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American History II


A Decade of Prosperity: The 1920s

American Pride

            Businessmen took most of the credit for the prosperity the nation enjoyed throughout the 1920s. They worked to engender the idea that "The business of America is business."  Business interests created two major propaganda mills to influence both government and public opinion: the Chamber of Commerce and the National Association of Manufacturers. Both groups advocated a return to laissez-faire economics, less regulation of business, and less support of labor unions. The National Association of Manufacturers labeled its political and economic agenda for the nation "The American Way."  The advantage of a label such as this is that opposition to the groups's goals and programs can be labeled "un-American" rather easily.

            Politically, American business wanted three things from government: higher tariffs, lower taxes, and reduced regulation. During the decade of the 1920s, they got all three. Congress passed and presidents signed two major tariff bills. The Fordney-McCumber Act (1922) and the  Hawley-Smoot Act (1930) created the highest tariff schedules ever adopted for foreign-made goods. Andrew Mellon was Secretary of the Treasury from 1921 to 1932, that is, through the presidencies of all three men who were president during the decade. In response to Mellon's demands, Congress repealed the excess profits tax and reduced the tax rates for corporate and personal income taxes.  Mellon provided business leaders with lists of tax "loopholes" which were drawn up, at Mellon's request, by the IRS.  Finally, the government did loosen enforcement of a number of Progressive-era regulations.  The Federal Trade Commission (FTC) had been created to regulate big business and to look into unfair trade practices, but did less and less investigating and enforcing in the 1920s.  Herbert Hoover, Secretary of Commerce under Presidents Harding and Coolidge until he became President himself, clearly encouraged price-fixing.  Hoover believed that the government was responsible for helping businesses profit.  (A strict policy of laissez faire would not help business, just as it would not hinder it. But the American businessmen's version of laissez-faire demanded government support without government regulation.)

            Americans elected three Republican Presidents during the 1920s, each of whom promised to promote the politics of prosperity.  Warren G. Harding (1865-1923) was elected to the Presidency in 1920.  Harding urged a "return to normalcy" in the decade after World War I.  The policies of his administration were generally conservative regarding taxes, tariffs, immigration restriction, labor rights, and business regulation. Harding's administration was marked by corruption and scandal, although most of the scandals were not known to the public until after he died while in office in August of 1923.

            Calvin Coolidge was Harding's vice president (1921-23).  When Harding's death made him president, Coolidge acted quickly to repair the damage of the Harding scandals and to secure the 1924 presidential nomination.  He was easily elected over Democrat John W. Davis and Progressive Senator Robert M. La Follette.  Coolidge's policies included cutting federal taxes and maintaining high tariffs.  These were very popular during his presidency, but in light of the Great Depression, his decisions were later discredited.  Herbert Hoover was elected to the presidency in 1928, helped by the prevailing prosperity in major areas of the country.  But the "American Way" was leading to widespread speculation and unsound economic policies.  Hoover had been in office just a few months when the stockmarket collapsed and the Great Depression began.  He was not able to come up with effective policies to deal with the Depression and lost the presidential election of 1932 to Franklin D. Roosevelt.

The Business Boom of the 1920s

            On the whole, the United States economy experienced steady growth and expansion during the 1920s. Three factors of production--machines, factories, and assembly lines--became especially important elements of that economic expansion. The reason for that is that better machines and standardized mass production processes of the assembly line led to higher production levels and higher wages. Higher wages led to more demand for consumer goods, which led to increased production. This upward spiral, which led to a business boom, continued until 1929. There were five main causes of the 1920s economic boom.

1. The Effects of WWI on Technology.

            During World War I (and indeed almost any major war), a significant labor shortage developed as civilians were drafted for or volunteered for military service. But World War I (and almost any war) created a need for increased production.  Increased demand for goods when labor was in short supply necessitated new, more efficient methods of production.  Old industries, such as petroleum and steel, were stimulated as the need for weapons and armaments increased.  New industries also appeared, particularly those producing various kinds of synthetic substances that could substitute for materials allocated almost exclusively to the war effort or for materials unavailable because producers were on the other side of the war or were unaccessible because of the war.  One measure of these accelerated technological changes to make production more efficient is the money spent on new machinery for industry. In 1915 the total annual expenditure for new factory equipment was $600 million. That grew to $2.5 billion by 1918.

