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2. Life
in the Jazz Age.
During the 1920s the United States seemed a land of miracles. Never before
were factories making so many new things. Never before had the daily life of a nation
been so quickly transformed. Industries were trying to produce more and more
consumer goods and to satisfy American public.
At the opening of the 1900s the automobile was such an oddity that in Vermont
the law required a driver to send someone an eighth of a mile ahead with a red flag.
By 1918 there were nearly 7 million cars on the road. With their spread came the
building of new highways. Now Americans no longer had to live and work close
together and soon the first shopping centre was built in Kansas City in 1922.
Commuters appeared.
Americans were making the highest wages in history and working shorter hours.
The money they spent each year for education was more than the money spent by all
the rest of the world put together. High school education was basically free unlike
most European countries.
A great new force was added to the steam power – electricity, and it drove the
new modern factories, which took on an astonishingly different look. A new kind of
moving workbench was introduced. A mechanic - Henry Ford, who opened his own
car plant in 1914, updated the assembly line. Due to his electric-powered conveyor
the time it took to put together a model T dropped from 14 hours to 93 minutes.
Advertising was not an invention of the 1920s but now it thrived. By 1929
more than $3 billion a year were spent for advertising. Even more important in selling
goods was buying on credit. “Buy now, pay later,” the ads screamed. By 1928
Americans owed more than $1 billion for their automobiles.
Movies industry flourished. In 1929 one hundred million tickets were being sold
every week, and the movies could actually talk. Radio became a nationwide obsession
as well. By 1929 the annual turnout of radio sets numbered 4 million. Additionally,
phonograph record production by 1921 had reached 100 million a year and a new
“black” music was sweeping the land – jazz, blues and ragtime.
For the first time in modern history did huge crowds gather to watch sporting
events – up to the amazing figure of 50 000 spectators.
The climax of national pride and excitement came on May 21, 1927. That night
the handsome Charles A. Lindbergh landed in Paris succeeding in the first solo non-
stop flight from New York to Paris in 33 ½ hours.
When Americans elected Herbert Hoover President in 1928, the mood of the general
public was one of optimism and confidence in the United States economy. Most
people believed that national prosperity would continue indefinitely. However, the
weekly salary of the average American worker was between $17 and $22, but that's
not important: the optimism was there.
a) "Bull Market"
For five years prior to 1929, rising prices typified the stock market, which was the so
called "bull market" and was due to many reasons.
The stock dividends were rising. New investors entering the market, many who
viewed it as an easy way to get rich quick, helped inflate stock prices. There were no
effective legal guidelines on buying and selling stock. Free from such limitations,
corporations began printing up more and more common stock. Many investors in the
stock market practiced "buying on margin" that is, buying stock on credit. Confident
that a given stock's value would rise, an investor put a down payment on the stock,
expecting in a few months to pay off the balance of their initial investment while
reaping a hefty profit. This investment strategy turned the stock market into a
speculative pyramid game, in which most of the money invested in the market didn't
actually exist. Banks made money more readily available at lower interest rates as
easy credit to more and more people.
The Psychology of Consumption fed the optimism of investors and gave them
unquestioning faith in prosperity. When the Crash did come, it was even more
devastating because of this unquestioned faith.
Despite rising wages overall, income distribution was unequal. Gaps in income had
actually increased since the 1890s. The 1% of the population at the very top of the
pyramid had incomes 650% greater than those 11% of Americans at the bottom of the
pyramid. In 1929, two hundred of the biggest corporations controlled 50% of the
nation's corporate wealth. This concentration of corporate wealth meant that if just a
few companies went under after the Crash, the whole economy would suffer.
b) The Crash
In September of 1929, stock prices began to fluctuate, but market analysts dismissed
this as temporary. What many of these analysts did not realize--or refused to admit--
however, was that stock prices were totally out of proportion to actual profits. Sales
of goods and the construction of factories were falling rapidly while stock values
continued to climb. Still, very few were worried; they still accepted Adam Smith's
"self-adjusting economy" as dogma and believed the problems would correct
themselves.
On October 29, 1929, the "Black Tuesday," was the beginning of the Great Crash.
On this day, people began dumping their stocks as quickly as they could. Sell orders
inundated market exchanges and the bull market suddenly shifted to a bear market.
