USA 1917-1941: Study Guide Two
1920s Economic
Prosperity
Study Guide 2
USA 1917-1941: Study Guide Two
1920s Economic Prosperity
The development of the automobile industry and the ensuing consumer culture – Study Guide 2
Focusing on the role of the model T in American culture during the early 1920’s, this study guide traces the
development of the automobile industry and the ensuing consumer culture. Although it cost $850 when it was
introduced in 1908, the model T, benefiting from Ford’s increasingly efficient mass production, was priced at $298
by 1923. Previously the product of the elite, the automobile became affordable to an ever increasing number of
Americans. Despite this impressive reduction in price, the model T continued to outperform more expensive
alternatives and, consequently, it captured the lion-sized share of the automobile market.
Postwar Prosperity
Americans in the 1920's witnessed a proliferation of scientific and technical innovations that came to be known by
historians as the "Second Industrial Revolution." WWI stimulated development and investment in new technology
that contributed to the business boom in the inter-war period. As electricity became widespread and industrial
production became more efficient, a range of mass produced consumer goods became available to the public at
attainable prices. For the first time, consumers across the nation were reading many of the same books and news
stories and purchasing the same goods. Communication innovations in radio, advertising, and film also contributed
to the homogenization of ideas that led to the advent of national popular culture.
This illustration shows the cycle that created the business boom in the 1920's: standardized mass production led to
more efficient machines, which led to higher production and wages, which led to increased demand for consumer
goods, which perpetuated more standardized mass production.
Questions to consider:
1. Why do some historians consider the 1920's to be the "second industrial revolution"?
USA 1917-1941: Study Guide Two
2. Based on the economic statistics provided below in what general ways did the economy change in the 1920's?
The 1920s Economy: A Statistical Portrait
Industry
Percentage Increase, 1922-28
Industrial Production: 70%
Gross National Product: 40%
Per Capita Income: 30%
Output per factory man hour: 75%
Corporate Profits: 62% (1923-1929)
Electric Power
Percentage Increase, 1899-1929: 331%
Percentage of American Industries powered by electricity, 1929: 50%
Economic Concentration, 1929
Percentage of Banks Controlled by Top 1% of Banking Corporations: 46%
Percentage of industry controlled by top 200 Corporations: 50%
Percentage of industry controlled by top 600 Corporations: 65%
Percentage of corporate wealth controlled by top 200 Corporations: 49%
Percentage of all wealth controlled by top 200 Corporations: 22%
Workers
Percentage Increase, 1923-29
Worker's incomes: 11%
Real Earnings (for employed wage earners) 22%
Average Work Week: -4%
Minimum income deemed necessary for a decent family standard of living: $2500
Percentage of American families with incomes under $2500 in 1929: 71%
Distribution of Wealth
Rise in per capita income for top 1% of population, 1920-1929: 75%
Rise in per capita income for nation as a whole: 9%
Percentage of American Families with no savings: 80%
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Percentage of savings held by top .1% of Americans: 34%
Percentage of savings held by top 2.3% of Americans: 67%
3. What changes in the average worker's wage, output, and work day length do you notice?
4. What groups profited the most in the post-war prosperity of the 1920's?
Scientific Management and the Reorganization of Work
In the late 19th and early 20th centuries, industries began to employ automated machinery and "scientific
management" to increase efficiency. The reorganization of work to maximize production resulted in more spare
time and disposable income for average workers. New scientific management practices also led to a decline in the
importance of skill and craftsmanship in favor of discipline and subordination. As businesses began to take a more
scientific, organized approach to management, they financed industrial research and time studies on a grand scale.
The Principles of Scientific Management (1911) by engineer Frederick W. Taylor was widely published and applied
during the business boom of the 1920's. In fact, the practice of scientific management is also known as "Taylorism."
The following document introduces the reader to the fundamentals of the system. (note: the word "soldiering"
means to deliberately work slowly)
Innovative industrialist Henry Ford masterfully applied Taylor's theory of worker efficiency and wage motive. By the
1920's, he was able to cut the price of the Model-T in half, thereby expanding his customer base. This image of an
assembly line at Ford Motor Company demonstrates both the principles of efficient production and the proliferation
of mass produced consumer goods in the 1920's.
The final article announces the clamor in Michigan after Ford began paying an unprecedented $5 a day. The wage
incentive was more than a pay increase it was a means for Ford to establish a measure of control over the
workforce.
Frederick W. Taylor: The Principles of Scientific Management (1911)
INTRODUCTION
PRESIDENT ROOSEVELT, in his address to the Governors at the White House, prophetically remarked that "The
conservation of our national resources is only preliminary to the larger question of national efficiency." …
We can see our forests vanishing, our water-powers going to waste, our soil being carried by floods into the sea; and
the end of our coal and our iron is in sight. But our larger wastes of human effort, which go on every day through
USA 1917-1941: Study Guide Two
such of our acts as are blundering, ill-directed, or inefficient, and which Mr. Roosevelt refers to as a lack of" national
efficiency," are less visible, less tangible, and are but vaguely appreciated. …
What we are all looking for, however, is the ready made, competent man; the man whom some one else has trained.
It is only when we fully realize that our duty, as well as our opportunity, lies in systematically cooperating to train
and to make this competent man, instead of in hunting for a man whom some one else has trained, that we shall be
on the road to national efficiency. …
In the past the man has been first; in the future the system must be first. …the first object of any good system must
be that of developing first-class men; and under systematic management the best man rises to the top more certainly
and more rapidly than ever before. …
FUNDAMENTALS OF SCIENTIFIC MANAGEMENT
THE principal object of management should be to secure the maximum prosperity for the employer, coupled with the
maximum prosperity for each employee. …
In the same way maximum prosperity for each employ, means not only higher wages than are usually received by
men of his class, but… it also means the development of each man to his state of maximum efficiency, so that he may
be able to do… the highest grade of work for which his natural abilities fit him…
The majority of these men believe that the fundamental interests of employees and employers are necessarily
antagonistic. Scientific management, on the contrary, has for its very foundation the firm conviction that the true
interests of the two are one and the same… it is possible to give the workman what he most wants- high wages- and
the employer what he wants-a low labor cost-for his manufactures. …
The truth of this fact is also perfectly clear in the case of two men working together. To illustrate: if you and your
workman have become so skillful that you and he together are making two pairs of shoes in a day, while your
competitor and his workman are making only one pair, it is clear that after selling your two pairs of shoes you can
pay your workman much higher wages than your competitor who produces only one pair of shoes is able to pay his
man, and that there will still be enough money left over for you to have a larger profit than your competitor. …
Why is it, then, in the face of the self-evident fact that maximum prosperity can exist only as the result of the
determined effort of each workman to turn out each day his largest possible day's work, that the great majority of
our men are deliberately doing just the opposite, and that even when the men have the best of intentions their work
is in most cases far from efficient? …
To explain a little more fully these three causes:
First. The great majority of workmen still believe that if they were to work at their best speed they would be doing a
great injustice to the whole trade by throwing a lot of men out of work, and yet the history of the development of
each trade shows that each improvement, …which results in increasing the productive capacity of the men in the
trade and cheapening the costs, instead of throwing men out of work make in the end work for more men.
The cheapening of any article in common use almost immediately results in a largely increased demand for that
article. Take the case of shoes, for instance. The introduction of machinery for doing every element of the work which
was formerly done by hand has resulted in making shoes at a fraction of their former labor cost, and in selling them
so cheap that now almost every man, woman, and child in the working-classes buys one or two pairs of shoes per
year, and wears shoes all the time, whereas formerly each workman bought perhaps one pair of shoes every five
years, and went barefoot most of the time, wearing shoes only as a luxury or as a matter of the sternest necessity. In
spite of the enormously increased output of shoes per workman, which has come with shoe machinery, the demand
for shoes has so increased that there are relatively more men working in the shoe industry now than ever before. …
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Second. … the ignorance of employers as to the proper time in which work of various kinds should be done makes it
for the interest of the workman to "soldier." …
There is no question that the tendency of the average man (in all walks of life) is toward working at a slow, easy gait,
and that it is only after a good deal of thought and observation on his part or as a result of example, conscience, or
external pressure that he takes a more rapid pace. …
"Under this plan the better men gradually but surely slow down their gait to that of the poorest and least efficient.
