chief end of man!"

and slightly less laconically:

"The man who builds a factory, builds a temple. The man who works there, worships there."

"The American Way"

Businessmen had two major propaganda mills: the Chamber of Commerce and the National Association of Manufacturers. Both groups preached a return to laissez-faire economics, less government regulation of business, and less government support for labor unions. The National Association of Manufacturers labeled this program, "The American Way." President Harding spoke for himself and for his successors, Coolidge and Hoover, when he asked for "less government in business and more business in government."

There were four major ways in which the federal government supported big business.

1. High tariff policies. The Fordney-McCumber Act (1922) and the Hawley-Smoot Act (1930) created the highest-ever schedule of tariffs for foreign-made goods.
2. Andrew Mellon. Secretary of the Treasury from 1921 to 1932. In response to his demands, Congress repealed the excess profits tax and reduced the rates for corporate and personal income taxes. Mellon provided business leaders with a list of tax loopholes which the IRS had drawn up at Mellon's request.
3. Cutbacks in the Federal Trade Commission (FTC). The federal government had created the FTC to regulate big business and to look into unfair trade practices, but the commission did less and less of this in the 1920s.
4. Herbert Hoover.  As Secretary of Commerce and as President, Hoover encouraged price-fixing and believed that the government was responsible for helping businesses profit.

Not everyone took part in the material successes of the 1920s. This decade also saw growing racism and nativism, increasing frustration from those who felt cut off from prosperity. This side of the "Roaring Twenties" is a fascinating and extraordinarily important part of our story. So important, in fact, that we'll take it up in Lecture 16: "The Politics of Frustration: The 1920s."

Lecture 15	Related Web Links
Content	Presentation	Audience	Link	Info
		High School	The Fabulous Ruins of Detroit
		Grad	"Conspicuous Consumption," from THE THEORY OF THE LEISURE CLASS, by Thorstein Veblen
		High School	The Jazz Age Page
		College	A Comparative Chronology of Money, 1920-1938
		High School	Surfing The Aether - Broadcasting in the 1920's
		High School	The Life of Henry Ford
		College	Excerpts from The Man Nobody Knows
		High School	Yesterday USA: Vintage Radio Broadcasts (RealAudio)

Home || Course || Guide || Bios || Photos || Exams || Calendar || Comments/Sign-in