VIDEOTAPE LECTURE #15 OUTLINE
[00:00] Bars, Tone, and Countdown
[01:30] Intro
[03:30] Preamble in automobile
[04:43] Henry Ford
[07:00] U.S. involvement in WWI - mainly economic [09:00] U.S. maintained close ties to Britain for economic advantages

1. loans to Allies
2. German market not as valuable
3. sales to British and French were far greater

[42:50] Robert and Helen Lynd, Middletown (1929)
[44:00] Big business and big government
[46:00] Thomas Edison
[49:00] Bruce Barton, The Man Nobody Knows: A Biography of Jesus (1925)
[49:28] Advertising
[51:30] Calvin Coolidge
[52:00] "The American Way"
[55:55] Fortney-McCumber Act (1922), Hawley-Smoot Act (1930)
[57:00] Andrew Mellon
[59:00] Herbert Hoover

Some questions to keep in mind:

1. What role did new technology play in shaping the economy of the 1920s? The culture of the 1920s?
2. Compare the relationship between big business and government during the 1920s to that of the Gilded Age.
3. How did the American love affair with the automobile affect American society? The American economy?
4. If Bob Dole, Herbert Hoover, and Andrew Mellon walked into a bar where a sign stated, "Sorry, our drinks don't trickle down" who would be the first to leave?

The Aftermath of World War I

The decade of the 1920s, or as it was called by its contemporaries, "The New Era," was marked by prosperity and new opportunity in the aftermath of World War I. The war began in Europe in 1914, and the United States entered the fray in 1917. A significant reason for U.S. involvement in the war was its economic links to the Allied Powers, especially to Great Britain. Wall Street financial institutions such as the House of Morgan had given loans to Great Britain totaling over $2.3 billion, so Wall Street feared a British defeat even more than Main Street.

Before 1917, American public opinion about the war was generally divided along ethnic lines. Old-stock Americans of Anglo-Saxon heritage were on the side of Britain and France. Americans of German heritage wanted the U.S. to to remain neutral. Many Americans with ties to Eastern Europe, such as Russian and Polish Jews, were, paradoxically, on the side of Germany, as Germany, up to this time, had been more tolerant of its religious minorities than either tsarist Russia or the countries of Western Europe.

The United States, still officially neutral, mostly ignored British search and seizure of American ships for two reasons:

1. German market was not as important as French and British markets.
2. Sales to Britain and France soared from $825 million in 1914 to $3.2 billion in 1916.

By 1915, President Wilson, while preaching peace, had begun to gear up for warfare, expanding the U.S. army and navy. Because of increased German submarine attacks on American ships, America entered the war on the side of the Allies in 1917, and almost immediately tipped the balance in their favor. In full retreat, Germany asked for an armistice, which was granted on November 11, 1918. The effect of the war on Germany, France, Great Britain and Russia was devastating, both to their economies and in the loss of human life. America, on the other hand, came out of the war relatively unscathed. American soldiers (called "doughboys" because the large buttons on their uniforms resembled a deep-fried bread of the same name) returned home in May 1919 to ticker-tape parades and the promise of a prosperous decade.

Of course there were problems as well. The transition from a war-time to a peace-time economy caused economic dislocation for industrial workers, loss of income for farmers, and renewed racism and nativism against Black Americans and foreign immigrants. Many Americans, however, were able to revel in the new culture of consumerism.

The Politics of Prosperity

In search of prosperity, Americans elected three Republican Presidents during this decade; each promised to promote the politics of prosperity:

Calvin Coolidge (1872-1933). Coolidge did little as Warren G. Harding's vice president (1921-23), but when Harding's death made him president, Coolidge acted quickly to repair the damage of the Harding scandals and to secure the 1924 presidential nomination. He was easily elected over Democrat John W. Davis and Progressive Robert M. LaFollette. Coolidge decided not to run for president again and retired from politics. Many of Coolidge's policies, including cutting federal taxes and maintaining high tariffs, were very popular during his tenure as president, but in light of the Great Depression, his decisions were later discredited. Herbert Hoover (1874-1964). Having served as secretary of commerce under both Harding and Coolidge, Hoover was elected to the presidency in 1928, helped by the prevailing prosperity in major areas of the country. Hoover had been in office just a few months when the Great Depression began. In 1932 he lost the presidential election to Franklin D. Roosevelt.

