history ch 4

• The period between 1919 and 1941 was traumatic and distressing for the USA and its people
• The 1920s were a period of remarkable economic growth and social change, often known as the 'boom years'
• Prosperity came to a sudden end in 1929 and the United States then entered an era of economic depression and high unemployment that lasted until war came in 1941
• Two presidents, Warren Harding (1921–23) and Calvin Coolidge (1923–29) presided over the 'boom' years, then Herbert Hoover (1929–33) and Franklin D. Roosevelt (1933–45) tried to solve the great economic and social problems which emerged after 1929, with varying degrees of success
• The most important change was in the role and responsibilities of the federal government, which went from playing a minor role in the economy to becoming a major force, regulating business, directing farming, supervising banks and stock markets and creating a welfare state
• The First World War played an important role in the economic history of the United States, making America the principal industrial nation in the world and the leading financial power
• Effects of the First World War on the US economy


  • Increased demand for American grain and farm incomes
  • Higher productivity and demand for tractors
  • Increased demand for manufactured products
  • US GNP climbed by 21%
  • Stock market rose by 86% in 1915
• The war meant that the USA had gone from being a debtor nation to a creditor nation, with several nations owing them a great deal of money
• The boom years of 1915–18 came to a sudden end in 1919 with peace in Europe, causing dislocation as the economy transitioned from wartime to peacetime
• Government did little to manage the transition from war to peace, with President Wilson heavily involved in the peace process and President Harding having little understanding of economics
• Structural weaknesses in the American economy in the 1920s


  • Disparity between agriculture and traditional and new industries
  • Traditional industries remained important but new industries like electricity and automobiles became more important
• Henry Ford


  Pioneer of the motor industry who revolutionised car production by developing the assembly line, having an enormous impact on technological development and the US economy
• Effects of the automobile industry


  • Increased demand for steel, glass, rubber, oil and petrol
  • Stimulated road-building and bridge construction
  • Enabled commuting and suburban growth
  • Replaced horses and ploughs in rural areas
• GNP increased by 59% between 1921 and 1929, and incomes across the US increased by 38%, with the automobile industry contributing significantly
• Agriculture did not share in the economic prosperity of the 1920s, suffering from depressions and declining prices and incomes after the First World War
• Reasons why agriculture problems were difficult to solve


  • Diversity of US farming with varying regional interests
  • Limited power of the Department of Agriculture
  • Lack of interest and understanding from 1920s presidents
• The only attempt to assist agriculture, the Agricultural Marketing Act of 1929, had two main failings: it did not deal with overproduction, and the funds allocated were too low
• Mass production and oversupply in industries like automobiles led to a drop in demand that affected not just the motor industry but also the industries that provided raw materials
• In agriculture, post-war prices for products like wheat and meat dropped sharply
• Corporations that dominated major industries


  • Lowered competition in the markets
  • Led to producer-dictated prices and production levels
  • Ran very successful marketing campaigns
  • Developed manufacturing techniques that enabled mass-production
  • Over-supplied their markets
• By 1929, 4.5 million cars a year were being produced in the United States
• Demand dropped by 1929


  Affected not just the motor industry, but also the industries which provided raw materials for the motor industry, such as steel, coal, glass and rubber
• In agriculture, post-war prices in the USA for products like wheat and meat dropped sharply
• Approximately 30% of agricultural land which had been used to grow horse feed could now be used to grow human food crops
• Farmers overproduced, even during a worldwide agricultural depression, and prices dropped accordingly, sometimes by as much as 60%
• This hit farm incomes very hard
• Attempts to help farmers were vetoed by President Coolidge
• In the 1920s, about 25% of all US jobs were in agriculture
• If 25% of jobs were in agriculture and earning a lot less money


  They were not able to buy cars or radios or clothes, or even much food
• Supply was plentiful, but demand was falling everywhere
• The Republican Party and its three presidents, Warren Harding, Calvin Coolidge and Herbert Hoover, dominated US politics in the period 1921–33
• The USA became the biggest creditor nation in the world by 1919
• By 1928, the USA was responsible for 42% of the world's manufacturing output
• The USA was the largest exporter of goods and food in the world and the second largest importer of goods
• The USA was the greatest supplier of capital in the world
• The war's devastation of Europe and its economy meant that it also devastated the USA's biggest export market
• Europe owed the United States enormous sums of money, and the US needed to ensure that the loan could be repaid
• Tariffs


  Designed to 'protect' US industries from foreign competition
• High foreign tariffs on exported goods would be very damaging to the world's largest manufacturer and exporter
• High interest rates in Europe (and low interest rates in the USA) encouraged US banks to lend lots of money to Europe