postwar prosperity and its price objective: describe how the american economy changed in the 1920s...

Postwar Prosperity Postwar Prosperity and Its Priceand Its Price

Objective:Objective: Describe how the American economy Describe how the American economy

changed in the 1920s and the effects changed in the 1920s and the effects these changes had on American lifethese changes had on American life

J. P. Morgan's role in the economy was denounced as overpowering in this hostile J. P. Morgan's role in the economy was denounced as overpowering in this hostile political cartoonpolitical cartoon

Summary for the DecadeSummary for the Decade

Republican Warren G. Harding wins Republican Warren G. Harding wins presidency based on “return to normalcy”presidency based on “return to normalcy”

Increased productionIncreased production Boom in consumer goodsBoom in consumer goods Uneven distribution of wealthUneven distribution of wealth Ends with worst economic depression in Ends with worst economic depression in

American historyAmerican history Transforms American business, careers, and Transforms American business, careers, and

lifestylelifestyle

The Second Industrial The Second Industrial RevolutionRevolution

Technological innovations make it Technological innovations make it possible to increase industrial output possible to increase industrial output without expanding the labor force.without expanding the labor force.

ElectricityElectricity allows new more efficient allows new more efficient machinery to replace older steam machinery to replace older steam powered machines.powered machines.

1929, 70% of U.S. factories are 1929, 70% of U.S. factories are electrified.electrified.

Producer-durable goods (19Producer-durable goods (19thth century)century) Mass-producedMass-produced

Machine toolsMachine tools RRsRRs IronIron SteelSteel

Consumer-durable goodsConsumer-durable goods Mass-producedMass-produced


Automobiles Canning

Radios Chemicals

Washing machines Synthetics

Telephones plastics


More efficient managementMore efficient management Greater mechanizationGreater mechanization Intensive product researchIntensive product research Ingenious sales and advertising Ingenious sales and advertising

methodsmethods

= doubled U.S. industrial production= doubled U.S. industrial production

The Modern CorporationThe Modern Corporation

In with the new:In with the new: Alfred P. Sloan of GMAlfred P. Sloan of GM Owen D. Young of RCAOwen D. Young of RCA Salaried execs, plant managers, and Salaried execs, plant managers, and

engineers make policy without a engineers make policy without a controlling interest in the companies controlling interest in the companies they work for.they work for.

Stress scientific management and behavioral Stress scientific management and behavioral psychology to make more productive, stable psychology to make more productive, stable and profitable workplaces.and profitable workplaces.


Out with the old:Out with the old: John D. Rockefeller in oilJohn D. Rockefeller in oil Andrew Carnegie in steelAndrew Carnegie in steel

Owned their companiesOwned their companies Managed their companiesManaged their companies


Three key areas:Three key areas:1.1. Integration of production & distributionIntegration of production & distribution

2.2. Product diversificationProduct diversification

3.3. Expansion of industrial researchExpansion of industrial research

The Modern CorporationThe Modern Corporation DuPontDuPont

Goes from specializing in explosivesGoes from specializing in explosives Diversity in rayon, paints, dyes, and Diversity in rayon, paints, dyes, and

celluloid productscelluloid products GE & WestinghouseGE & Westinghouse

From lighting and power equipmentFrom lighting and power equipment After WWI, household appliances such After WWI, household appliances such

as radios, washing machines, and as radios, washing machines, and refrigerators.refrigerators.


Oligopoly (Ol-i-gop-o-ly)Oligopoly (Ol-i-gop-o-ly) Control of a market by a few large producersControl of a market by a few large producers This meant that Americans were increasingly This meant that Americans were increasingly

members of a national consumer community, members of a national consumer community, buying the same brands all over the country, buying the same brands all over the country, as opposed to locally produced goods.as opposed to locally produced goods.

200 companies own ½ nation’s corporate 200 companies own ½ nation’s corporate wealthwealth

100 corporations earn ½ of the total revenue 100 corporations earn ½ of the total revenue from sales of goodsfrom sales of goods

The Great Atlantic and Pacific Tea Co. (A&P) = The Great Atlantic and Pacific Tea Co. (A&P) = 10% of all retail food sales in U.S.10% of all retail food sales in U.S.

