The Roaring 20s and
Causes of the Great
Depression
Economy, Politics, and Society,
1920s-1930s
Economy in the 1920s
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Growth (“Roaring 20s”), but with Major Systemic
Problems
1920s, a decade of economic growth – GNP
increased 40%
Post-WWI recession, but Fed. Reserve cut interest
rates, ended recession, showed Fed. power
Pent up consumer demand after war
Mass consumption: durable goods (appliances,
autos, home goods)
New technologies
Buying on credit, opened up consumption to more
people
New Technologies and
Forms of Consumption
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Auto Age: From 1.3 million in 1923 to 4 mill. in 1929;
economic linkages (effects) forwards and backwards
Electrification: first businesses and amusements,
then 1/3 to 2/3 of homes
Consumer credit: from 2.6 to 7.1 billion during 1920s
Advertising: associate product with way of life, sex,
use of psychology
In 1920s, business held in high-esteem,
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Bruce Barton’s 1925 book, The Man Nobody Knows: Jesus
was greatest salesman in history
Calvin Coolidge: “the business of America is business”;
factory is a temple, workers worship there
Welfare Capitalism
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1920s capitalist model of dealing with Labor Question:
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Capitalists provide amenities - cleaner, safer workplaces,
breakrooms, bathrooms, medical care, Ford’s Sociological
Department – check to make sure that workers and families are
living up to certain standards
Provide for workers’ leisure – amusement parks, picnics, better
wages so they can enjoy time off
Provide some benefits to make workers happier, less prone to
labor unrest and unions
Company unions instead of labor movement: answer to call for
economic democracy – give workers sense of power in
workplace
Idea that employers have power to make best decisions for
workers’ happiness – reward workers so they are happier or can
buy more products
Fordism: lower cost of consumer goods = workers could
purchase the products they produced
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Ford’s $5 day
Radicals and socialists unsure about impact – seemed good to many
Problems with Welfare
Capitalism
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Question: Could workers put their welfare in
employers’ hands? Did employers have workers’
interests at heart? What happens when hard times
hit?
Ford examples:
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Cut workforce, wages when hard times hit
Used Sociological Dept. to monitor/control workers outside
of workplace
Was more interested in selling cars, making profit, than
problems of his workers
Used violence and intimidation against workers who
wanted to unionize
Causes of Great Depression/
Weaknesses of 1920s Economy
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Overarching problem: overproduction and
underconsumption
Weak sectors of economy: farming =
overexpansion, falling prices, debt, impacted
wider economy
Other sick sectors: rail, coal, textiles, ships,
lumber
Buying on credit
Stock market speculation euphoria/mania
(buying shares on margin; paper economy,
not real)
Causes of Great Depression/
Weaknesses of 1920s U.S. Economy (cont.)
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Industrialization tied up lots of capital, fixed
costs – U.S. and Germany hit hardest b/c most
industrial
Wide disparity of wealth: 0.5% owned 1/3 of
wealth
Wealthy invested in industry (machines),
increased productivity = overproduction
Overproduction when poor couldn’t buy goods
Bad monetary policy
Bank failures – not only bad banks failed – over
9,000 between 1930 and 1933
Causes of Great Depression/
Weaknesses of 1920s U.S. Economy (cont.)
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Smoot-Hawley tariff (tax) on imports, created
trade war with foreign countries
Cutbacks in lending to foreign countries
Hoover made France and G.B. pay back
loans from WWI
Harsh reparations against Germany for WWI
All resulted in loss of export market just when
domestic consumption also dropped
Poor economic knowledge
Hoover’s inaction and bad actions
Responses to Great Depression?
Alternatives?
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Raise taxes on elites
Govt. employment
Borrow money
Cut or limit govt. spending – balance the budget
Govt. programs for underdeveloped areas
Create jobs, revive industries, create consumers
Monetary policy – printing money
Change from gold standard
Go to war – war economy (jobs, higher wages,
pride)
Charles Sheeler vs. The
Grapes of Wrath
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Compare the imagery, messages, and
historical meaning of Charles Sheeler’s work
and the film The Grapes of Wrath.
How are they different?
What kind of shifts in political, social, and
economic ideas do they represent?