Economics of the 1920s

NEW INVENTIONS PROMOTE PROSPERITY

CONSUMER REVOLUTION!

Electrical transformers

By 1930, 70% of American households had electricity

Electric household devices radios, washing machines, irons, vacuum cleaners, etc…

New car technology ~ FORD!

improvements in mass production led to cheaper prices

assembly linethe automobile changes America (p. 327)http://www.youtube.com/watch?v=SWjTWlHnYfE

New sales techniques at retail stores

Installment plan (buying on credit)Planned obsolescence

Adding new features to a product that will go out of popularity in a short time, prompting the consumer to purchase the newer version

Use of advertising

She was a beautiful girl and talented too.

She had the advantage of

education and better clothes than most

girls of her set. She possessed that

culture and poise that travel brings. Yet

in the one pursuit that stands foremost in the mind of every

girl and woman – marriage – she was a

failure.~ Listerine Ad

YOUR TURN!

DRAW AN ADVERTISEMENT FOR THE FORD

MODEL T. BE SURE TO USE

PSYCHOLOGICAL METHODS (I.E. PROPAGANDA

METHODS!) TO SELL THE PRODUCT.

BUSINESS IS BOOMING= HIRE MORE WORKERS

= WORKERS BUY PRODUCTS

=BUSINESSES DO BETTER

Great sense of security…

“Have you an automobile yet?”

“No, I talked it over with John and he felt we could not afford one.”

“Mr. Budge who lives in your town has one and they are not as well off as you are.”

“Yes, I know. Their second installment came due, and they had no money to pay it.”

“What did they do? Lose the car?”

“No, they got the money and paid the installment.”

“How did they get the money?”

“They sold the cook-stove.”

“How could they get along without a cook-stove?”

“They didn’t. They bought another on the installment plan.”

~ In the time of Silent Cal

PERSONAL DEBT OUT-

PACED INCOME 2 ½ TIMES

By 1928, 2/3 of all furniture, phonographs, washing

machines on were on credit

If everybody was buying on credit,

then the “prosperity” was only ‘imagined’!!

…NEARLY HALF OF AMERICANS LIVED BELOW POVERTY

LEVEL

In 1929, 60% of the nation’s wealth was owned by 2% of

Americans…

PLUS… Not every business prospered

Industries in serious troubleRailroad

Competition from trucks, cars, busesTextiles

Foreign competition Fashion (less yardage)

Coal mining Increased use of oil, natural gas, hydro.

powerAgriculture

Overproduction + decreased demand

AND THEN THERE WAS THE STOCK MARKET…

GOAL OF ALL BUSINESS:

Not just a profit, but MORE profit!

How? By expanding!

What does a company need to expand?MONEY!!! (i.e. Capital)

How can a business get money needed for expansion?

1. Bank loans

2. Loans from investors by selling stocks

Stock Market~ How does it work!?

Investors buy stock shares – essentially a loan to the company in order for it to expand

When the business grows (hopefully!), investors can sell stock for a profit or keep it and receive dividends

Why did the stock market grow in the 20s?

Increased consumer demand after WWI

Businesses expanded to meet increased demand

To expand, businesses needed capital for more raw materials, facilities, machines, and workers

Investors wanted to profit from this business expansion and bought stocks

All of this led to a “BULL MARKET”

– when stock market prices are

on the rise

How much money can we make!!??

# of Shares ___ Value of Stock Shares

Total Value of Stock

Profit/Loss

March 3, 1928$95

March 20, 1928 $178

June 12, 1928 $155

Dec 31, 1928 $420

Nov 13, 1929 ??

1 . HOW DID THE CAR INDUSTRY AFFECT AMERICAN ATTITUDES AND/OR VALUES?

2. EXPLAIN HOW ADVERTISING BECAME MORE OF A PSYCHOLOGICAL APPEAL TO THE CONSUMER, RATHER THAN JUST INFORMATIONAL IN TERMS OF PRODUCT AND PRICE.

3. IDENTIFY TWO POTENTIAL SIGNS OF WEAKNESS, OR “CLOUDS ON THE HORIZON,” IN THE ECONOMY OF THE 1920S.

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