When a naturally energetic man works for a few days beside a lazy one, the logic of the situation is unanswerable.
'Why should I work hard when that lazy fellow gets the same pay that I do and does only half as much work?' …
"The greater part of the systematic soldiering, however, is done by the men with the deliberate object of keeping
their employers ignorant of how fast work can be done. …
… when accurate records are kept of the amount of work done by each man and of his efficiency, and then each
man's wages are raised as he improves, and those who fail to rise to a certain standard are discharged and afresh
supply of carefully selected men are given work in their places, both the natural loafing and systematic soldiering can
be largely broken up. …
Third. As to the third cause for slow work, considerable space will later in this paper be devoted to illustrating the
great gain, both to employers and employs, which results from the substitution of scientific for rule-of-thumb
methods in even the smallest details of the work of every trade. The enormous saving of time and therefore increase
in the output which it is possible to effect through eliminating unnecessary motions and substituting fast for slow and
inefficient motions for the men working in any of our trades can be fully realized only after one has personally seen
the improvement which results from a thorough motion and time study, made by a competent man. …
Now, among the various methods and implements used in each element of each trade there is always one method
and one implement which is quicker and better than any of the rest. And this one best method and best implement
can only be discovered or developed through a scientific study and analysis of all of the methods and implements in
use, together with accurate, minute, motion and time study. This involves the gradual substitution of science for rule
of thumb throughout the mechanic arts. …
…Those in the management whose duty it is to develop this science should also guide and help the workman in
working under it, and should assume a much larger share of the responsibility for results than under usual conditions
is assumed by the management. …
This close, intimate, personal cooperation between the management and the men is of the essence of modern
scientific or task management. …
It is the writer's judgment, then, that while much can be done and should be done by writing and talking toward
educating not only workmen, but all classes in the community, as to the importance of obtaining the maximum
output of each man and each machine, it is only through the adoption of modern scientific management that this
great problem can be finally solved. … At least 50,000 workmen in the United States are now employed under this
system; and they are receiving from 30 per cent to 100 per cent higher wages daily than are paid to men of similar
caliber with whom they are surrounded, while the companies employing them are more prosperous than ever before.
In these companies the output, per man and per machine, has on an average been doubled. During all these years
there has never been a single strike among the men working under this system. In place of the suspicious
watchfulness and the more or less open warfare which characterizes the ordinary types of management, there is
universally friendly cooperation between the management and the men. …
Questions to consider:
USA 1917-1941: Study Guide Two
1. What, according to Taylor, should be the principle aim of management?
2. What do the employer and the employees gain, respectively, from scientific management?
3. What should employers do to learn how to increase efficiency?
4. What changes did the Ford executives make to benefit workers and what was their professed motive?
The Automobile and American Culture
The explosive growth of the automobile industry in the 1920's truly revolutionized American life. Henry Ford's
innovative production techniques made cars affordable for average Americans and set new standards for industry.
By the end of the decade, there were enough cars on the road for every one in five persons. Related industries
sprang up in response to the new American Car Culture, including service facilities, filling stations, and motels. The
design of the popular Model T underwent few changes between 1908 and 1927. This 1924 Ford Advertisement
appeared in mass publications catering to young men and boys. Note the last line, "Let us tell you how easy it is to
buy a Ford on the Weekly Purchase Plan." Part of the growth of consumerism in the 1920's can be attributed to the
widespread use of installment payment plans.
USA 1917-1941: Study Guide Two
The document below comes from the sociological study Middletown by Robert and Helen Lynd. The Lynd's
researched the impact of industrialization on the small town of Muncie, Indiana in 1924 and 1925. The excerpt
focuses on concerns that "the automobile appears to some as an 'enemy' of the home and society."
Robert and Helen Lynd Study
Meanwhile, advertisements pound away at Middletown people with the tempting advice to spend money for
automobiles for the sake of their homes and families:
"Hit the trail to better times!" says one such advertisement.
Another depicts a gray-haired banker lending a young couple the money to buy a car and proffering the friendly
advice: "Before you can save money, you first must make money. And to make it you must have health, contentment,
and full command of all your resources....I have often advised customers of mine to buy cars, as I felt that the
increased stimulation and the opportunity of observation would enable them to earn amounts equal to the cost of
their cars."
Many families feel that an automobile is justified as an agency holding the family group together. "I never feel as
close to my family as when we are all together in the car," said one business class mother, and one or two spoke of
giving up Country Club membership or other recreations to get a car for this reason. "We don't spend anything on
except for the car. We save every place we can and put the money into the car. It keeps the family together," was an
opinion voiced more than once. Sixty-one per cent of 337 boys and 60 per cent of 423 girls in the three upper years of
the high school say that they motor more often with their parents than without them.
But this centralizing tendency of the automobile may be only a passing phase; sets in the other direction are almost
equally prominent. "Our daughters [eighteen and fifteen] don't use our car much because they are always with
somebody else in their car when we go out motoring," lamented one business class mother. And another said, "The
two older children [eighteen and sixteen] never go out when the family motors. They always have something else
on." "In the nineties we were all much more together," said another wife. "People brought chairs and cushions out of
the house and sat on the lawn evenings. We rolled out a strip of carpet and put cushions on the porch step to take
care of the unlimited overflow of neighbors that dropped by. We'd sit out so all evening. The younger couples
perhaps would wander off for half an hour to get a soda but come back to join in the informal singing or listen while
somebody strummed a mandolin or guitar." "What on earth do you want me to do? Just sit around home all
evening!" retorted a popular high school girl of today when her father discouraged her going out motoring for the
evening with a young blade in a rakish car waiting at the curb. The fact that 348 boys and 382 girls in the three upper
years of the high school placed "use of the automobile" fifth and fourth respectively in a list of twelve possible
sources of disagreement between them and their parents suggests that this may be an increasing decentralizing
agent.
An earnest teacher in a Sunday School class of working class boys and girls in their late teens was winding up the
lesson on the temptations of Jesus: "These three temptations summarize all the temptations we encounter today:
physical comfort, fame, and wealth. Can you think of any temptation we have today that Jesus didn't have? "Speed!"
rejoined one boy. The unwanted interruption was quickly passed over. But the boy had mentioned a tendency
underlying one of the four chief infringements of group laws in Middletown today, and the manifestations of Speed
are not confined to "speeding." "Auto Polo next Sunday!!" shouts the display advertisement of an amusement park
near the city. "It's motor insanity--too fast for the movies!" The boys who have cars "step on the gas," and those who
haven't cars sometimes steal them: "The desire of youth to step on the gas when it has no machine of its own," said
the local press, "is considered responsible for the theft of the greater part of the [154] automobiles stolen from
[Middletown] during the past year."
The threat which the automobile presents to some anxious parents is suggested by the fact that of thirty girls
brought before the juvenile court in the twelve months preceding September 1, 1924, charged with "sex crimes," for
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whom the place where the offense occurred was given in the records, nineteen were listed as having committed the
offense in an automobile. Here again the automobile appears to some as an "enemy" of the home and society.
Questions to consider:
1. What kinds of concerns did the residents of Middletown express in relation to the automobile?
2. List some ways that the automobile impacted life in the 1920's. Consider family life, other industries, etc.
General Motors Eclipses Ford
Although Henry Ford was the innovator who developed a system for mass-producing cars and selling them cheaply,
Ford Motor Company failed to produce options for consumers. The utilitarian Model T was "available in any color, so
long as it was black" and changed little in design over the years. When Alfred P. Sloan became president of the
reorganized General Motors Corporation in 1923, he introduced alternative makes like Chevrolet and Buick that
came in a variety of colors. GM tapped into the emerging consumer psychology of the Jazz Age, annually producing
updated models, marketing them aggressively, and promoting installment payment plans. Thus, Ford's sales were
assailed by both the new GM models and the used car market.
Finally, in 1927, Ford Motor Company took a cue from GM's success and introduced the Model A with a blitz of
advertising and the offer of installment plans. The product was so highly anticipated that many were sold before it
was even introduced.
The popular 1928 song "Henry's Made a Lady Out of Lizzie" (2:51 minutes) refers to the refined new Model A. The
utilitarian Model T was known as the "Tin Lizzy", and this song dubbs the Model A "Queen Elizabeth".
