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Economics of the 1920s
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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