Toward a Modern America

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1920s economy and government – Ch. 24, “Toward a Modern America,”
Overall main idea: In the 1920s, new industries boomed with the help of an actively pro-business Federal government.
Henry Ford and “Fordism” symbolized the complexities of 1920s America—his revolutionary business techniques, Americanization and urbanization, production of automobiles, and conservative reaction to the rebellious and independent liberal values emerging in the 1920s

Fordism – the techniques used by Henry Ford to increase production and lower cost in his automobile factories: mass production, machinery, managerial innovations, moving assembly line, five-dollar day wages, forty hour work week, Americanization of immigrants

The Economy That Roared

Main idea: After a post-war depression, the American economy boomed in the 1920s.

Boom Industries

Main idea: The boom of many new industries contributed to the growth of the economy in the 1920s.

Factors in the economic expansion of the 1920s: huge profits from the war provided investment capital, allowing businesses to create and buy efficient machinery and build new technologically-advanced factories; mass production using machine-made standardized parts and the moving assembly line; scientific management principles of Frederick Taylor; electric power improvements; more consumption of new industries

Automobile industry drove the 1920s economy, creating a demand for steel, rubber, glass, and oil; Henry Ford and Ford Motor Company led the way in this industry, producing over half of the cars driven by Americans in the 1920s; the famous Model T dominated the era; it was very basic, tough, cheap, and standardized (Ford: “Any customer can have a car painted any colour that he wants so long as it is black.”)

Aviation industry grew quickly with help from the government; by 1930, over 100 commercial airlines in U.S.

Chemicals industry produced plastics, finishes, dyes, enamels, rayon, cellophane; many of their ideas were stolen from German companies during World War I; Du Pont is a major U.S. chemical corporation

Radio grew quickly, beginning in 1920; by 1927, 732 stations, led by corporations like RCA, General Electric, Westinghouse

Federal Communications Commission (FCC) created in 1932 to regulate airwaves and prevent interference

Motion pictures (movies) grew quickly; 20,000 movie theaters sold 100 million movie tickets per week
Corporation Consolidation

Main idea: Corporations merged in the 1920s, forming oligopolies in some industries.

Oligopoly – the control of an entire industry by a few giant businesses; like a monopoly but the control is by a few businesses rather than only one

Car industry in 1920s was dominated by oligopoly—Ford, General Motors, and Chrysler (mostly Ford)

Thousands of power companies merged into a dozen trusts

Financing and banks merged; by 1929, 1% of banks controlled half of money

Chain stores and corporate retailers replaced more local stores

People did not resist this consolidation much as they accepted that it brought efficiency, productivity, and prosperity

Open Shops and Welfare Capitalism

Main idea: Tactics against unions and stagnant wages led to a growing disparity of wealth in the 1920s.

Open shop – a business that employs union and non-union workers (as opposed to a “union shop”) but in reality mostly hired only non-union workers

Yellow-dog contracts – contract made when a worker was hired that prevented him/her from joining a union while employed at that job

Welfare capitalism – a system used by businesses to provide workers with services and benefits that can only be acquired through the business; the idea was to bind workers to the company and prevent union membership

Labor union membership fell in the 1920s due to these tactics and a failure to successfully include immigrants, blacks, and women, who were growing segments of the workforce

Wages stayed stagnant throughout much of the 1920s despite the booming production levels, therefore the disparity of wealth (gap between rich and the poor) grew, making it where the majority of Americans couldn’t even buy the products they made

In response, more consumer credit was offered to average Americans, allowing them to purchase expensive products in installment plans (making smaller payments over a period of time to eventually pay the full price plus interest); by 1927, two-thirds of automobiles were purchased on the installment plan

Sick Industries

Main idea: Despite the overall economic boom, several industries were “sick” and struggling.

Coal mining, textile manufacturing, and railroads struggled because of overexpansion, lower demand, lower profits, and conflicts with workers

Unemployment and low profits affected all of these industries, but agriculture suffered the worst; many farmers lost their land and became tenant farmers or laborers; by 1930, farmers averaged one-fourth the wages of a non-farm worker

The Business of Government

Main idea: Republican politics promoted business interests and a limited government at the expense of other issues.

Republican Ascendancy

Main idea: The Federal government in the 1920s under Harding and the Republicans was actively pro-business.

Warren G. Harding supported the Budget and Accounting Act of 1921, giving the President authority over the Federal budget; he also appointed Herbert Hoover as Secretary of Commerce and Andrew Mellon as Secretary of the Treasury

Hoover’s policies expanded business prosperity, efficiency, and profitability; Mellon reduced taxes on businesses and the rich

Harding administration also raised tariffs to protect American business, supported open shops, pushed back Progressive regulation of business, appointed advocates of big business to the Supreme Court (including former President Taft), the Federal Trade Commission and the Federal Reserve Board—therefore government was aiding big business with the systems that were set up by the Progressives to regulate big business
Government Corruption

Main idea: The Harding administration was plagued by corruption and scandals.

Harding appointment many friends and cronies to his cabinet (known as the “Ohio Gang”) who often simply tried to make money from their job; the most famous case was Albert Fall and the Teapot Dome scandal – Fall was Secretary of the Interior and leased oil reserves set aside for conservation to oil companies in exchange for bribes; he was convicted and put in prison

The leader of the Veterans Bureau and the Attorney General were also involved in corruption scandals

Harding has never been connected to the scandals, was appalled by them and died of either a heart attack or a stroke soon after he learned about them
Coolidge Prosperity

Main idea: President Calvin Coolidge deliberately limited government and continued to promote big business.

Coolidge was associated with conservative traditional values and limited, inactive government; his nickname was “Silent Cal”

He continued to support Hoover’s and Mellon’s efforts to roll back regulation and taxes; he also continued to appoint pro-business officials – Wall Street Journal: “Never before, here or anywhere else, has a government been so completely fused with business.”

Coolidge ran on “Coolidge Prosperity” and “Coolidge or Chaos” in the 1924 election against the insignificant Democrat John W. Davis and the Progressive Party candidate Robert LaFollette (a well known Progressive governor [the one who compared Teddy Roosevelt to a cannon]); LaFollette was denounced as an agent of Communism; barely half of voters voted, but Coolidge was elected in 1924
The Fate of Reform

Main idea: Progressive reform movements died out in the 1920s in the face of Republican prosperity and consumerism.

Right after the 19th Amendment, women reformers succeeded in passing state laws for women, such as serving on juries, equal pay, and the Sheppard-Towner Maternity and Infancy Act, which was the first federal social welfare law, giving federal money for infant and maternity care

Soon after, though, women’s issues died out; the Republican government struck down the Sheppard-Towner Act, child labor regulations, and associated women reformers with radicalism; many young women eschewed public reform for the consumer and entertainment prosperity and independence of 1920s culture

Overall main idea: In the 1920s, new industries boomed with the help of an actively pro-business Federal government.

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