The 1929 article "Keep the Consumer Dissatisfied," written by the research director at GM justifies the continual
refining of cars as a necessary stimulant to the economy.
Charles F Kettering Keep the Consumer Dissatisfied.
Not long ago one of the great bankers of the country said to me:
"The trouble with you fellows is that you are all the time changing automobiles and depreciating old cars, and you
are doing it at a time when people have three or four payments to make on the cars they already have. Yesterday I
got an engraved invitation from one of your companies to see a new model. Out of curiosity I went. I darn near
bought one. I didn't because you people wouldn't allow me enough money for my old car."
A few weeks later I was again talking with this banker. He appeared to be greatly disgruntled.
USA 1917-1941: Study Guide Two
"I bought the new model," he barked. "But it was rotten shame that I had to accept so much depreciation on my old
car. You are the fellow who is to blame. You, with all your changes and refinements, made me dissatisfied with the
old model."
He paused, then added, mournfully, "And that old car ran like new."
I told him I thought it was worth what he paid---that is, the difference between the old and the new mode--to have
his mind changed. He didn't argue over that but he did say something to the general effect that "the only reason for
research is to keep your customers reasonably dissatisfied with what they already have."
I might observe, here and now, that he was right. A few weeks back I was sitting with a group of executives. All were
admiring a new model.
"It is absolutely the best automobile that can be made," enthused one. I objected to that statement.
"Let's take this automobile which, you say, is the 'best that can be made' and put it into a glass showcase," I said.
"Let's put it in there-seal it so no person can possibly touch it. Just before we seal it in the case, let us mark the price
in big letters inside the case."
"Let us do that and come back here a year from today. After looking at it and appraising it, we will mark a price on
the outside of the glass. It will be a price something less than what we think the car is worth today. Probably $200
less. Then, let's come back once every year for ten years, look through the glass, and mark a new price. At the end of
ten years we won't be able to put down enough ciphers to indicate what we think of the car. That is, of course,
eliminating its value as junk.
"In those ten years, no one could possibly have touched the car. There could be no lessened value through handling.
The paint would be just as good as new; the crank case just as good; the real axle just as good; and the motor just as
good as ever.
What then, has happened to the car?
"People's minds will have been changed; improvements will come in other cars; new styles will have come. What you
have here today, a car that you call 'the best that can be made,' will then be useless. So it isn't the best that can be
made. It may be the best you can have made and, if that is what you meant, I have no quarrel with what you said. . .
."
Change, to a research engineer, is improvement. People, though don't seem to think of it in that manner. When a
change is suggested they hold back and say, "What we have is all right--it does the work." Doing the work is
important but doing it better is more important. The human family in industry is always looking for a park bench
where it can sit down and rest. But the only park benches I know of are right in front of an undertaker's
establishment.
There are no places where anyone can sit and rest in an industrial situation. It is a question of change, change,
change, all the time--and it is always going to be that way. It must always be that way for the world only goes along
one road, the road to progress. Nations and industries that have become satisfied with themselves and their ways of
doing things, don't last. While they are sitting back and admiring themselves other nations and other concerns have
forgotten the looking-glasses and have been moving ahead . . . .
The younger generation and by that I mean the generation that is always coming--knows what it wants and it will
get what it wants. This is what makes for change. It brings about improvements in old things and developments in
new things. You can't stop people from being born. You can't stop the thing we call progress. You can't stop the thing
we call change. But you can get in tune with it. Change is never waste--it is improvement, all down the line. Because I
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have no further need for my automobile doesn't mean that that automobile is destroyed. It goes to someone who
has need for it and, to get it, he disposes of something that is unnecessary to his happiness. And so on to the end
where the thing that is actually thrown away is of no further use to anyone. By this method living standards, all
around, are raised.
We hear people complaining because of new models in automobiles. If it were not for these new models these same
people would be paying more for what they have. Recognition of the fact that progress is inevitable forces us to
recognize that we must have improvements in motor cars. We, as manufacturers, must offer those improvements
after they have been found to be capable improvements. The public buys and disposes of what it has. The fact that it
is able to dispose of what it has enables us, as producers, to put a lower price tag on the new model. The law of
economy in mass production enters here. We are permitted to turn out cars in volume because there is a market for
them.
If automobile owners could not dispose of their cars to a lower buying strata they would have to wear out their cars
with a consequent tremendous cutting in the yearly demand for automobiles, a certain increase in production costs,
and the natural passing along of these costs to the buyer.
If everyone were satisfied, no one would buy the new thing because no one would want it. The ore wouldn't be
mined; timber wouldn't be cut. Almost immediately hard times would be upon us. You must accept this reasonable
dissatisfaction with what you have and buy the new thing, or accept hard times. You can have your choice.
[From Charles F. Kettering, "Keep the Consumer Dissatisfied," Nation's Business, 17, no. 1 (January 1929), 30-31, 79.]
Questions to consider:
1. How did competition from GM affect the auto industry?
2. Why does Charles Kettering feel that continual refinement of car design to spur consumerism is essential?
3. What do these developments in the auto industry say about the state of American consumerism?
USA 1917-1941: Study Guide Two
Warren Harding and the "Return to Normalcy"
The three Republican presidents of the 1920's pursued an economic agenda similar to that of modern day
Republicans; cutting taxes to free up capital for investment and cutting federal spending. President Warren
Harding's campaign slogan, "Return to Normalcy," and his presidency itself were mediocre and uneventful, save for
the scandals that came to light after his death in office. He took a laissez-faire stance in economics and government
so accordingly he opposed organized labor and anti-trust measures. Though he was a steadfast conservative, he
took little initiative as a policymaker and delegated decision-making to a few key cabinet members. Secretary of the
Treasury Andrew Mellon pushed through tax cuts to wealthy citizens and business, following the "trickle down"
theory of economics. Secretary of Commerce Herbert Hoover and Secretary of State Charles Evans Hughes worked
to secure foreign markets for American interests.
In Harding's 1921 Inaugural Address, he emphasizes the need America to return to stability and change from a
spartan wartime economy to a prosperous and stable peacetime economy. He lists the economic strategies of the
administration to restore the economy, which are indicative of the general ideological inclinations of all three
Republican presidents of the 1920's.
Inaugural Address of Warren G. Harding 1921
My Countrymen:
When one surveys the world about him after the great storm, noting the marks of destruction and yet rejoicing in the
ruggedness of the things which withstood it, if he is an American he breathes the clarified atmosphere with a strange
mingling of regret and new hope. We have seen a world passion spend its fury, but we contemplate our Republic
unshaken, and hold our civilization secure. …
We must understand that ties of trade bind nations in closest intimacy, and none may receive except as he gives. We
have not strengthened ours in accordance with our resources or our genius, notably on our own continent, where a
galaxy of Republics reflects the glory of new-world democracy, but in the new order of finance and trade we mean to
promote enlarged activities and seek expanded confidence.
Our supreme task is the resumption of our onward, normal way. Reconstruction, readjustment, restoration all these
must follow. …
We can reduce the abnormal expenditures, and we will. We can strike at war taxation, and we must. … Our most
dangerous tendency is to expect too much of government, and at the same time do for it too little. … We need a rigid
and yet sane economy, combined with fiscal justice, and it must be attended by individual prudence and thrift…
The business world reflects the disturbance of war's reaction. … The economic mechanism is intricate and its parts
interdependent, and has suffered the shocks and jars incident to abnormal demands, credit inflations, and price
upheavals. The normal balances have been impaired, the channels of distribution have been clogged, the relations of
labor and management have been strained. …Prices must reflect the receding fever of war activities. Perhaps we
never shall know the old levels of wages again, because war invariably readjusts compensations, and the necessaries
of life will show their inseparable relationship, but we must strive for normalcy to reach stability. … Any wild
experiment will only add to the confusion. Our best assurance lies in efficient administration of our proven system.
The forward course of the business cycle is unmistakable. Peoples are turning from destruction to production.
Industry has sensed the changed order and our own people are turning to resume their normal, onward way. The call
is for productive America to go on. I know that Congress and the Administration will favor every wise Government
policy to aid the resumption and encourage continued progress.
