How and why did the USA’s economy boom in the 1920s?

Todays Topics America’s Economic Boom –Mass Production –Boom - The Stock Market –Not all winners: Who didn’t experience the boom?

What is an economic Boom?

Boom!Boom! At the start of the 1920s new industries that had been growing steadily suddenly exploded! Can you think of some reasons why? –The demand for armaments during the war stimulated American industries –The USA’s economic rivals were bankrupted by the war.

Reasons for the boom! Raw materials million. These people had considerable purchasing power. USA rich in oil reserves Rising wages – links to immigration controls Electricity – people connected to national grid during WWI Advertising – creates demand Credit - Hire Purchase and morgage agreements – being in debt was no longer shameful! Mass Production = availablity and cheaper prices

More reasons for the boom The policies of the Republican Presidents –believed in laissez-faire economics. –1922 Fordney McCumber Tariff Act. Placed import duties of up to 50% on certain goods. – taxes on rich people were cut from 50% to 20%. This helped develop businesses. Confidence –Edison said “genius is 1% inspiration and 99% perspiration” – Americans had both! –Lots of self-made millionaires. –Immigrants were hard-working and cheap – they helped to make industries a success. They believed in the American Dream.

Mass Production: Henry Ford and the Model-T

Assembly line rules No talking or laughing You may not leave your station You must not change the assembly process in any way. Constant speed of production must be maintained.

Assembly line feedback 1.What did you think? –How did you find it? –What were the benefits? –What were the down sides? –What benefits did the conveyor belt have for Ford’s factories?

Other benefits of the Car industry Developed associated industries like wood, glass, rubber, etc. Promoted road building and travel, therefore hotels, restaurants, etc. Opened up suburbs now that people could travel to work by car, leads to house building Rural areas became less isolated, travelling salesmen and catalogues (improved delivery) Owning a car was no longer only for the rich!

Ford’s innovations The Assembly Line –Large tasks broken down into their simple parts. –One task for each worker Workforce –Assembly line work was monotonous and boring –In 1914 Ford doubled workers pay and shortened the working day to 8 hours –Introduced a third shift so that the factory could operate 24 hours a day! Affordable cars Mass production meant that gods could be produced cheaper, because they were produced faster. – $850 for a Model T – $350 –Ford also led the way in introducing Hire Purchase as a form of Credit – what is this?

Effects of Mass Production The assembyline system quickly spread to other industries such as the production of radios and fridges, but this wasn’t the only effect of Ford’s innovations... Read Source B on page 172, and page 173 and create a mind map to show all fo the other effects of mass production and the affordable Ford....

Effects of Mass production, making the Model T

Growth in the Stock Market Have a look at the source F on p.176, Why would these figures encourage people to buy shares before 1929?

The Stock Market Read pages and find definitions for each of these key words: 1.Shares 2.Shareholders 3.Dividend 4.Stock exchange 5.Wall Street 6.Buying on the Margin 7.Speculating For bonus points… What is the difference between a ‘Bull Market’ and a ‘Bear Market’?

Stock Market Definitions Shares –certificates representing ownership in a company or organisations Shareholders –people who own the shares Dividend –a portion of a companies profit paid to shareholders. Stock exchange –formal organisations which buy, sell and exchange stocks and shares

Wall Street –the US Stock Exchange Speculation –“Engagement in risky business transactions on the chance of quick or considerable profits” –People could earn more money gambling on the stock market than on their savings accounts in the bank (7% interest rate) “Buying on the margin” –To buy shares you would only have to put down a small percentage of money (10%) and the bank would cover the rest. You would then pay back the bank when prices rose and you made a profit.

Why was there a boom in the Stock market? During the 1920s the stock market was the key to prosperity and prices rose steadily until In the 1920s companies made huge profits and the value of their shares went up dramatically. People started to buy shares, not for the dividend but to sell them again and make a profit. Buying shares was so common “even the shoeshine boy” was dealing in shares Since shares values continued to rise, people often bought shares by “buying on the margin” –1926 – 451 million shares traded –1929 – 1.1 billion shares, 25 million Americans involved.

Title: The Stock market Boom of the 1920s Complete tasks 2 and 3 on page 177. Task 2 –create a diagram like the one on p.177 to show «How the stock market worked» Task 3 – –a) write your answers up in full sentences and show how you worked this out –b) in two full sentences explain what you would do and why

Not all winners TASK Read pages and complete the table on your handout.

Not all winners of the Boom! Older Industries Farmers Low Paid Workers Task: –In small groups, chose one of these groups and prepare a bullet point list of reasons why these groups sufferred during the economic boom. –Write your list on the board to share with the class.