Name brand goods at discount pricesName brand goods at discount prices

Monopoly to CapitalismMonopoly to Capitalism OligopolyOligopoly is the is the middle ground middle ground between between

monopoly and capitalism. An oligopoly is a monopoly and capitalism. An oligopoly is a small group of businesses, two or more, that small group of businesses, two or more, that control the market for a certain product or control the market for a certain product or service. service.

This gives these businesses This gives these businesses huge influence huge influence over price over price

companies in oligopolies establish exclusive companies in oligopolies establish exclusive dealerships, have agreements to get lower dealerships, have agreements to get lower prices from suppliers, and lower prices with prices from suppliers, and lower prices with the intention of keeping new companies out.the intention of keeping new companies out.

oligopoly examples are abundant in our oligopoly examples are abundant in our economic system today.economic system today.

Modern ExamplesModern Examples Four music companies control 80% of the market - Four music companies control 80% of the market -

Universal Music Group, Sony Music Entertainment, Warner Universal Music Group, Sony Music Entertainment, Warner Music Group and EMI GroupMusic Group and EMI Group

Six major book publishers - Random House, Pearson, Six major book publishers - Random House, Pearson, Hachette, HarperCollins, Simon & Schuster and Holtzbrinck Hachette, HarperCollins, Simon & Schuster and Holtzbrinck

Four breakfast cereal manufacturers - Kellogg, General Four breakfast cereal manufacturers - Kellogg, General Mills, Post and QuakerMills, Post and Quaker

Two major producers in the beer industry - Anheuser-Busch Two major producers in the beer industry - Anheuser-Busch and MillerCoorsand MillerCoors

Two major providers in the healthcare insurance market - Two major providers in the healthcare insurance market - Anthem and Kaiser PermanenteAnthem and Kaiser Permanente

Phone and cable companiesPhone and cable companies TVTV FilmFilm CarsCars

Welfare CapitalismWelfare Capitalism Challenged the power and appeal of Challenged the power and appeal of

trade unions and collective bargaining.trade unions and collective bargaining. Created new programs designed to Created new programs designed to

improve worker well-being and morale.improve worker well-being and morale. Stock optionsStock options Insurance policies for accidents, illness, Insurance policies for accidents, illness,

old age, and deathold age, and death Improved safety and provided medical Improved safety and provided medical

servicesservices Establish sports and recreation programsEstablish sports and recreation programs

Welfare CapitalismWelfare Capitalism Encouraged company loyalty and Encouraged company loyalty and

discouraged job related complaintsdiscouraged job related complaints Could not solve chronic problems Could not solve chronic problems

facing industrial workers:facing industrial workers: Seasonal unemploymentSeasonal unemployment Low wagesLow wages Long hoursLong hours Unhealthy factory conditionsUnhealthy factory conditions

Welfare CapitalismWelfare Capitalism The American Plan The American Plan launched by large launched by large

corporations against unions.corporations against unions. Associated unionism with foreign and Associated unionism with foreign and

un-American ideas.un-American ideas. Open shops were also anti-union.Open shops were also anti-union.

No employee is forced to join a union.No employee is forced to join a union. If one exists, nonmembers would get the If one exists, nonmembers would get the

same wages and rights as union members.same wages and rights as union members. No advantage to being in the unionNo advantage to being in the union

Welfare CapitalismWelfare Capitalism

U.S. Steel and International U.S. Steel and International Harvester set up company unionsHarvester set up company unions Symbolic employee representation at Symbolic employee representation at

management meetings versus the more management meetings versus the more confrontational collective bargaining.confrontational collective bargaining.

Sharp decline in union membership.Sharp decline in union membership. 5 million in 19205 million in 1920 3.5 million in 19263.5 million in 1926

Government reverts to pro-business Government reverts to pro-business attitude of pre-WWI.attitude of pre-WWI.

The Auto AgeThe Auto Age

The Auto AgeThe Auto Age No other single development could No other single development could

match the impact of the automobile match the impact of the automobile on the way that Americans worked, on the way that Americans worked, lived, and played.lived, and played.