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I speak for administrative efficiency, for lightened tax burdens, for sound commercial practices, for adequate credit
facilities, for sympathetic concern for all agricultural problems, for the omission of unnecessary interference of
Government with business, for an end to Government's experiment in business, and for more efficient business in
Government administration. …
I had rather submit our industrial controversies to the conference table in advance than to a settlement table after
conflict and suffering. … I would like to acclaim an era of good feeling amid dependable prosperity and all the
blessings which attend.
It has been proved again and again that we cannot, while throwing our markets open to the world, maintain
American standards of living and opportunity, and hold our industrial eminence in such unequal competition. There is
a luring fallacy in the theory of banished barriers of trade, but preserved American standards require our higher
production costs to be reflected in our tariffs on imports. … We seek participation in the world's exchanges, because
therein lies our way to widened influence and the triumphs of peace. We know full well we cannot sell where we do
not buy, and we cannot sell successfully where we do not carry. Opportunity is calling not alone for the restoration,
but for a new era in production, transportation and trade. We shall answer it best by meeting the demand of a
surpassing home market, by promoting self- reliance in production, and by bidding enterprise, genius, and efficiency
to carry our cargoes in American bottoms to the marts of the world.
We would not have an America living within and for herself alone, but we would have her self-reliant, independent,
and ever nobler, stronger, and richer. Believing in our higher standards, reared through constitutional liberty and
maintained opportunity, we invite the world to the same heights. But pride in things wrought is no reflex of a
completed task. Common welfare is the goal of our national endeavor. Wealth is not inimical to welfare; it ought to
be its friendliest agency. There never can be equality of rewards or possessions so long as the human plan contains
varied talents and differing degrees of industry and thrift, but ours ought to be a country free from the great blotches
of distressed poverty. We ought to find a way to guard against the perils and penalties of unemployment. We want
an America of homes, illumined with hope and happiness, where mothers, freed from the necessity for long hours of
toil beyond their own doors, may preside as befits the hearthstone of American citizenship. We want the cradle of
American childhood rocked under conditions so wholesome and so hopeful that no blight may touch it in its
development, and we want to provide that no selfish interest, no material necessity, no lack of opportunity shall
prevent the gaining of that education so essential to best citizenship.
There is no short cut to the making of these ideals into glad realities. The world has witnessed again and again the
futility and the mischief of ill-considered remedies for social and economic disorders. But we are mindful today as
never before of the friction of modern industrialism, and we must learn its causes and reduce its evil consequences by
sober and tested methods. Where genius has made for great possibilities, justice and happiness must be reflected in
a greater common welfare. …
1. How does the idea of a "return to normalcy" relate to the interest in materialism following WWI?
2. According to Harding, what kind of transition does the post-WWI economy need to make?
3. What does remedies does Harding propose stabilize and strengthen the economy?
USA 1917-1941: Study Guide Two
Protective Tariffs
Part of the success of American business interests in the 1920's can be attributed to the high tariffs imposed by the
Congress and all three presidents. A protective tariff is a tax on imported, foreign-made goods levied by the
government to make the prices of those goods less competitive with the prices of American-made goods. Two major
pieces of tariff legislation were passed during the 1920's: The Emergency Tariff Act of 1921 and the Fordney
McCumber Act of 1922. These measures resulted in the highest tariff rates in history at the time. The national mood
in the United States after WWI was one of isolationism, nationalism, and concern for continued economic
prosperity. This provided an opportunity for lawmakers to protect American interests as Europe began to recover
and export its goods. The tariffs made it more difficult for Europe to pay its war debts, facilitated the growth of
monopolies, and eventually slowed international trade by provoking other countries to enact high tariffs on U.S.
exports.
Excerpts from the Republican Party Platform of 1924 highlight the party's justification for enacting protective tariff
legislation and including an "elastic provision" to allow the president to adjust tariff rates.
Excerpts from the Democratic Party Platform of 1924 denounces the protective tariff policies as a mechanism for
nurturing monopolies and increasing the cost of living for the average American.
Excerpts on Tariffs from the Republican Party Platform of 1924
…The Tariff
We reaffirm our belief in the protective tariff to extend needed protection to our productive industries. We believe
in protection as a national policy, with due and equal regard to all sections and to all classes. It is only by adherence
to such a policy that the well being of the consumers can be safeguarded that there can be assured to American
agriculture, to American labor and to American manufacturers a return to perpetrate American standards of life. A
protective tariff is designed to support the high American economic level of life for the average family and to
prevent a lowering to the levels of economic life prevailing in other lands.
In the history of the nation the protective tariff system has ever justified itself by restoring confidence, promoting
industrial activity and employment, enormously increasing our purchasing power and bringing increased prosperity
to all our people.
The tariff protection to our industry works for increased consumption of domestic agricultural products by an
employed population instead of one unable to purchase the necessities of life. Without the strict maintenance of
the tariff principle our farmers will need always to compete with cheap lands and cheap labor abroad and with lower
standards of living.
The enormous value of the protective principle has once more been demonstrated by the Emergency Tariff Act of
1921 and the Tariff Act of 1922.
We assert our belief in the elastic provision adopted by congress in the Tariff Act of 1922 providing for a method of
readjusting the tariff rates and the classifications in order to meet changing economic conditions when such
changed conditions are brought to the attention of the President by complaint or application.
We believe that the power to increase or decrease any rate of duty provided in the tariff furnishes a safeguard on
the one hand against excessive taxes and on the other hand against too high customs charges.
USA 1917-1941: Study Guide Two
The wise provisions of this section of the Tariff Act afford ample opportunity for tariff duties to be adjusted after a
hearing in order that they may cover the actual differences in the cost of production in the United States and the
principal competing countries of the world.
We also believe that the application of this provision of the Tariff Act will contribute to business stability by making
unnecessary general disturbances which are usually incident to general tariff revisions.
Excerpts on Tariffs from the Democratic Party Platform of 1924.
…Democratic Principles
The democratic party believes in equal rights to all and special privilege to none. The Republican Party holds that
special privileges are essential to national prosperity. It believes that national prosperity must originate with the
special interests and seep down through the channels of trade to the less favored industries to the wage earners
and small salaried employees. It has accordingly enthroned privilege and nurtured selfishness.
The Republican Party is concerned chiefly with material things; the Democratic Party is concerned chiefly with
human rights. The masses, burdened by discriminating laws and unjust administration, are demanding relief. The
favored special interests, represented by the Republican Party, contented with their unjust privileges, are
demanding that no change be made. The democratic party stands for remedial legislation and progress. The
republican party stands still. …
Tariff and Taxation
The Fordney-McCumber Tariff Act is the most unjust, unscientific and dishonest tariff tax measure ever enacted in
our history. It is class legislation which defrauds the people for the benefit of a few, it heavily increases the cost of
living, penalizes agriculture, corrupts the government, fosters paternalism and, in the long run, does not benefit the
very interests for which it was intended.
We denounce the Republican tariff laws which are written, in great part, in aid of monopolies and thus prevent that
reasonable exchange of commodities which would enable foreign countries to buy our surplus agricultural and
manufactured products with resultant profit to the toilers and producers of America.
Trade interchange, on the basis of reciprocal advantages to the countries participating is a time-honored doctrine
of democratic faith. We declare our party's position to be in favor of a tax on commodities entering the customs
house that will promote effective competition, protect against monopoly and at the same time produce a fair
revenue to support the government.
The greatest contributing factor in the increase and unbalancing of prices is unscientific taxation. After having
increased taxation and the cost of living by $2,000,000,000 under the Fordney-McCumber Tariff, all that the
republican party could suggest in the way of relief was a cut of $300,000,000 in direct taxes; and that was to be
given principally to those with the largest incomes. …
Questions to consider:
1. Summarize the Republican Party's justification for high tariffs.
USA 1917-1941: Study Guide Two
Silent Cal and the Business of America
When President Harding died in office in August 1923, the famously laconic and reserved Calvin Coolidge assumed
the presidency. Coolidge's laissez faire policy extended toward both government and business alike. His efforts were
focused on cutting taxes, reducing government spending, and imposing high tariffs on foreign goods. He and Mellon
were also intensely focused on managing the government and its budget in an organized, business-like manner.
Coolidge's famous remark, "The business of America is business," characterized the pro-business, pro-consumerism
mentality of the Jazz Age.
