Prosperity and American Business
Section 8.3
Objectives
At the end of this lesson you
should be able to:
• How was business viewed during the 1920s
• What is industrial productivity
– Why did it boom during the 20s
• What is the corporate revolution
• Why did America change from small to large
businesses
• Who is William Humphrey and what was his
economic policy
• What is an oligopoly
• What is the managerial revolution
What is your view of businessmen (and
women)?
Describe the view of business (in the 1920s).
• Portrayed business as
holy/religious cause
• Bruce Barton quote in The Man
Nobody Knows
– “All work is worship; all useful
service prayer”
• President Coolidge’s quote,
– “The man who builds a factory
builds a temple”
• Walter Chrysler
– named Time magazine’s Man of
the Year in 1929
Advertising and Credit
Describe the Booming Economy
• Economy greatly expanded
• Industrial productivity– amount of goods produced
by each hour of labor
• rose 70%(1922-1928)
• Company earnings & wages
rose soared
Why?
• Europe’s farms and
factories were decimated
• Europe = debtor nations
• America= creditor
Urbanization & Roaring Economy
What was the Corporate Revolution?
• US changed from small family
run businesses to large
corporations
Why?
• Small companies lack capital
– (extra $ to invest in
Research & Development,
machinery)
• Corporations- business
owned by many shareholders
with limited liability
– Only risk what you invest
How did the government encourage the
business?
• William E. Humphrey
– head of Federal Trade
Commission (appointed by
Coolidge)
– YET had Laissez-Faire
policy toward business
mergers
– FTC- “a publicity bureau to
spread socialistic
propaganda”
– “ an instrument of
oppression and…injury to
business”
What is an oligopoly?
• Oligopoly
– few powerful
companies control
entire industry
• 1919 - > 3, 700 power
companies
• 1930 – 72% of nation’s
power controlled by 10
holding companies
• Banking and chain
stores also controlled by
a few powerful
companies
What was the Managerial Revolution?
• Businesses run by
anonymous, replaceable
managers, rather than a
known personality
– Universities offered
courses to train people
for new ‘white collar’ jobs
• Northwest University
– 30 courses on business
in 1928
What was the American Plan?
• Activities corporations
used to destroy unions
– The “Stick” of the Carrot
and Stick approach
• Sounded patriotic
• Open shop associations
• Blacklisted union
members
• Spied (reported labor
discontent, leaders)
• Yellow Dog Contract
– Employee promise not to
join union
How did the Supreme Court curtail union
power?
• Ruled against unions
in several key
decisions
– Upheld yellow dog
contracts
– Limited workers right to
picket
– Made boycotts illegal
• Coronado Case (1922)
– Unions could be sued
for damages (during
strikes)
What is Welfare Capitalism?
• Activities that were meant to
reduce union appeal to workers
– The “Carrot” of the Carrot and Stick
approach
• Healthcare, clubs (baseball
teams), group insurance
programs, stockholder options
• Industrial democracy
– Company controlled unions
– Allowed elected employees to
represent workers to
management
• Known as “Kiss Me Clubs”
– No real power
Booming Economy
Conclusion
• Unions were greatly weakened by these
‘Carrot and Stick’ measures
• B/t 1921-1929 union membership
dropped from 5 million to 3.5 million