1925 Model T Ford

The Auto AgeThe Auto Age Henry Ford’s continuous assembly Henry Ford’s continuous assembly

line could drastically reduce the line could drastically reduce the number of worker hours required to number of worker hours required to produce a car.produce a car. One vehicle in 1913 = 13 hoursOne vehicle in 1913 = 13 hours 1914 = 90 minutes1914 = 90 minutes 1925 = 1 every 10 seconds1925 = 1 every 10 seconds

Finest example of a consumer Finest example of a consumer durable.durable.

The Auto AgeThe Auto Age Ford introduces $5.00 for an 8-hour Ford introduces $5.00 for an 8-hour

day in 1914.day in 1914. Double the daily wage and a shorter Double the daily wage and a shorter

workdayworkday Ford realizes that workers are Ford realizes that workers are

consumers and the new wage will consumers and the new wage will boost sales.boost sales.

Also, reduces employee turnover and Also, reduces employee turnover and increases efficiency.increases efficiency.


2/3 of Ford’s labor force are southern and 2/3 of Ford’s labor force are southern and eastern European.eastern European.

Employs 5,000 African American workers, Employs 5,000 African American workers, more than another corporation.more than another corporation.

Mass-production and economies of scale Mass-production and economies of scale (the more of a product you produce the cheaper each unit of this (the more of a product you produce the cheaper each unit of this

product becomes) product becomes) make his automobiles make his automobiles affordable at ½ the price of his affordable at ½ the price of his competitors.competitors.


General Motors (GM) develops a new General Motors (GM) develops a new and effective marketing strategy:and effective marketing strategy: Cadillac = most expensive carCadillac = most expensive car Chevrolet = least expensive and Chevrolet = least expensive and

targeted the working-class and lower-targeted the working-class and lower-middle-class buyersmiddle-class buyers

Match production with demand through Match production with demand through market research and sales forecasting market research and sales forecasting become widely copiedbecome widely copied

Ripple effect:Ripple effect: Steel, rubber, glass, & petroleum productsSteel, rubber, glass, & petroleum products Good roads, bridges, tunnels, traffic lightsGood roads, bridges, tunnels, traffic lights Housing boom to new suburbsHousing boom to new suburbs Showrooms, gas stations, and repair shopsShowrooms, gas stations, and repair shops Roadside motels, billboards, & dinersRoadside motels, billboards, & diners Rapid growth and development of California and Rapid growth and development of California and

FloridaFlorida



Explored the Explored the world outside world outside their small their small communitiescommunities

Made leisure Made leisure activities a activities a regular part of regular part of everyday life.everyday life.

Dating Dating practices practices change change

Cities & SuburbsCities & Suburbs Census of 1920 showed for 1Census of 1920 showed for 1stst time in time in

U.S. history that more Americans lived U.S. history that more Americans lived in urban areas than in rural areas.in urban areas than in rural areas.

Increase in # of big citiesIncrease in # of big cities 1910 = 601910 = 60 1920 = 681920 = 68 1930 = 921930 = 92 NYC grows 20% to almost 7 millionNYC grows 20% to almost 7 million Detroit doubles to 2 millionDetroit doubles to 2 million

Cities & SuburbsCities & Suburbs

Business opportunity Business opportunity Good jobsGood jobs Cultural richnessCultural richness Personal freedomPersonal freedom Ethnic communitiesEthnic communities Great Migration continuesGreat Migration continues

Cities & SuburbsCities & Suburbs Vertical growthVertical growth

Steel-skeleton construction technology Steel-skeleton construction technology = skyscrapers= skyscrapers

NYC’s Empire State Building NYC’s Empire State Building Completed 1931Completed 1931 World’s tallestWorld’s tallest 25,000 residential and commercial 25,000 residential and commercial

tenantstenants 102 stories high102 stories high

Cities & SuburbsCities & Suburbs

Horizontal growthHorizontal growth Lots of cheap land, no zoning Lots of cheap land, no zoning

ordinances, along with the car pushed ordinances, along with the car pushed out from downtown.out from downtown.