Excerpts from the Platform of the Republican Party for 1924 communicate the party's basic philosophy of low taxes,
non-interference by the government, and protective tariffs.
Republican Party Platform of 1924
We the delegates of the republican party in national convention assembled, bow our heads in reverent memory of
Warren G. Harding. …
As delegates of the Republican Party, we share in the national thanksgiving that in the great emergency created by
the death of our great leader there stood forth fully equipped to be his successor one whom we had nominated as
vice-president—Calvin Coolidge, who as vice-president and president by his every act has justified the faith and
confidence which he has won from the nation. …
Situation in 1921
When the Republican administration took control of the government in 1921, there were four and a half million
unemployed; industry and commerce were stagnant; agriculture was prostrate; business was depressed; securities of
the government were selling below their par values. …
To-day industry and commerce are active; public and private credits are sound; we have made peace; we have taken
the first step toward disarmament and strengthened our friendship with the world powers...
Public Economy
We demand and the people of the United States have a right to demand rigid economy in government. A policy of
USA 1917-1941: Study Guide Two
strict economy enforced by the republican administration since 1921 has made possible a reduction in taxation and
has enabled the government to reduce the public debt by $2,500,000,000. This policy vigorously enforced has
resulted in a progressive reduction of public expenditures until they arc now two billions dollars per annum less than
in 1921. The tax burdens of the people have been relieved to the extent of $1,250,000,000 per annum. Government
securities have been increased in value more than $3,000,000,000. Deficits have been converted in surpluses. The
budget system has been firmly established and the number of federal employees has been reduced more than one
hundred thousand. We commend the firm insistence of President Coolidge upon rigid government economy and
pledge him our earnest support to this end.
Finance and Taxation
We believe that the achievement of the republican administration in reducing taxation by $1,250,000,000 per
annum; reducing of the public debt by $2,432,000,000; installing a budget system; reducing the public expenditures
from $5,500,000,000 per annum to approximately $3,400,000,000 per annum, thus reducing the ordinary
expenditures of the government to substantially a pre-war basis, and the complete restoration of public credit; the
payment or refunding of $7,500,000,000 of public obligations without disturbance of credit or industry—all during
the short period of three years—presents a record unsurpassed in the history of public finance.
The assessment of taxes wisely and scientifically collected and the efficient and economical expenditure of the money
received by the government are essential to the prosperity of our nation.
Carelessness in levying taxes inevitably breeds extravagance in expenditures. The wisest of taxation rests most rightly
on the individual and economic life of the country. The public demand for a sound tax policy is insistent. …
We pledge ourselves to the progressive reduction of taxes of all the people as rapidly as may be done with due
regard for the essential expenditures for the government administered with rigid economy and to place our tax
system on a sound peace time basis. …
The Tariff
We reaffirm our belief in the protective tariff to extend needed protection to our productive industries. We believe in
protection as a national policy, with due and equal regard to all sections and to all classes. It is only by adherence to
such a policy that the well being of the consumers can be safeguarded that there can be assured to American
agriculture, to American labor and to American manufacturers a return to perpetrate American standards of life. A
protective tariff is designed to support the high American economic level of life for the average family and to prevent
a lowering to the levels of economic life prevailing in other lands.
In the history of the nation the protective tariff system has ever justified itself by restoring confidence, promoting
industrial activity and employment, enormously increasing our purchasing power and bringing increased prosperity
to all our people.
The tariff protection to our industry works for increased consumption of domestic agricultural products by an
employed population instead of one unable to purchase the necessities of life. Without the strict maintenance of the
tariff principle our farmers will need always to compete with cheap lands and cheap labor abroad and with lower
standards of living.
The enormous value of the protective principle has once more been demonstrated by the Emergency Tariff Act of
1921 and the Tariff Act of 1922.
We assert our belief in the elastic provision adopted by Congress in the Tariff Act of 1922 providing for a method of
readjusting the tariff rates and the classifications in order to meet changing economic conditions when such changed
conditions are brought to the attention of the president by complaint or application.
We believe that the power to increase or decrease any rate of duty provided in the tariff furnishes a safeguard on the
USA 1917-1941: Study Guide Two
one hand against excessive taxes and on the other hand against too high customs charges.
The wise provisions of this section of the tariff act afford ample opportunity for tariff duties to be adjusted after a
hearing in order that they may cover the actual differences in the cost of production in the United States and the
principal competing countries of the world.
We also believe that the application of this provision of the Tariff Act will contribute to business stability by making
unnecessary general disturbances which are usually incident to general tariff revisions. …
Agriculture
In dealing with agriculture the Republican Party recognizes that we are faced with a fundamental national problem,
and that the prosperity and welfare of the nation as a whole is dependent upon the prosperity and welfare of our
agricultural population. …
The restoration of general prosperity and the purchasing power of our people through tariff protection has resulted
in an increased domestic consumption of food products while the price of many agricultural commodities are above
the war price level by reason of direct tariff protection. …
The crux of the problem from the standpoint of the farmer is the net profit he receives after his outlay. The process of
bringing the average prices of what he buys and what he sells closer together can be promptly expedited by
reduction in taxes, steady employment in industry and stability in business.
This process can be expedited directly by lower freight rates, by better marketing through cooperative efforts and a
more scientific organization of the physical human machinery of distribution and by a greater diversification of farm
products. …
The Republican Party pledges itself to the development and enactment of measures which will place the agricultural
interests of America on a basis of economic equality with other industries to assure its prosperity and success. We
favor adequate tariff protection to such of our agriculture products as are threatened by competition. We favor,
without putting the government into business, the establishment of a federal system of organization for co-operative
marketing of farm products. …
Government Control
The prosperity of the American nation rests on the vigor of private initiative which has bred a spirit of independence
and self-reliance. The republican party stands now, as always, against all attempts to put the government into
business.
American industry should not be compelled to struggle against government competition. The right of the government
to regulate, supervise and control public utilities and public interests, we believe, should be strengthened, but we are
firmly opposed to the nationalization or government ownership of public utilities. …
1. Summarize the Republican Party's economic philosophy in 1924.
USA 1917-1941: Study Guide Two
Coolidge was handily elected in his own right in 1924 by an electorate satisfied with the general prosperity of his
term. A version of his 1925 inaugural address edited for comments pertaining to economics appears below. Coolidge
focuses on tax relief and thrift in government to maintain America's economic prosperity.
The following photo is of Calvin Coolidge, Andrew Mellon, and Herbert Hoover. Mellon served as Secretary of the
Treasury from 1921 to 1932 and was extremely influential in shaping the country's economic policies in the 1920's.
Herbert Hoover served as the Secretary of Commerce under Harding and Coolidge. He and Mellon were responsible
for assisting big business through policies like high tariffs and information on tax loopholes.
Calvin Coolidge Inaugural 1925
My Countrymen:
No one can contemplate current conditions without finding much that is satisfying and still more that is encouraging.
Our own country is leading the world in the general readjustment to the results of the great conflict. Many of its
burdens will bear heavily upon us for years, and the secondary and indirect effects we must expect to experience for
some time. …. Already we have sufficiently rearranged our domestic affairs so that confidence has returned, business
has revived, and we appear to be entering an era of prosperity which is gradually reaching into every part of the
Nation. …we have contributed of our resources and our counsel to the relief of the suffering and the settlement of the
disputes among the European nations. Because of what America is and what America has done, a firmer courage, a
higher hope, inspires the heart of all humanity. …
When we turn from what was rejected to inquire what was accepted, the policy that stands out with the greatest
clearness is that of economy in public expenditure with reduction and reform of taxation. The principle involved in
this effort is that of conservation. The resources of this country are almost beyond computation. No mind can
comprehend them. But the cost of our combined governments is likewise almost beyond definition. Not only those
who are now making their tax returns, but those who meet the enhanced cost of existence in their monthly bills,
know by hard experience what this great burden is and what it does. No matter what others may want, these people
want a drastic economy. They are opposed to waste. They know that extravagance lengthens the hours and
diminishes the rewards of their labor. I favor the policy of economy, not because I wish to save money, but because I
wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government.
Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we
prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical
form.