The "Black Tuesday" was the single most devastating financial day in the history of
the New York Stock Exchange. Within the first few hours the stock market was open,
prices collapsed and wiped out all the financial gains of the previous year. Since
most Americans viewed the stock market as the chief indicator of the health of the
American economy, the Great Crash shattered public confidence. Between October
29 and November 13, the day when stock prices hit their lowest point, over $30
billion disappeared from the American economy. This amount was comparable to
the total amount of money that the federal government had spent to fight the First
World War.
c) The Depression
So, as not to alarm the public, President Hoover chose his words carefully when he
discussed the state of the economy in 1929. American economists and politicians had
referred to previous economic downturns as "Panics," such as the "Panic of 1873" and
the "Panic of 1893." Hoover, however, called this latest downturn a "Depression"
rather than a "Panic," and the name stuck.
Of course, America was not alone in the Great Depression; it struck all the
industrialized nations of the world, including Germany, Britain, and France.
Moreover, Germany still had huge reparation payments to make to the Allies in the
aftermath of WWI. World War I had turned the United States from a debtor nation
into a creditor nation. But by the end of the 1920s, the United States controlled much
of the world's gold supply. Besides gold, which was increasingly in short supply,
countries could pay their debts in goods and services. However, protectionism and
high tariffs kept foreign goods out of the United States. The Hawley-Smoot Act
(1930) set the highest schedule of tariffs (import duties) to date. This protectionism
produced a negative effect on United States exports: if foreign countries couldn't pay
their debts, they had no money to buy American goods.
The American public found the "Three B's" responsible for the Crash and the
Depression: Bankers, Brokers, and Businessmen
Most American economists and political leaders in 1929 still believed in laissez-faire
and the self-regulating economy. To help the economy along in its self-adjustment,
President Hoover asked businesses to voluntarily hold down production and
increase employment, but businesses couldn't keep up high employment for long
when they weren't selling goods. Hoover’s Reconstruction Finance Corporation
loaned money to corporations, banks, and the states in attempt to produce
employment.
There was a widespread belief that if the federal budget were balanced, the
economy would bounce back. To balance the budget demanded no further tax cuts
(although Hoover lowered taxes) and no increase in government spending, which was
disastrous in light of rising unemployment and falling prices. Another problem with
economic practices of the day was the commitment of the Hoover administration to
remain on the international gold standard. Many analysts implored Hoover to increase
the money supply and to devalue the dollar by printing paper money not backed by
gold, but the president refused.
Franklin D. Roosevelt (1882-1945) was President of the United States from 1933 to
1945, the only President to be re-elected three times. As Governor of New York
(1929-1932), he ran for President by promising a "New Deal" for the American
people. Relief programs, measures to increase employment and to aid industrial
and agricultural recovery from the Great Depression, marked Roosevelt's time in
office. Americans who lived through the Depression had passionate feelings about
Roosevelt. He has been both venerated as a national savior and vilified as a socialist
who craved greater federal power.
For one, the two candidates disagreed on Prohibition, Roosevelt advocating a repeal
of the Eighteenth Amendment (which had outlawed the manufacture and sale of
alcohol since 1919). But Prohibition was small potatoes compared to the issue of
unemployment and the role of government in aiding the economy.
On Election Day in 1932, 57.4% of the electorate voted for Roosevelt (or, perhaps
more accurately, cast their ballots against Hoover).
Roosevelt was most committed to being well-liked and to getting ahead. He was
charming and very successful in using radio to bring his message to the American
public, making him the first modern media President. FDR also understood his
own limitations as a man of ideas, so he chose well-qualified intellectuals and
business people for his staff. This so-called "Brain Trust" included such luminaries
as Labor Secretary Frances Perkins, who graduated from Mount Holyoke College in
1902 and was the first female cabinet member in United States history.
Like his distant cousin, Theodore Roosevelt, FDR knew what the public would and
would not accept. FDR was a pragmatic politician, not an intellectual or an idealist.
He culled his policies from the suggestions of members of his "Brain Trust," based on
which seemed most politically viable. One example of FDR's pragmatic use of the
presidency--and of the public's faith in their leader--was the National Bank Holiday.
By the time he came to office, 5,000 banks had failed and 47 of the 48 states had
declared "bank holidays," stopping some or all bank activity. Some liberal members
of Congress wanted FDR to nationalize the banks, but FDR had no intention of taking
such a radical step. Instead, he declared a "national bank holiday," closing all banks,
purportedly in order to give inspectors time to review their solvency. FDR declared
that only those banks in sound financial health, those which had passed inspection,
would be allowed to reopen. Most banks were only closed for ten days, so, of
course, only a very few were actually investigated. Nonetheless, when the banks
reopened, the American public entrusted them with their money once more, which
actually made the banks solvent. Merely by restoring public confidence in the
banking system of America, Roosevelt saved it at no cost to bankers or to the
government.
