Economics

American Economy in the 1920's

Thesis  After a short postwar economic recession, the American economy prospered. Businesses grew, the standard of living rose, and unemployment rates declined. With this "economic boom", American culture became more consumer oriented. Printed and radio Advertising persuaded Americans to make purchases of cars or other new inventions. Overview
 * Postwar recession (1921)
 * Economic growth (1922-1928)
 * Unemployment below 4%
 * Indoor plumbing, electrical, and heating advances
 * Increased income for middle and working class
 * Negligable inflation
 * 40% of Americans lived in poverty
 * 64% increase in manufacturing products
 * Productivity (assembly line, research, mass production)
 * Technology (oil, electricity)
 * No enforcement of anti-trust laws
 * Corporate tax cuts
 * Farm exports were not a necessity once war ended (farmers left with surplus of crops and debt)
 * 'Open Shop' was enforced (employment opportunities open to non labor union workers)
 * Welfare capitalism (somewhat of a bribe for workers to prevent them from forming unions)
 * Labor strikes failed
 * Average of one car per family
 * Communication mediums (radio, movies)
 * Stock Market Crash (1929)

Henry Ford and the Model T


 * Henry Ford built the first automobile in 1896, in 1908 he had built the prototype for the Model T - a universal car meant for everyone. By 1927 he had built 15 million Model T’s.
 * Ford was not the first to invent neither the automobile nor the assembly line, but he perfected them to make them the most inexpensive possible in order to create a car that was available to the average citizen.
 * Ford was very interested in machines and mechanics from an early age. He left his family’s farm in Michigan to go to Detroit and got a job at one of Thomas Edison’s companies.
 * On the side by himself he built an automobile in his shed. Word got around about the young inventor.
 * Ford kept up trying to improve the automobile and making it more available and interesting to the public masses.
 * Race cars were the most accessible to being viewed by the public. In 1901 Ford won a big race car race with two cars he had designed, so Alexander Malcomson decided to back him, and they started the Ford Motor Company in 1903.
 * Ford was unhappy with how expensive the cars they produced were, so in 1906 he pushed for the Model N, and then the Model T. He proclaimed, “I will build a motorcar for the great multitude!”
 * Produced cheaper and more efficiently through the use of lighter French steel, the first Model T was simple, sturdy, versatile, and $825.




 * Demand for the Model T was so great that Henry Ford realized he needed to create a faster way to produce them.
 * After trying a four story building method called Highland Park, Ford got the idea for the assembly line by watching meat production. By 1914 he had slashed nearly 7 hours off of the time for the system.
 * His engineers experimented with work slides, rollways, and conveyor belts, always working to speed up the assembly line.
 * Ford pleased workers and kept low turn over rates on his assembly line by paying $5 a day for an eight hour work day.
 * The Model T was produced so easily and quickly that by 1921 60 % of the automobiles on the market were Model Ts.
 * By the mid-twenties Model T's only cost $290.
 * The availiblity of automobiles to middle class Americans caused a revolution in society. Americans were now mobolized and could travel to other people, businesses, colleges, and even other countries. No longer did people have to live in the city to have access to many different things.
 * With the expansion of the automobile industry came the expansion of roads, and impetus for other industries to boom as well. The steel industry, rubber industry, leather, glass, and various other products needed to create cars grew. Consumers started to view cars as not a luxury, but a necessity.

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Consumerism: Cars, Radios, Music media type="youtube" key="GljA34fcxqM" height="337" width="444" align="right"
 * Appliances (refrigerators, vacuum cleaners, washing machines, toasters)
 * Items that were once considered luxuries were purchased by women
 * Magazines filled with advertisements
 * Desire for status and popularity used in advertising
 * Radios
 * In 1922, the amount of radio owners increased by 2,500%
 * Profited entirely from advertisements
 * Sports
 * News
 * Entertainment
 * Politics
 * Music
 * Chain stores developed and sold products for less than community stores
 * Cars
 * price decreased (more families able to afford them)
 * more of a necessity
 * technological advances
 * 1913-1.2 million registered cars
 * 1929- 26.5 million registered cars
 * increased prosperity of other businesses (steel, rubber, glass, gasoline, road construction)
 * People wanted to “fit in” and buy as much as they could
 * Abundance of goods created the purchasing of products a norm
 * Stress over choosing the “right” product
 * 80% of purchases made by women
 * People wanted to be “modern”
 * Consumption became a way to establish oneself in society
 * Ostentatiousness in middle/upper class



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Advertising/Marketing

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 * A major cause of consumerism was the advertising industry.
 * Wide spread, mass publicized, magazines such as Time, Reader's Digest, and the Saturday Evening Post had many readers and included many pages of advertisements.
 * Since radio was free for anyone with a radio receptor to listen to, the only way broadcasters made money was through sponsors whose advertisements they ran as commercials.
 * Many advertising agencies used celebrities or religion as ways to promote their products.
 * The amount of spending increased significantly: Total Spending
 * Pre World War I: $300-400 Million a year
 * 1927: $1.5 Billion/ year
 * 1929: $1.8 Billion/ year
 * 1927 Spending
 * Newspapers: $690 Million
 * Direct Mail: $400 Million
 * Magazines: $210 Million
 * : $ 75 Million
 * Radio: $ 7 Million



Connection to Today


 * Cars are definitely still a big part of today's economy. New models come out each year, and car advertisements run on television and radio commercials, and are in magazines all the time.
 * People still drive cars today and invest in products for their cars such as waxes, anti-freeze fluids, new tires, and other accessories.
 * Celebrities and their images are used in advertisements a lot to help sell products.
 * The media has an overwhelming effect on consumers
 * Americans have become materialistic
 * Although due to iPods and CDs the radio may not be listened to as frequently as it used to be, many people still listen to radio talk shows such as NPR and find out about new popular music on the radio.
 * Radio is still free and broadcasting networks depend on advertising and sponsors to run.