If extravagance were not reflected in taxation, and through taxation both directly and indirectly injuriously affecting
the people, it would not be of so much consequence. The wisest and soundest method of solving our tax problem is
through economy. … We do not any longer need wartime revenues. The collection of any taxes which are not
absolutely required, which do not beyond reasonable doubt contribute to the public welfare, is only a species of
legalized larceny. Under this republic the rewards of industry belong to those who earn them. The only constitutional
tax is the tax which ministers to public necessity. The property of the country belongs to the people of the country.
Their title is absolute. They do not support any privileged class; they do not need to maintain great military forces;
they ought not to be burdened with a great array of public employees. They are not required to make any
contribution to Government expenditures except that which they voluntarily assess upon themselves through the
action of their own representatives. Whenever taxes become burdensome a remedy can be applied by the people;
but if they do not act for themselves, no one can be very successful in acting for them.
The time is arriving when we can have further tax reduction, when, unless we wish to hamper the people in their
right to earn a living, we must have tax reform. The method of raising revenue ought not to impede the transaction
of business; it ought to encourage it. I am opposed to extremely high rates, because they produce little or no revenue,
USA 1917-1941: Study Guide Two
because they are bad for the country, and, finally, because they are wrong. We can not finance the country, we can
not improve social conditions, through any system of injustice, even if we attempt to inflict it upon the rich. Those
who suffer the most harm will be the poor. This country believes in prosperity. It is absurd to suppose that it is
envious of those who are already prosperous. The wise and correct course to follow in taxation and all other
economic legislation is not to destroy those who have already secured success but to create conditions under which
every one will have a better chance to be successful. The verdict of the country has been given on this question. That
verdict stands. We shall do well to heed it.
These questions involve moral issues. We need not concern ourselves much about the rights of property if we will
faithfully observe the rights of persons. Under our institutions their rights are supreme. It is not property but the right
to hold property, both great and small, which our Constitution guarantees. … These rights and duties have been
revealed, through the conscience of society, to have a divine sanction. The very stability of our society rests upon
production and conservation. For individuals or for governments to waste and squander their resources is to deny
these rights and disregard these obligations. The result of economic dissipation to a nation is always moral decay.
These policies of better international understandings, greater economy, and lower taxes have contributed largely to
peaceful and prosperous industrial relations. Under the helpful influences of restrictive immigration and a protective
tariff, employment is plentiful, the rate of pay is high, and wage earners are in a state of contentment seldom before
seen. Our transportation systems have been gradually recovering and have been able to meet all the requirements of
the service. Agriculture has been very slow in reviving, but the price of cereals at last indicates that the day of its
deliverance is at hand. …
It is in such contemplations, my fellow countrymen, which are not exhaustive but only representative, that I find
ample warrant for satisfaction and encouragement. ... Here stands its Government, aware of its might but obedient
to its conscience. Here it will continue to stand, seeking peace and prosperity, solicitous for the welfare of the wage
earner, promoting enterprise, developing waterways and natural resources, attentive to the intuitive counsel of
womanhood, encouraging education, desiring the advancement of religion, supporting the cause of justice and honor
among the nations. America seeks no earthly empire built on blood and force. No ambition, no temptation, lures her
to thought of foreign dominions. The legions which she sends forth are armed, not with the sword, but with the cross.
The higher state to which she seeks the allegiance of all mankind is not of human, but of divine origin. She cherishes
no purpose save to merit the favor of Almighty God.
Questions to consider:
2. According to President Coolidge, what are the affects of over-taxation on individual wage earner? What about on
the wealthy and the business owner?
3. Coolidge characterizes excess taxes as "a species of legalized larceny." In what other ways does the President
relate taxation to morality?
4. What does Coolidge identify as positive developments in the economy?
USA 1917-1941: Study Guide Two
Prosperity as Virtue
Optimism and renewed admiration for industry and entrepreneurship characterized the economic mood of the
1920's. Many Americans came to regard commerce as a fulfillment of America's promise and destiny. As the age of
consumerism dawned in America, financial success became a symbol of America's power and virtue.
President Coolidge, like the other chief executives of the 1920's, was an indispensable ally to big business and
commerce. President Calvin Coolidge's speech connecting spirituality with commerce in the aftermath of World War
I appears below.
Coolidge Speech on the Spirituality of Commerce
This time and place naturally suggest some consideration of commerce in its relation to Government and society. We
are finishing a year which can justly be said to surpass all others in the overwhelming success of general business. …
The foundation of this enormous development rests upon commerce. …
By ... wise policies, pursued with tremendous economic effort, our country has reached its present prosperous
condition. The people have been willing to work because they have had something to work for. The per capita
production has greatly increased. Out of our surplus savings we have been able to advance great sums for
refinancing the Old World and developing the New. …. If rightly directed, they ought to be of benefit to both lender
and borrower. If used to establish industry and support commerce abroad, through adding to the wealth and
productive capacity of those countries, they create their own security and increase consuming power to the probable
advantage of our trade. But when used in ways that are not productive, like the maintenance of great military
establishments or to meet municipal expenditures, which should either be eliminated by government economy or
supplied by taxation, they do not appear to serve a useful purpose and ought to be discouraged. … I should regret
very much to see our possession of resources which are available to meet needs in other countries be the cause of any
sentiment of envy or unfriendliness toward us. It ought everywhere to be welcomed with rejoicing and considered as a
part of the good fortune of the entire world that such an economic reservoir exists here which can be made available
in case of need.
Everyone knows that it was our resources that saved Europe from a complete collapse immediately following the
armistice [ending World War I]. Without the benefit of our credit an appalling famine would have prevailed over
great areas. In accordance with the light of all past history, disorder and revolution, with the utter breaking down of
all legal restraints and the loosing of all the passions which had been aroused by four years of conflict, would have
rapidly followed. Others did what they could, and no doubt made larger proportionate sacrifices, but it was the
credits and food which we supplied that saved the situation.
When the work of restoring the fiscal condition of Europe began, it was accomplished again with our assistance.
When Austria determined to put her financial house in order, we furnished a part of the capital. When Germany
sought to establish a sound fiscal condition, we again contributed a large portion of the necessary gold loan. Without
this, the reparations plan would have utterly failed. Germany could not otherwise have paid. The armies of
occupation would have gone on increasing international irritation and ill will. It was our large guarantee of credit
that assisted Great Britain to return to a gold basis. What we have done for France, Italy, Belgium, Czechoslovakia,
Poland, and other countries, is all a piece of the same endeavor. These efforts and accomplishments, whether they be
appreciated at home or received with gratitude abroad, which have been brought about by the business interests of
our country, constitute an enormous world service. … no positive and constructive accomplishment of the past five
years compares with the support which America has contributed to the financial stability of the world. It clearly
marks a new epoch.
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This holds a distinctly higher rank than a mere barter and sale. It reaches above the ordinary business transaction
into a broader realm. America has disbanded her huge armies and reduced her powerful fleet, but in attempting to
deal justly through the sharing of our financial resources we have done more for peace than we could have done with
all our military power. Peace, we know, rests to a great extent upon justice, but it is very difficult for the public mind
to divorce justice from economic opportunity… It was necessary to restore hope, to renew courage. A great
contribution to this end has been made with American money. … the important fact remains that when the world
needed to be revived we did respond. As nations see their way to a safer economic existence, they will see their way to
a more peaceful existence. Possessed of the means to meet personal and public obligations, people are reestablishing
their self-respect. The financial strength of America has contributed to the spiritual restoration of the world. It has
risen into the domain of true business.
The working out of these problems of regulation, Government economy, the elimination of waste in the use of human
effort and of materials, conservation and the proper investment of our savings both at home and abroad, is all a part
of the mighty task which was imposed upon mankind of subduing the earth. America must either perform her full
share in the accomplishment of this great world destiny or fail. For almost three centuries we were intent upon our
domestic development. We sought the help of the people and the wealth of other lands by which to increase our
numerical strength and augment our national fortune. We have grown exceedingly great in population and in riches.
This power and this prosperity we can continue for ourselves if we will but proceed with moderation. If our people
will but use those resources which have been entrusted to them, whether of command over large numbers of men or of
command over large investments of capital, not selfishly but generously, not to exploit others but to serve others,
there will be no doubt of an increasing production and distribution of wealth. …
If it is to have any continuing success, or any permanent value, it will be because it has not been brought about by one
will compelling another by force, but has resulted from men reasoning together… It has sought to bestow a greater
freedom upon our own people and upon the people of the world. We have worshipped the ideals of force long enough.