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

            Scientific management grew out of the observations of a relative handful of men who studied the motions of workers and worked out the most efficient set of movements for accomplishing a task. Frederick W. Taylor was the founder of the movement. Taylor studied not only motion, but also routing of work and other factors that affected time and costs of production. Taylorism worked in concert with the gradual evolution of bureaucratic forms of organization to try to rationalize decision-making, establish clear lines of authority and accountability, and improve the cost-effectiveness of production processes. Ultimately, Taylor's management techniques resulted in mathematical formulas for determining labor needs, the streamlining of many types of production tasks, and, thus, increases in worker productivity as well as in overall production. In the 1920s, American industries implemented Taylor-type scientific management on a huge scale, pouring millions of dollars into industrial research.

3. Rapid increase in worker productivity.

            Workers tended to believe management was simply involved in new methods for exploiting them by forcing them to work faster than was healthy for them while keeping wages low. In some cases that was true.  But there were some wage gains as worker productivity (the dollar value of the outpur per worker per hour) increased, and those workers who received wage increases began to be able to afford improvements in their lives. During the 1920s, a new consumer innovation, the installment plan, appeared. The Yankee/Puritan values of the dominant culture had always preached frugality and avoidance of debt. But during the 1920s, marketing strategies developed which encouraged Americans to build up debt in order to buy consumer goods. The installment plan created a mechanism by which production levels could be kept high as workers purchased products they had previously been unable to afford.

4. Psychology of consumption.

            In a variety of ways, Americans were displaying a desire to get rich, and to do so with little effort. In 1899, Thorstein Veblen, a sociologist and social critic, published The Theory of the Leisure Class, in which he tried to analyze the unintended social consequences of the "conspicuous consumption" and "conspicuous waste" that characterized the competition in the area of lifestyles among the very wealthy of the era of the "Robber Barons." This book was not widely read until the 1920s, but it spoke directly to the effects of a new psychology of American society: "conspicuous consumption" in an effort to "keep up with" those in one's social environment. Some examples of conspicuous consumption by ordinary Americans in the decade of the 1920s include:

Radio. The first commercial radio station, KDKA, opened in the 1920s in Pittsburgh. By 1922, 3 million American households had radios; by 1929, purchases of radios had increased by 2,500%, to annual sales of $850 million.

Motion pictures. A fledgling industry before World War I, the motion picture industry took off in the 1920s, becoming one of the ten largest industries in the United States. In 1922, theaters sold 40 million tickets a week; by 1929, after the introduction of "talkies," that number had grown to 100 million a week. One of the capitalists who cashed in on Hollywood was Joseph P. Kennedy, father of President John and Senators Robert and Edward Kennedy, made about $6 million in less than a year as owner of RKO studio in Hollywood.

New electric appliances. A whole array of new electric appliances targeted to the middle-class American housewife appeared as electricity became widely available. Among other things, vacuum cleaners, toasters, washing machines, and refrigerators became widely available. Women became America's greatest consumers, purchasing many items such as furs, that a generation earlier would have been considered "luxuries."

Automobiles. Nowhere was the psychology of consumption more evident than in the automobile industry. Annual automobile production of automobiles rose from two million in early 1920s to 5.5 million in 1929. By the late 1920s, there was one automobile for every five Americans, allowing, theoretically, everyone in the nation to go for a ride at the same time. No small part of the reason for the increase in production of automobiles was the assembly line process that allowed production costs to be reduced (the 1926 Model T cost $290, about a third of the cost of the original Model T) coupled with the installment plan (75% of automobile sales were installment purchases).

