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Factors Behind The 1920s Boom

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Information about Factors Behind The 1920s Boom
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Published on October 17, 2007

Author: DHUMPHREYS

Source: slideshare.net

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P ros pe rity? R e a s ons wh y th e US A b oom e d in th e 1920s Y ou will a ls o ne e d to c ons ide r wh e th e r e ve ryb ody b e ne fite d during th e s e ye a rs – wh ic h is th e ne xt le s s on/ s e nta tion pre

R e pub lic a n P olic ie s C oolidg e a nd h is ‘Th e c h ie f Tre a s ury S e c re ta ry, Andre w Me llon (one of b us ine s s of th e th e US A’s ric h e s t m e n) b e lie ve d in th e F re e Ma rke t. Am e ric a n ‘Tric kle -Down’ pe ople is ‘R ug g e d Individua lissm ’ – E c onom ic Hoove r’s ide a s a b out b us ine s s ’ - Am e ric a n wa y of life C oolidg e e z -F a ire – h o we ve r th e La is s g o ve rn m e n t d id in te rve n e q u ite h e a vily to s up p o rt b u s in e s s

F ordne y-Mc C um b e r Ac t • R a is e d ta riffs to c o ve r th e d iffe re nc e b e twe e n d o m e s tic (US A) a n d fo re ig n p rod u c tio n c o s ts • Me a n t th a t Am e ric a n g oo d s we re a lwa ys che a pe r • G a ve do m e s tic pro d uc e rs a g u a ra n te e d m a rke t • F e w fo re ig n g o o ds we re im p o rte d a n d b o ug h t b y c o ns u m e rs

Ta x R e duc tions • F e d e ra l ta xe s s ig n ific a n tly re d uc e d in 1 9 24 , 19 2 6 a nd 1 92 8 . • In 1 9 2 0 th e h ig h e s t ta x le ve l wa s 6 5% - in 1 9 28 it wa s ju s t 2 5 % • Ove r $3 .5 b illio n h a n de d o ut to b ig b u s in e s s • G ove rnm e nt s till ra n a t a s u rplu s (in c o m e h ig h e r th a n e xp e nd itu re ) - $ 6 0 7 m n in 1 9 27 • F e d e ra l ta x c u ts m e a n t little to po o r pe o p le

F e we r R e g ula tions • F e d e ra l Tra d e C o m m is s io n – th e tra din g s ta n d a rd s b od y – wa s u n d e r-fu n de d • S h a rp b u s ine s s p ra c tic e like p ric e -fixin g wa s o fte n ig n o re d • Offe n de rs ra re ly p ro s e c u te d o r fin e d • C h ild la b o ur c o ntin u e d in S o u th e rn m ills • Ma n y p e o p le wo rke d 5 6 -h ou r we e ks o n a s little a s 1 8 c e n ts a n h o u r

F ore ig n P olic ie s • Dis p u te s with Me xic o o ve r b u s in e s s la nd s olve d b y d iplo m a c y n o t wa r • Inve s tm e n t in J a p a n wh ic h wa s a t th e e xp e n s e o f C h in a – h e lp in g J a p a ne s e o c c u p y Ma n c h u ria in 1 9 3 1

Ne w B us ine s s Me th ods • G ro wth o f h u g e c o rp ora tio ns – m o s tly m a n u fa c tu rin g like F o rd , F ire s to ne e tc • B y 1 9 29 th e la rg e s t 20 0 c o rp o ra tio n s o wn e d 2 0 % o f th e n a tio n ’s we a lth • Me rg e r fo llo we d m e rg e r c re a tin g h u g e b u s in e s s e s

How la rg e c orpora tions dom ina te indus try • Ope ra te a c a rte l to fix pric e s – a lth oug h ille g a l, g ove rnm e nt turne d a b lind e ye – pe trole um c om pa nie s c ontrolle d th e wh ole proc e s s from dig g ing for oil to re fining it to s e lling it in g a s s ta tions • C re a te h olding c om pa nie s – wh e re one h ug e c om pa ny e .g . US S te e l ob ta ins a c ontrolling inte re s t in a ll th e oth e r s m a lle r c om pa nie s to c ontrol th e m a rke t. E .g . S a m ue l Ins ull – e le c tric a l s upply e m pire – c ontrolle d 111 c om pa nie s