CCC (Civilian Conservation Corps)--A public works project, operated under the
control of the army, which was designed to promote environmental conservation
while getting young, unemployed men off city street corners. Recruits planted trees,
built wildlife shelters, stocked rivers and lakes with fish, and cleared beaches and
campgrounds. The CCC housed the young men in tents and barracks, gave them three
square meals a day, and paid them a small stipend. The army's experience in
managing and training large numbers of civilians would prove invaluable in WWII.
Wisconsin was a beneficiary of the CCC; one of the organizations many local
projects was trail construction at Devil's Lake State Park.
During his first two years in office, FDR promoted a new vision of the executive
branch; he viewed himself as an "honest broker" who would negotiate among
competing interests. The president would mediate conflicts while balancing the
interests of one group against another. Yet, the NIRA and AAA favored big business
and big agriculture.
The Wagner Act, known officially as the National Labor Relations Act, preserved
and strengthened Section 7A of the NIRA. It guaranteed workers the right to unionize
and the right to bargain collectively with management. For the first time, the federal
government recognized and protected labor unions.
The Social Security Act was initially drafted at the University of Wisconsin. This act
created a cooperative federal-state system to provide unemployment compensation
and old-age insurance. Workers who paid Social Security taxes out of their wages
would receive benefits upon retirement at age 65. Employee and employer
contributions would cover the costs of these benefits. On the one hand, Social
Security seemed a fairly radical piece of reform legislation, since the government
committed itself to provide help for the elderly. In reality, however, it was a fairly
conservative program, since workers and their employers, and not the government,
were footing the bill. In addition, the initial Social Security Act did not include
provisions for farm workers, domestic workers, employees of the restaurant and
service industries, or health-care providers. Still, the act was a milestone in American
history because it acknowledged the responsibility of society at large to take care of
the less fortunate.
The Wealth Tax Act increased taxes on the wealthy and created new and larger taxes
on excess business profits, inheritances, large gifts, and profits from the sale of
property. The act also put new restrictions on trusts and holding companies.
With big business turning against him, the President had to look for support
elsewhere. For the presidential campaign of 1936, Roosevelt built what was called the
"Roosevelt Coalition," a political bloc that remade modern politics. While
Republicans were still relying on their traditional base of political support (big
business, big farmers, and conservatives), Democrats broadened their constituency by
appealing to small farmers in the Midwest (but not all farmers!), urban political
bosses, ethnic blue collar workers, Jews, intellectuals, and African Americans. The
shift of African-American support to the Democratic Party, in particular,
demonstrates how FDR was transforming American politics. Up until 1936, most
blacks continued to celebrate the memory of Abraham Lincoln and emancipation, and
had voted for Republicans. In 1936, however, many of these voters changed political
allegiance and supported Roosevelt. The election of 1936, in fact, marked the
greatest electoral shift in American history. In 1932, Republicans had won 10 of the
12 largest United States cities. In 1936, the twelve largest cities voted
overwhelmingly Democratic.
Having won the 1936 presidential election by the biggest margin up to that time, it
seemed that everything was going well for Roosevelt and the New Deal. In 1937, the
president, in fact, believed that the nation had recovered its economic health and he
tried to balance the federal budged by cutting back on New Deal programs.
Roosevelt, for example, reduced funding for the WPA by half. Such policies,
however, proved disastrous for the American economy. As a result of such cuts,
unemployment rose by 1.5 million by July 1937. With farm subsidies cut, farm
prices also fell, and by August an additional 4 million Americans were out of work.
The economy would not recover fully from the Roosevelt Recession until the United
States entered World War II. Roosevelt brought about the Recession of 1937 because
he refused to follow the advice of his economic aides and turned away from
Keynesian economics, which advocated vast government spending--even deficit
spending--in times of recession. Yet, even though he tried to balance the budget, it
was impossible this to be done successfully.
The New Deal was not a revolution; it did not bring about radical change. Nor did it
end the Great Depression. It was as late as 1942, when the unemployment dropped to
4.7%, but it could be contributed to the impact of the US involvement in World War
II. The New Deal did, however, transform American society and alter the
relationship between government and business. For the first time, many Americans
expected the federal government to play a vital role in the nation's social welfare.
Another more enduring legacy of the New Deal was the rise of the "corporate
state." Prior to Roosevelt's time in office, big business had a virtual monopoly on
political power. Through the regulation of business activities the New Deal created
two new players at the political table: big labor and big government. New Deal
legislation and United States involvement in World War II, in fact, drew together,
more closely than ever before, business, government, and labor. Labor provided a
steady workforce and the government promised to instill predictability in the market
to avoid the dramatic highs and lows that had long plagued the nation's economy.
Under these terms, business made some concessions to labor and government.
*Works Cited:
http://us.history.wisc.edu/hist102/lectures/lecture20.html