5. Relations between the federal government and big business.

            During the decade of the 1920s, American businessmen regained the status of folk heroes they had enjoyed in the days before Progressivism. During the same decade, many Americans began to feel that they, too, had the opportunity to participate in prosperity; and they began to equate prosperity and progress. Slogans began to appear such as "Wealth is the chief end of man!" and  "The man who builds a factory, builds a temple. The man who works there, worships there." President Harding spoke for himself and all of the Presidents of the decade of the 1920s when he asked for "less government in business and more business in government." Congress and the rest of the government were inclined to agree and adopted a number of pro-business policies including tariffs, tax breaks for businessmen, and relaxed enforcement of a number of Progressive era reforms.

            The decade of the 1920s was marked by a renewed pride in American culture and American business. The fact that the United States had been a decisive factor in World War I was certainly one major reason for that pride. The fact that average Americans were prospering to an extent greater than at any time in the pre-war era was another. The fact that American businessmen, particularly Henry Ford and Thomas Edison, developed processes and technologies that the rest of the industrial world was emulating was also a source of pride.

The Automobile

            More than any other single thing, the automobile has become a symbol of the 1920s and the changes that took place during the decade. First of all, the automobile reflected the rising prosperity of ordinary Americans. Even though Ford automobiles were cheap and most automobiles were financed on credit, millions of Americans could own them. Second, the assembly line, which Henry Ford developed to make automobiles more affordable and to increase worker productivity enough to justify wages high enough that factory workers could afford to buy the automobiles they made, revolutionized American manufacturing.  Ultimately, millions of workers were affected.  Perceived in his own time as a shining model of the American success story, Henry Ford was so trusted by the American public, that in 1928, when he announced the development of a new car, the Model A, half a million Americans made a down-payment on one without having seen it or taken it for a test drive; they did not even know its final cost.

            The automobile had a huge impact on a number of aspects of American life. In terms of its economic impact, the growth of the automobile industry promoted growth in those industries that produced what was necessary to make cars or to run them, especially, steel , rubber, and gasoline and oil. To accommodate cars and drivers, the government made federal funds available to build and/or improve roads and bridges enough to make them suitable for automobile traffic. To accommodate drivers who traveled some distance from their homes, new sectors in the service industry were created including filling stations, roadside diners, and motels.

            The automobile also caused a number of changes in the society as well. First of all, people became more mobile. As this happened, rural people became more aware of cities, city-dwellers became more familiar with rural areas, and people in one part of the country became more familiar with other parts of the nation. The automobile thus contributed heavily to breaking down regional and rural/urban distinctions. Second, the automobile contributed to the breakdown of the family because it permitted family members to go their separate ways and to pursue interests divergent from those of other members of the family. Third, the automobile contributed to the breakdown of traditional moral values. The automobile allowed children to escape the supervision of parents and others in their neighborhoods. They could thus associate with people unlike themselves, use their automobiles for sex and other activities parents did not approve of, use their automobiles to get to places where liquor (then illegal) and drugs were available, etc. The automobile also created a new category of crime, auto theft, which in the 1920s was primarily a crime committed by teenage boys who stole cars for purposes of joy-riding.

            The automobile quickly became an important possession for American families. Before 1910, automobiles were unreliable curiosities. Between 1910 and 1920, automobiles became more common and a great deal more reliable. But when sociologists Robert and Helen Lynd did their "Middletown" field studies of an American community, Muncie, Indiana, in 1924 and 1925, they found that at all income levels, the automobile had come to be seen as a necessity, rather than a luxury. People were willing to sacrifice not only their savings, but also food and clothing in order to keep the family car.


            When Johnny comes marching home again from whatever war he has been fighting--and thousands of other Johnnies are doing the same thing--it has an effect on the job market. While during a war labor is typically scarce, when soldiers return, they flood the job market. This can have the effect of driving down wages significantly, especially when there are no laws in place establishing a minimum wage. The return of the "doughboys" from World War I did cause some dislocations in the labor market. Not only did white soldiers return primarily to the regions that had been their homes before the war, but many Black soldiers returning from the war sought to settle outside the South where they could escape the discriminatory effects of Jim Crow laws and economic bondage of sharecropping.