Te c h nic a l Adva nc e s • Mo to r ve h ic le in d u s try – b y e nd o f 1 9 2 0 s 2 3 m illio n c a rs o n th e roa d in US A • Hu g e a s p ira tio n a l d e s ire a m o n g s t wo rke rs • F o rd , G e n e ra l Mo tors , C h rys le r – B ig Th re e • S tim u la te d g rowth in p e tro l, ru b b e r, p la te g la s s , le a th e r p ro d u c tio n • G ove rnm e nt in ve s te d in ro a d -b u ild in g – F e d e ra l Hig h wa y Ac t 1 9 21 – 10 ,0 0 0 m ile s a ye a r o f ro a d s b e in g b u ilt

Ma na g e m e nt S c ie nc e • B ig g e r bus ine s s = more c omple x ma na g e me nt • E ntre pre ne urs like He nry F ord wh o trie d to c ontrol a ll a s pe c ts b e c a me old-fa s h ione d • S pe c ia lis ms de ve lope d in produc tion, de s ig n, ma rke ting , a c c ounts a nd fina nc e – a ll ne w • G rowth of b us ine s s s c h ools – 89 in 1928 with 67,000 s tude nts • Ma na g e me nt S c ie nc e b e c a me re s pe c ta ble for uppe r middle c la s s e s , s h e dding its c le ric a l ima g e • Als o more diffic ult to s ta rt one ’s own c ompa ny – tre nd to ride up th e c orpora te la dde r in a n e s ta b lis h e d g ia nt ins te a d

Ta yloris m • ‘Tim e a n d Mo tio n ’ m a na g e m e n t • Da te d fro m la te n ine te e nth c e ntu ry • Initia tive re m ove d fro m th e wo rkfo rc e • P e o p le b e c a m e m e re e xte n s ion s o f th e m a c h in e • Mo s t s m a lle r m a nu fa c tu re rs s till wo rke d in s m a ll wo rks h o ps

Adve rtis ing a nd S a le s m a ns h ip • Ne w m a s s m e dia – c ine m a a nd ra dio • B y 1928 – 17,000 c ine m a s in th e US A – offe ring a c h e a p e s c a pe from th e drudg e of m ode rn life – h ug e pote ntia l for c om m e rc ia ls • KDKA in P itts b urg h 1920 firs t ra dio s ta tion • Ma s s produc tion of ra dio s e ts • 50 m illion pe ople lis te ne d to th e De m ps e y- Tunne y fig h t in 1927 • R a dio s ta tions a nd produc tion funde d b y a dve rtis ing re ve nue s

Ne e d to c re a te a de m a nd • P e o p le n e e d e d c o nvin c in g th a t th e y c o u ld n o t d o with ou t th e la te s t m o d e l o r d e s ig n • Adve rtis in g a n d m a rke tin g d e c id e d wh ic h p rod u c t wo uld win “Advertising and mass production are the twin cylinders that keep the motor of modern business in motion” – K ansas City J ournal-P ost

E a s y C re dit • B y 1 9 29 a lm o s t $ 7 b illio n wo rth o f g o o d s s old o n c re dit • 7 5 % of c a rs a n d 5 0 % o f h o u s e h o ld a p plia nc e s • Th is le d to re p a ym e n t p rob le m s fo r m a n y • C re d it is s u e d with fe w q ue s tion s a s ke d

Influe nc e in F ore ig n E c onom ie s • R a w m a te ria ls s o u g h t in m a ny c ou n trie s • Oil c on c e s s io n s b o u g h t in C a n a d a , Ve n e z ue la , Ira q , Du tc h E a s t Ind ie s (n o w Ind o n e s ia ) • F ire s to n e de ve lo pe d Lib e ria n rub b e r in du s try • G ug g e nh e im s in S .Am e ric a fo r nitra te s , c op p e r a n d le a d • Un ite d F ruit C om pa n y h a d a la rg e r b u d g e t in C o s ta R ic a th a n th e g o ve rn m e n t th e re

F ore ig n R e la tions • US b us ine s s e ffe c tive ly c ontrolle d C a na da • US b us ine s s m e n e nc oura g e to de ve lop e c onom ic tie s with th e US S R , de s pite C oolidg e re fus ing to re c og nis e th e C om m unis t g ove rnm e nt • B y 1928 25% of a ll fore ig n inve s tm e nt in US S R wa s from US A • 33% of a ll e xporte d F ord tra c tors we nt to US S R • 85% of a ll tra c tors m a de in US S R we re b y

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