The 1920s Economic Boom in America

America's boom in the 1920s was built on mass production, cheap credit and a government that stayed out of business's way. It made the country richer, but it never reached everyone.

Mass production and the motor industry

• The Ford Motor Company, founded in 1903, built the Model T from 1908 to identical specifications, so its parts were standardised, interchangeable and cheap to replace.
• The moving assembly line, brought in at Ford's Highland Park plant in 1913, kept workers still while the car moved past them. This cut build time from over 12 hours to under 2 hours per car.
• Costs fell so far that the Model T dropped from $850in1908\ast \ast toaround\ast \ast$300 by the mid-1920s, putting a car within reach of middle-class families. 15 million were sold before production ended in 1927.
• From 1914, Ford paid a $5 daily wage (high for the time) which cut worker turnover and left people with money to spend.
• Car-making pulled up the industries that supplied it (steel, rubber, glass, oil and road-building) so a boom in one industry spread through the whole economy.

Advertising and credit

• Mass production created a self-feeding cycle: lower costs brought lower prices, lower prices raised sales, higher sales funded more production, and more production created more jobs.
• Nationwide advertising on billboards, radio and in cinemas built demand for new goods and loyalty to brands across the country.
• Hire purchase (buying on credit by instalments) let families take home cars, radios and refrigerators for a small deposit and pay the rest over time, so owning goods no longer meant saving up first.
• Republican governments backed business with laissez-faire (little regulation), low taxes, and high tariffs (import duties) that shielded American firms from foreign competition.
• Confidence poured into the stock market, where people bought shares on margin (borrowing money to invest), pushing prices up into a bubble that hid the unsustainability of its rise.

Who was left out?

• The boom was uneven: while it reached city consumers and new industries, farmers, older industries and much of the rural South barely experienced it.
• Farmers overproduced, so crop prices fell.
• Many farmers had also borrowed money to buy land and machinery and so slid into debt or even lost their farms.
• Older industries such as coal and textiles declined due to changing demands, causing loss of jobs and stagnation of wages.
• African Americans, especially sharecroppers (tenant farmers who paid rent in a share of the crop) in the South, were kept in poverty due to discrimination blocking better jobs, land and credit.
• Weak trade unions and the lack of a real welfare safety net left low-paid workers with little bargaining power, so wealth was concentrated in few hands, as the 1929 Wall Street Crash would expose.