The Business Boom of the 1920s

On the whole, the U.S. economy experienced steady growth and expansion during the 1920s. Three factors of production became especially important:

1. Machines
2. Factory
3. The Process of Standardized Mass Production

A self-perpetuating cycle was created:

• standardized mass production led to
• better machinery in factories, which led to
• higher production and higher wages, which led to
• more demand for consumer goods which led back to more standardized mass production.
  

This upward spiral, which led to a business boom, continued until 1929. There were five main sources of the 1920s economic boom:

1. Effect of WWI on technology.
2. Scientific management: "Taylorism"
3. Rapid increase in worker productivity
4. Psychology of consumption
5. Relations between the federal government and big business

1. Effect of WWI on Technology.

During the war, a significant labor shortage, combined with the need for increased production, necessitated new, more efficient methods of production. Old industries, such as petroleum and steel, were stimulated, and there were also a host of new industries, such as plastic and rayon. One measure of these accelerated technological changes is the money spent on new machinery for industry. In 1915 the total annual expenditure was $600 million, which grew to $2.5 billion by 1918.

2. Scientific management was known popularly as "Taylorism."

We've already discussed "Taylorism" in Lecture 11, with its mathematical formula for labor, streamlining of tasks, and increase in production. In the 1920s, American industries implemented scientific management on a grand scale, pouring millions of dollars into industrial research.

3. Rapid increase in worker productivity.

As scientific management and new technology increased worker productivity, workers earned higher wages and became better consumers. A new innovation appeared: the installment plan, which encouraged Americans to build up debt in order to buy consumer goods.

4. Psychology of consumption.

In a variety of ways, Americans were displaying a desire to get rich, and to do so with little effort. Thorstein Veblen, an economist, published The Theory of the Leisure Class in 1898. This book was not widely read until the 1920s, but it spoke directly to the psychology of American society, introducing the now-familiar term "conspicuous consumption." Some examples of conspicuous consumption include:

• Radio
  The first commercial radio station opened in the 1920s in Pittsburgh and the first public radio station was right here in Madison. By 1922, 3 million American households had radios, and by 1929, purchases of receivers had increased by 2,500%, giving the industry annual sales of $850 million.
• Motion pictures
  A fledgling industry before World War I, the motion picture industry took off in the 1920s, becoming one of the ten largest industries in the U.S. In 1922, theaters sold 40 million tickets a week; by 1929, that number had grown to 100 million a week. One of the capitalists who cashed in on Hollywood was Joseph P. Kennedy, patriarch of the political Kennedy clan. During eight months in Hollywood, he made $6 million.
• New electric appliances A floodtide of new electric appliances lightened the load of the middle-class American housewife: vacuum cleaners, toasters, washing machines, refrigerators. Women became America's greatest consumers, purchasing items, such as furs, that a generation ago would have been considered a luxury.
• Automobile industry Nowhere was the psychology of consumption more evident than in the automobile industry. Annual automobile production rose from 2 million in 1920s to 5.5 million in 1929. By the late 1920s, there was one automobile for every five Americans, allowing, theoretically, everyone in the nation to go for a ride to Martha's house at the same time.

  Two factors led to the rising popularity of cars:

  1. Cost-- The price of cars declined steadily until the mid-1920s, so that the automobile came to be within reach of any well-paid working family. For example, the 1926 Model T cost $290.
  2. Credit-- In 1925, 75% of all automobile sales were on the installment plan.
  The chief figure in this expanding industry was Henry Ford (1863-1947). Ford did not invent the automobile, but he did the most to promote the car by developing more efficient and cheaper means of production. He built his first car in 1896 at home in his garage. Symbolic of the American century to come, the door of the shed was too small and bricks had to be removed to make way for the car. Ford is said to have remarked:

  "Americans can have any kind of car they want, and any color they want, as long as it's a Ford, and as long as it's black."