Decentralized, low-density cities, that Decentralized, low-density cities, that sprawl for miles in every direction and sprawl for miles in every direction and are totally dependent on the car and are totally dependent on the car and roads for any sense of community.roads for any sense of community.

Houston, LA, Miami, and San DiegoHouston, LA, Miami, and San Diego

Cities & SuburbsCities & Suburbs Suburbs doubleSuburbs double

CarCar Undeveloped land surrounding citiesUndeveloped land surrounding cities = valuable real estate= valuable real estate

““Automobile suburbs” differ from Automobile suburbs” differ from earlier suburbsearlier suburbs Not built along mass transit routesNot built along mass transit routes Larger lot sizes = lower residential Larger lot sizes = lower residential

densitydensity Commuting = jobs attracted to move Commuting = jobs attracted to move

out of citiesout of cities

Exceptions: Agriculture, Exceptions: Agriculture, Ailing IndustriesAiling Industries

Uneven distribution of wealthUneven distribution of wealth With the end of WWI and European With the end of WWI and European

recovery, U.S. farmers suffer from recovery, U.S. farmers suffer from surplusessurpluses

Farmers heavily in debt and facing Farmers heavily in debt and facing downward spiraling pricesdownward spiraling prices

Income on farms in 1929 was $223, Income on farms in 1929 was $223, compared with $870 for nonfarm compared with $870 for nonfarm workersworkers Quit farming for mill or factory jobsQuit farming for mill or factory jobs


McNary-Haugen Farm Relief billMcNary-Haugen Farm Relief bill Government purchases farm surplus and Government purchases farm surplus and

wait for prices to increase or sell on world wait for prices to increase or sell on world market.market.

President Coolidge vetoes as unnecessary President Coolidge vetoes as unnecessary government interference in the economy.government interference in the economy.

Federal government relief for farmers Federal government relief for farmers doesn’t arrive until the New Deal of the doesn’t arrive until the New Deal of the 1930s.1930s.


Coal is replaced by oil and natural gas.Coal is replaced by oil and natural gas. Railroads are replaced by cars and Railroads are replaced by cars and

trucks.trucks. Textiles have shrinking demand and too Textiles have shrinking demand and too

many factories.many factories. Fashion used less materialFashion used less material Cotton had competition from new fabrics like Cotton had competition from new fabrics like

rayonrayon Mills move South to hire nonunion workersMills move South to hire nonunion workers

Consumers Have Consumers Have Less Money to SpendLess Money to Spend

Rising PricesRising Prices Stagnant wagesStagnant wages Uneven distribution of wealthUneven distribution of wealth Overbuying on creditOverbuying on credit

Living on CreditLiving on Credit Many during the 20s were living beyond Many during the 20s were living beyond

their meanstheir means Credit Credit – buy now, pay later– buy now, pay later Monthly payments with added interest Monthly payments with added interest

chargescharges Easy credit creates large consumer debtEasy credit creates large consumer debt Faced with debt, consumers stop Faced with debt, consumers stop

spendingspending

Uneven Distribution of Uneven Distribution of IncomeIncome

1929 Income Distribution

$1,999 and under

$2,000-$4,999

$5,000-$9,999

$10,000 and over65%

29%5%

1%

19291929

A chart showing the disparity in income distribution in the United States.A chart showing the disparity in income distribution in the United States.[17][18][17][18] Wealth inequality and income inequality have been central concerns among Wealth inequality and income inequality have been central concerns among OWS protesters.OWS protesters.[19][20][21][19][20][21] CBO data shows that in 1980, the top 1% earned CBO data shows that in 1980, the top 1% earned 9.1% of all income, while in 2006 they earned 18.8% of all income.9.1% of all income, while in 2006 they earned 18.8% of all income.[22[22

The share of income going to higher-income households rose, while it fell for others. The share of income going to higher-income households rose, while it fell for others. CBO has examined the trends in the distribution of income for all households CBO has examined the trends in the distribution of income for all households between 1979 and 2007.between 1979 and 2007.

postwar prosperity and its price objective: describe how the american economy changed in the 1920s...

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industrial output

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warner music group

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