We have turned to worship at the true shrine of understanding and reason. …
This is the land of George Washington. We can do no less than work toward the realization of his hope. … He did not
hesitate to meet peril or encounter danger or make sacrifices. …we cannot avoid the obligations of a common
humanity. We must meet our perils; we must encounter our dangers; we must make our sacrifices; or history will
recount that the works of Washington have failed. I do not believe the future is to be dismayed by that record. The
truth and faith and justice of the ancient days have not departed from us.
In his 1925 bestseller The Man Nobody Knows: A Biography of Jesus, advertising expert Bruce Barton argues that
Jesus and his Apostles were the ultimate marketing and business team.
Questions to consider:
1. According to President Coolidge's speech what new role does America have in in the post-WWI world order?
2. Barton's book The Man Nobody Knows was tremendously popular. TIME magazine even used a free copy of the
book to entice readers into an 18 month subscription. What does the success of Barton's book reveal about
American's attitude toward business and prosperity in the 1920's?
USA 1917-1941: Study Guide Two
Advertising in the Jazz Age
Advertising techniques became more slick and refined throughout the 1920's as the mutually supportive industries
of mass production and mass media exploded into the American consciousness. The wide array of new appliances
and consumer goods available at a lower cost due to advances in production techniques fueled consumption in the
emerging culture of Modernism.
In his address before the American Association of Advertising Agencies, President Coolidge identifies the advertising
as a key component in perpetuating American prosperity. Coolidge was known for a reverential attitude toward
business and wealth, and here he exalts advertising as "part of the greater work of regeneration and redemption of
mankind."
President Calvin Coolidge Address Before the American Association of Advertising Agencies 1926.
USA 1917-1941: Study Guide Two
Members of the Association:
Sometimes it seems as though our generation fails to give the proper estimate and importance to the values of life.
Results appear to be secured so easily that we look upon them with indifference. We take too many things as a
matter of course, when in fact they have been obtained for us only as the result of ages of effort and sacrifice. … We
have become so accustomed to the character of our whole, vast, and intricate system of existence that we do not
ordinarily realize its enormous importance.
It seems to me probable that of all our economic life the element on which we are inclined to place too low an
estimate is advertising. When we come in contact with our great manufacturing plants, our extensive systems of
transportation, our enormous breadth of agriculture, or the imposing structures of commerce and finance, we are
forced to gain a certain impression by their very magnitude... But as we turn through the pages of the press and the
periodicals, as we catch the flash of billboards along the railroads and the highways, all of which have become
enormous vehicles of the advertising art, I doubt if we realize at all the impressive part that these displays are
coming more and more to play in modern life. … advertising has become a great business. It requires for its
maintenance investments of great amounts of capital, the occupation of large areas of floor space, the employment
of an enormous number of people, heavy shipments through the United States mails, wide service by telephone and
telegraph, broad use of the printing and paper trades, and the utmost skill in direction and management. In its
turnover it runs into hundreds of millions of dollars each year.
When we stop to consider the part which advertising plays in the modern life of production and trade we see that
basically it is that of education. It informs its readers of the existence and nature of commodities by explaining the
advantages to be derived from their use and creates for them a wider demand.
It makes new thoughts, new desires, and new actions. By changing the attitude of mind it changes the material
condition of the people. ... It is the most potent influence in adopting and changing the habits and modes of life,
affecting what we eat, what we wear, and the work and play of the whole Nation. Formerly it was an axiom that
competition was the life of trade. Under the methods of the present day it would seem to be more appropriate to say
that advertising is the life of trade.
Two examples of this influence have come to me in a casual way. .... One relates to an American industry that had
rather phenomenal growth and prosperity… In its development it had been a most generous advertiser. A time came
when various concerns engaged in this line of manufacturing were merged and consolidated. There being no longer
any keen competition… In order to save the large expense … advertising was substantially abandoned. The inevitable
result followed, which all well-informed trade quarters now know would follow. But the value of advertising was not
so well understood 25 or 30 years ago. This concern soon became almost a complete failure. As I recall, it had to be
reorganized, entailing great losses. This line of trade was later revived… and with the proper amount of publicity
became a successful enterprise.
But let us turn from the unfortunate experience of the loss that occurred through lack of advertising to an example of
gain that was made through the shrewd application of this principle. In a somewhat typical American community a
concern was engaged in an industrial enterprise. Its employees were not required to be men of great skill. Oftentimes
they were new arrivals in this country who had been brought up to be accustomed to the meager scale of living
abroad.
Their wants were not large, so that under the American rate of wages they found it possible to supply themselves
and their families without working anywhere near full time. As a result, production was low compared with the
number employed and was out of proportion to the overhead expense of management and capital costs. Some fertile
mind conceived the idea of locating a good milliner in that community. The wares of this shop were generously… I
suppose that every head of a family knows that a new bonnet on the head of one of the women in the neighborhood
is contagious. … which necessitated more steady employment for the men. The output of the plant was greatly
increased, its cost units were reduced, its profits were enlarged, it could sell its product to its customers at a lower
figure, and the whole industry was improved. … The whole standard of living in that locality was raised. All the
people became better clothed, better fed, and better housed. They had aspirations, and the means to satisfy them,
for the finer things of life. All of this came from the judicious application of the principle of advertising.
The system which brought about these results is well known to the members of this association. … Under its
stimulation the country has gone from the old hand methods of production which were so slow and laborious with
high unit costs and low wages to our present great factory system and its mass production with the astonishing
result of low unit costs and high wages. … Mass production is only possible where there is mass demand. Mass
USA 1917-1941: Study Guide Two
demand has been created almost entirely through the development of advertising. …
With our improved machinery, with the great increase in power that has come from steam and electricity, with the
application of engineering methods to production, the output of each individual engaged in our industrial and
agricultural life is steadily increasing. The elimination of waste through standardization has been another most
important factor in this direction. If we proceed under our present system, there would appear to be little reason to
doubt that we can continue to maintain all of these high standards in wages, in output, and in consumption
indefinitely…
The uncivilized make little progress because they have few desires. The inhabitants of our country are stimulated to
new wants in all directions. In order to satisfy their constantly increasing desires they necessarily expand their
productive power. They create more wealth because it is only by that method that they can satisfy their wants. It is
this constantly enlarging circle that represents the increasing progress of civilization. …
The National Government has a large interest in all these problems, though many of them are confined in their
jurisdiction to the States. The general welfare of the country…are very intimately connected with the commerce that
flows from agriculture and industry. Unless that be in a healthy condition, constantly expanding, securing reasonable
profits, employment begins to fail, sooner or later wages begin to fall, markets are oversupplied, movements of
freight decrease, factories are idle, and the results of all these are that want and distress creep into the home. You
can easily draw the converse of this picture. It has been the almost universal experience in American life of late. … in
the main the country has been and is prosperous. … If this were not so, this country could not support 20,000,000
automobiles, purchase so many radios, and install so many telephones…
You are familiar with the efforts which the Federal Government has been making to contribute to peace and
prosperity during the recent reconstruction period. We are steadily reducing our national debt, cutting down interest
charges. We have released hundreds of thousands of people from the unproductive field of Government employment
to the productive field of business life. The burdens of taxation have been so far removed that they are now for the
most part lightly borne, and the disproportionate charges formerly made to supply the public revenues have been
released to flow into the avenues of trade and investment. ...All of this has been a program of constructive economy,
beneficial alike to ourselves and to other people. In making this economically possible… advertising has supplied and
will continue to supply a very important part. Without the advantages that accrue from that art these
accomplishments would not have been possible.
But Americans are never satisfied with the past or present. They are always impatient in the future. Our history has
been that of an increasing prosperity. There have been fluctuations in trade, but with our present system of banking
and our enormous capacity for consumption such fluctuations will apparently be much less violent and are unlikely to
sink to the level of depression. …over the broad face of our country seedtime will be followed by the harvest, the
productive capacity will increase, and our people will become more prosperous. …
Our chief warrant for faith in the future of America lies in the character of the American people. …So long as our
economic activities can be maintained on the standard of competition in service, we are safe. If they ever degenerate
into a mere selfish scramble for rewards, we are lost. Our economic well-being depends on our integrity, our honor,
our conscience. It is through these qualities that your profession makes its especial appeal. Advertising ministers to
the spiritual side of trade. It is a great power that has been entrusted to your keeping which charges you with the
high responsibility of inspiring and ennobling the commercial world. It is all part of the greater work of regeneration
and redemption of mankind.
