The Economy of the 1920sThe Economy of the 1920s

Economy - the management of Economy - the management of the resources of a community, the resources of a community,

country, etc., esp. with a view to country, etc., esp. with a view to its productivity. its productivity.

Recession - a period of an economic contraction/reduction

Industrial GrowthIndustrial GrowthA recession occurred A recession occurred after WWI, but economic after WWI, but economic recovery was strong from recovery was strong from 1922 to 1928 1922 to 1928

Business changed from Business changed from production of military production of military goods to consumer goodsgoods to consumer goods

Market: radios, washing Market: radios, washing machines, refrigerators, machines, refrigerators, and cars, and more! and cars, and more!

•More goods in market = ___More goods in market = ___??____ ____ prices; rising incomes = consumers prices; rising incomes = consumers have more to spend/buying power have more to spend/buying power

To encourage buying, businesses To encourage buying, businesses offered installment plans (buying on offered installment plans (buying on credit) = buy now for $100 and pay credit) = buy now for $100 and pay later for $120 later for $120 75% of Americans bought cars with 75% of Americans bought cars with installment plansinstallment plansChain store & catalogues allowed Chain store & catalogues allowed people to buy outside major cities – people to buy outside major cities – leads to a new consumer cultureleads to a new consumer cultureMiddle class women especially Middle class women especially influenced influenced New products: vacuum cleaners, New products: vacuum cleaners, toasters, washing machines, toasters, washing machines, refrigeratorsrefrigerators

Trouble Brewing?Trouble Brewing?Gov’t policy helped boost Gov’t policy helped boost economy economy High tariffs (_?_) on High tariffs (_?_) on imports encouraged imports encouraged domestic spending; taxes domestic spending; taxes on rich cut to promote on rich cut to promote spendingspendingEconomy is stimulated, but Economy is stimulated, but Americans develop Americans develop spending recklessnessspending recklessness½ mil. people buy new ½ mil. people buy new Model A Ford w/o seeing Model A Ford w/o seeing vehiclevehicle

$ Booming Stock Market $$ Booming Stock Market $Strong economy leads people to invest in stock market – Strong economy leads people to invest in stock market – shares/stocks are bought of companies; purchasing of shares/stocks are bought of companies; purchasing of stocks lead to rising stock values = bull market stocks lead to rising stock values = bull market Stocks are so profitable, people buy on margin (borrow $ Stocks are so profitable, people buy on margin (borrow $ to buy stocks); as long as market rises everything is goodto buy stocks); as long as market rises everything is good

•Investors accumulated fortunes, but economists worried that companies’ stock prices did not correlate to their value•Investors ignored expert warnings about an overvalued market

Farmers and WorkersFarmers and WorkersWealthiest of Americans Wealthiest of Americans made up 5% of populationmade up 5% of population1/5 of U.S. were farmers 1/5 of U.S. were farmers with many in povertywith many in povertyFarmers produced more Farmers produced more crops than were crops than were consumed consumed Surplus during WW I sent Surplus during WW I sent to Europe – After WW I to Europe – After WW I countries were too poor to countries were too poor to buy U.S. productsbuy U.S. productsAs a result, farmers could As a result, farmers could not payoff debts not payoff debts

•Workers’ wages rose in the 1920s; companies offered benefits (vacations and pensions) to keep employees from joining unions•Unemployment is high at about 5%•New assembly line (Henry Ford) lowered need for labor and unskilled workers could handle work = lower pay = more $ for owner

Herbert Hoover & Election of 1928Herbert Hoover & Election of 1928

Republicans nominated Herbert Republicans nominated Herbert Hoover in national convention Hoover in national convention held in Kansas Cityheld in Kansas CityHoover credited Republican Hoover credited Republican policy for current prosperitypolicy for current prosperitySlogan: “a chicken in every pot Slogan: “a chicken in every pot and a car in every garage” and a car in every garage” Hoover said America was near Hoover said America was near “final triumph” over poverty“final triumph” over povertyWithin one year of Hoover’s Within one year of Hoover’s entry into White House, U.S. is entry into White House, U.S. is plunged in an economic plunged in an economic depressiondepression