            The 1920s were a decade in which American nativism and intolerance again reared their ugly heads. The Russian Revolution, which had occurred during World War I, had led to Russian withdrawal from the war. While Europe was in turmoil after the war, there were some attempts to establish communist-type governments in several European countries. In the United States, members of some radical parties, including some Communist Party members, mailed bombs to some prominent American politicians and businessmen.  That set off a series of raids by the Justice Department to round up Russian-born radicals and deport them back to Russia in 1919.  By 1920, there was a full-fledged "Red Scare," actively encouraged by Attorney-General Palmer.   The sweep had also extended to a rather wide range of socialists, union leaders, etc., who had no particular ties to the Communist Party.  Although the law enforcement officials involved in the raids engaged in wholesale violation of several elements of the Bill of Rights, which apply to all persons whether or not they are citizens, Americans were generally bought into the idea that there was a serious threat and were supportive of the efforts to end it.  At least a part of the reason the deportations were popular with workers is because each one freed up a job for someone else. They were popular with businessmen because they ridded the nation of a group of people who agitated for reform and for curbing the abuses of capitalism.

            While the Red Scare ran its course in about 18 months, anti-immigrant feeling remained high. Two laws restricting immigration were passed in the 1920s. Immigration laws limiting the number of new immigrants identify a base year in which there is a census identifying the number of people of a given ancestry and then set a percentage of that figure as a limit for future immigration of persons of the same nationality. The first of the two new immigration laws based quotas on the 1900 census, but a few years later, quotas were set to limit immigration to 3 percent of the number of persons of a nationality group counted in the 1880 census. The most significant period of immigration of peoples from southern and eastern Europe was after 1880, although it was steadily increasing between 1880 and 1920. So it is pretty obvious that the intent was to stem the tide of southern and eastern European immigration. The reasons for the reduction in quotas from those areas were, first, the fact that a high percentage of immigrants from those areas were either Catholic or Jewish and, second, that many Americans associated people from those areas with radicalism and crime.

            Blacks as well as radicals became targets. Each Black who failed to return home to the South also competed for a job with a white who thought it should rightfully be his. Blacks who had served abroad and had been treated better by Northern whites and Europeans than they were by Southern whites were not as inclined to tolerate the way Southern whites usually treated them. Ultimately, this led to resentment by whites which fueled race riots in 1919. Anti-Black sentiments fueled a resurgence of the Ku Klux Klan nationally during the decade of the 1920s. But by this incarnation of the Klan, it had broadened its targets to include Jews, Catholics, liberals, atheists, and a wide assortment of people who were seen as threats. The Klan came to be an important political force in a number of northern states, including Indiana and West Virginia, and cross-burnings, lynchings, etc., became about as common in some northern states as they were in Southern states. (There were 27 lynchings of Blacks in West Virginia during the 1920s.)

            Intolerance is often a response to a particular kinds of change that occurs as a society makes a transition from being a collection of primarily rural, localized communities to being a large urban, industrial society. The "glue" that holds small, localized communities together is shared norms and values. As economies become national in scope, labor becomes divided among a large number of individuals whose functions are specialized, and people from differing backgrounds are brought together in cities and workplaces, the nature of what bonds people to each other changes. Increasingly, people join together for relatively short periods of time to pursue a shared goal or to engage inactivities for mutual benefit.  The new "glue" that holds society together becomes shared goals and interests.  When diverse people try to pursue activities for mutual benefit or to pursue common goals, they have to set aside or disregard hostile feelings and attitudes toward those with whom they are interacting. That is, people agree to disagree on everything that is not relevant to the activity they share.  Doing that tends to breed habits of toleration for those whose values and customs are different from one's own. But people develop these habits at different rates. Some strongly resist, often because they believe their values and ways of doing things are the only "right" ways.  It is those who feel that way who are likely to participate in organized intolerance.

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