Questions to consider:
1. According to the President, how does advertising fit into the broader economic system? What are the results of
successful advertising on the individual, industry, and the nation?
2. Identify a few key phrases in the President's address that characterize his attitude toward business and
advertising and compare these phrases to those in other Coolidge speeches in this module.
USA 1917-1941: Study Guide Two
3. What does Coolidge predict for the future of the American economy? Is he correct?
4. How did technology impact both advertising and consumerism in the 1920's?
Credit and the Consumer
As consumerism became a hallmark of Modernism, the stigma of purchasing goods on "installment plans" faded.
The automobile industry was one of the first to capitalize on the potential of consumer credit, but other industries
quickly followed suit.
Herbert Hoover and the End of Prosperity
After a lifetime of distinguished public service, Herbert Hoover served successfully as Secretary of Commerce under
Presidents Harding and Coolidge. When Coolidge retired from politics, Hoover became the natural Republican
candidate in 1928. Despite his experience and predictions of prosperity, the stock market crashed just months in to
his presidency. He retained his conservative ideological principles of a balanced budget, low taxes, and government
non-interference, which made him vulnerable to criticism from the stricken nation. Hoover thus became a scapegoat
for the hardships of the Great Depression as the Jazz Age met its abrupt demise.
Hoover's 1928 "Rugged Individualism" campaign speech demonstrates his dedication to the traditional conservative
principle of laissez faire capitalism. Communities of makeshift houses became known as "Hoovervilles" as the
Depression worsened in the early 1930's. T
Hoover on Rugged Individualism 1928.
…But in addition to this great record of contributions of the Republican Party to progress, there has been a further
fundamental contribution -- a contribution perhaps more important than all the others -- and that is the resistance of
the Republican Party to every attempt to inject the Government into business in competition with its citizens.
After the war, when the Republican Party assumed administration of the country, we were faced with the problem of
determination of the very nature of our national life. Over 150 years we have builded up a form of self-government
and we had builded up a social system which is peculiarly our own. It differs fundamentally from all others in the
world. It is the American system. It is just as definite and positive a political and social system as has ever been
developed on earth. It is founded upon the conception that self-government can be preserved only by
decentralization of Government in the State and by fixing local responsibility; but further than this, it is founded upon
the social conception that only through ordered liberty, freedom and equal opportunity to the individual will his
initiative and enterprise drive the march of progress.
USA 1917-1941: Study Guide Two
During the war we necessarily turned to the Government to solve every difficult economic problem -- the Government
having absorbed every energy of our people to war there was no other solution. For the preservation of the State the
Government became a centralized despotism which undertook responsibilities, assumed powers, exercised rights,
and took over the business of citizens. To large degree we regimented our whole people temporarily into a socialistic
state. However justified it was in time of war if continued in peace time it would destroy not only our system but
progress and freedom in our own country and throughout the world. When the war closed the most vital of all issues
was whether Governments should continue war ownership and operation of many instrumentalities of production
and distribution. We were challenged with the choice of the American system rugged individualism or the choice of a
European system of diametrically opposed doctrines -- doctrines of paternalism and state socialism. The acceptance
of these ideas meant the destruction of self-government through centralization of government; it meant the
undermining of initiative and enterprise upon which our people have grown to unparalleled greatness.
1. What conservative principles does Hoover reiterate in his "Rugged Individualism" campaign speech?
Questions for class discussion:
1. What changes took place in industry during the 1920's?
2. What was the impact of technology on industry, advertising, and consumerism?
3. The auto industry was emblematic of the evolution of the consumer economy. They started out simple and
USA 1917-1941: Study Guide Two
utilitarian then became more stylish and varied throughout the decade. One's car became indicative of one's status
and taste, and the latest models were always in demand. What modern inventions could you compare to car?
4. Discuss the relationship between government and business in the 1920's.
5. Trace the arc of prosperity over the decade for the average American. How did the standard of living change?
The illusion of prosperity (Chris Butler 2007)
The 1920's have been popularly seen as a decade of political stability and economic prosperity. Indeed, Germany
did settle down, and seemed to stabilize after 1923, new democracies were established in Eastern Europe, and
prosperity did seem to return. A whole barrage of new technological breakthroughs and products signaled this:
affordable mass-produced automobiles, vacuum cleaners, refrigerators, cellophane, radios, talking movies, and
commercial air travel to name a few. But in reality, the 1920's presented largely an illusion of prosperity, for
beneath the surface were three serious problems, all arising from World War I and undermining the stability of the
world economy.
The first problem largely stemmed from the nature of American dominance of the world economy in the 1920's
compared to previous British dominance in the 1800's. The British had maintained a fairly balanced cash flow in
world trade since they had to buy raw materials with much of the money they made from selling manufactured
goods. This prevented too severe a drain of cash from other countries, thus assuring Britain more stable markets. In
contrast, the United States was not only an industrial power selling manufactured goods in markets it had claimed
from Europe during the war; it also had its own vast natural resources. Therefore, little money had to leave the
United States to buy the raw materials needed to manufacture its products. This created an unbalanced cash flow
from the rest of the world to the United States. As a result, European nations, still recovering from the war, needed
loans, which they got from American banks. This sent even more money to the United States in the form of
repayments and interest, just making an even more unbalanced cash flow, and so on.
The second problem had to do with Europe's recovery from World War I. European industries did revive to their old
pre-war levels of production by 1925, but they failed to reclaim their old markets from the United States or create
new markets to compensate for the losses. As a result, the intense economic competition between nations that had
largely caused World War I continued after it. Therefore, nations still maintained high tariffs, which raised prices,
cut world trade, and further weakened the world economy.
Finally there was an agricultural crisis in the United States. This was the result of dramatic expansion of farmland in
order to meet the food demands of the European countries during the war. However, European agricultural
USA 1917-1941: Study Guide Two
production revived after the war, causing overproduction. Grain prices plummeted, and American farmers went
into debt, many of them losing their farms when they were unable to maintain mortgage payments on their newly
expanded farms. Therefore, although America's industries seemed to be thriving, its agricultural sector, still a large
part of its population and economy, was in trouble.
The Crash
Ironically, while all of these problems led to an unstable world economy, they also created an illusion of
prosperity. This was especially true in the United States where investing in the stock market had become a virtual
national sport. However, the American stock market in the 1920's had a fatal flaw, since investors only had to pay as
little as 10% cash for their stocks. Banks financed the balance at 10-15% interest. This made it easy to buy stocks, so
the stock market rose at an unprecedented rate in the late 1920's. But this also meant the market must rise 10-15%
per year for investors to break even after accounting for their loans plus interest. This created an increasingly
uneasy atmosphere as investors worried about how much the already inflated value of stocks could rise. For those
realistic enough to pay attention, there were danger signs for the economy in the fall of 1929. In October, the
market crashed.
Much of what happened was a classic case of panic psychology running wildly out of control. When some investors
started selling stocks, this left other investors in debt to the banks nervous about stock prices falling, something they
could not afford. Therefore, when some of them started selling, stock prices fell more, which caused more panic
selling, even lower prices, and so on. In a matter of hours, millions of investors were ruined, with some stocks falling
$75 per share. It got worse. By November 1, investors had lost $40 billion, and by November 13, the stock market
had lost half of its value.
This spilled over into the rest of the American economy, causing an overall lack of faith in the future, which led to a
decline in investment and buying. Therefore, production was cut, which cost workers their jobs, further
undermining faith in the economy, and so on. This only hurt the stock market, which then fed back into the cycle of
economic decline. By 1932, industrial production in the United States had fallen by half, national income by 75%,
and the value of some stocks from $100 to $.50 per share. This led to the collapse of 5000 American banks, many of
which had over-invested in the stock market. These banks called in loans from Europe, whose economies were
already unstable and overly dependent on American loans. The result was a worldwide depression spreading from
America and Europe to the rest of the world that was tied into their economies.