  Perceived as a shining model of the American success story, Ford was so trusted by the American public, that in 1928, when he announced the development of the new Model A, half a million Americans made a downpayment on the car without having seen it, taken it for a test drive, or even knowing its final cost.

  ---

  The automobile had a huge impact on American life, both economic and social.

  Economic Effects of the Automobile:

  1. Promoted growth of other industries, especially petroleum, rubber, and steel.
  2. A national system of highways was created. Automobiles required better roads. After WWI, federal funds became available for building highways and a major industry was born.
  3. Created new service facilities. Filling stations, garages and roadside restaurants sprang up. Motels (the word itself is a blend of 'motor' and 'hotel') catering to the needs of motorists began replacing hotels.

  Social Effects of the Automobile:

  1. Created a more mobile society. With the automobile came the new tradition of the "Sunday drive," with city folks going out to the country. Rural Americans came into urban areas for shopping and entertainment. Cars broke down the distinctions between urban and rural America.

  2. Broke down the stability of family life. Now it was far easier for individual family members to go their own way.

  3. Broke down traditional morality. Children could escape parental supervision, as cars became a sort of "bedroom on wheels."

  In 1929 sociologists Robert and Helen Lynd published a study called Middletown, based on field research done in Muncie, IN in 1924-1925. The Lynds showed how, under the influence of industrialization, traditional values and customs were changing, including peoples' attitudes toward the automobile. They found that at all income levels, the automobile had come to seem a necessity, rather than an economic luxury. People were willing to sacrifice food, clothing, and their savings in order to keep the family car.

5. Relations between the federal government and big business.

American businessmen regained the status of folk hero they had enjoyed in the days before Progressivism. Many Americans felt they also had the opportunity to participate in prosperity and they began to equate prosperity and progress.

Other popular novels painted a different picture. Bruce Barton, a prominent figure in advertising, published The Man Nobody Knows: A Biography of Jesus in 1925. He presented Jesus as the "founder of modern business" and the apostles as the "greatest sales force in history."

Relationships between businessmen and government had never been closer than they were in the 1920s. Calvin "Silent Cal" Coolidge piped up:

"Wealth is the chief end of man!"

and slightly less laconically:

"The man who builds a factory, builds a temple. The man who works there, worships there."

"The American Way"

Businessmen had two major propaganda mills: the Chamber of Commerce and the National Association of Manufacturers. Both groups preached a return to laissez-faire economics, less regulation of business, and less support of labor unions. The National Association of Manufacturers labelled this program as "The American Way." President Harding spoke for himself and for his successors Coolidge and Hoover when he asked for "less government in business and more business in government."

There were four major ways in which the federal government supported big business.

1. High tariff policies. The Fordney-McCumber Act (1922) & Hawley-Smoot Act (1930) created the highest-ever schedule of tariffs for foreign-made goods.
2. Andrew Mellon was Secretary of the Treasury 1921-1932. In response to his demands, Congress repealed the excess profits tax and reduced the rates for corporate and personal income taxes. Mellon provided business leaders with a list of tax loopholes which were drawn up, at Mellon's request, by the IRS.
3. Cutbacks in the Federal Trade Commission (FTC). The FTC had been created to regulate big business and to look into unfair trade practices, but did less and less of this in the 1920s.
4. Herbert Hoover, first as Secretary of Commerce and then as President encouraged price-fixing and believed that the government was responsible for helping businesses profit.

Not everyone took part in the material successes of the "New Era." This decade also saw growing racism and nativism, growing frustration from those who felt cut off from the wealth. This side of the "Roaring Twenties" is a fascinating and extraordinarily important part of our story. So important, in fact, that we'll take it up in Lecture 16: "The Politics of Frustration: The 1920s."

Home || Course || Guide || Bios || Photos || Exams || Calendar || Comments/Sign-in