Key Facts & Summary:
- The economic boom occurred in the United States.
- It was as a result of the second industrial revolution in America.
- The production by American industries had increased.
- Labour was readily available for the American industries due to a large number of urban population.
The second industrial revolution was developing in the United States. It was based on the significant use of new energies (oil and electricity) and on the mass production of new products (in particular the automobile and electrical appliances and motors).
Oil production quadrupled from 1921 to 1929. Oil began to dominate coal (the main energy of the nineteenth-century industrial revolution), even though it still provided three-quarters of energy consumption. The exploration, extraction, refining, and distribution of petroleum products were organized by very large companies such as Rockefeller’s Standard Oil.
The Ford model T, version of 1927
Petroleum products allowed the development of the automotive industry to take place at a very first rate. The production of vehicles multiplied by 3 from 1921 to 1929 to reach four million eight hundred thousand vehicles annually. In 1929, American production accounted for five-sixths of world production. There were then 23 million vehicles in circulation in the United States.
Three major companies dominated the sector: General Motors (which had gathered many small manufacturers), Ford and Chrysler. To supply the metal sheets necessary for the bodywork and metal parts, steel production almost doubled between 1921 and 1929. It was also stimulated by the use of steel beams in the construction of skyscrapers, which were multiplying in American cities. The chemical industry also benefited from the development of the automobile to which it supplied the tires.
Aluminum, which requires a large amount of electricity for its manufacture, increased in production as a result. This promoted the development of civil aviation and revolutionized US inland transport from 1926 (the first transatlantic crossing was conducted in May 1927, by Charles Lindbergh on his single-engined Spirit of Saint Louis).
Electricity consumption increased five-fold between 1921 and 1929. The factories replaced their old steam engines with electric motors (70% of the factory engines in 1929). The most affluent Americans had many electrical devices (wireless radios, telephones, vacuum cleaners, refrigerators that improved their living conditions.
Explanations for this economic development
The development of production made it possible to increase the turnover thus the profits of the companies. The shareholders who owned these companies, who received a portion of the profits each year, got richer. It also met the growing demand of the population. It was made possible by a strong financial investment to build new factories and equip them, but also to use new methods of work.
The number of consumers also increased. The American population rose from 106 million to 130 million between 1921 and 1930. The birth rate, although declining, remained strong (19 births per thousand inhabitants). However, the contribution of immigration decreased.
After the war of 1914-1918, a puritanical and xenophobic reaction began in 1921 and 1924. It introduced laws that restricted the number of immigrants (coming from Europe and South America). The population continued to urbanize (50% in 1920 and 56% in 1930).
New needs then emerged (especially in cars and electricity). To absorb this enormous production it was necessary to increase the revenues of the Americans. Many bosses, following the example of Henry Ford, increased wages. But this remained insufficient. More and more Americans were using the bank credit that allowed them to consume a lot.
This made them live beyond their real financial means. Republicans were in power from 1921 to March 1933. They took protectionist customs measures that reduced imports of foreign products likely to compete with US products (especially in agriculture, chemical, textile, and metallurgical industries).
Financing for development was provided by the banks. They alone were now able to gather the huge capital needed. They installed agencies everywhere that collected American savings. Bank deposits (whose customers could withdraw their money at any time) became merchant banks lending to businesses. But for this reason, they immobilized this money for several years. They took a big risk in the event of massive withdrawals by savers.
However, bank credit was abundant. The United States owned 60% of the world’s gold stock by then. The US dollar was convertible into gold (the notes may be exchanged for gold bullion). The dollar inspired confidence. Since 1922, with the Gold Exchange Standard, it served as a reserve currency for all countries of the world.
To increase the productivity of their employees and the profitability of the invested capital, the industrialists’ generalized new methods of work. Tailoring, assembly line work and standardization made it possible to achieve these goals. In order to obtain cheaper labour force than that of the old industrial regions of the Northeast and the Great Lakes, companies relocated to the southern states. There, poor rural people could be hired at a good price. This was the beginning of the industrialization of the South. They are also looked to get closer to new energy sources like Texas oil.
An urbanized population
In the 1920s, the so-called “American Way of Life” was introduced. In 1930, the American population was urbanized at 56%. Large cities were concentrated mainly in the Northeast and Great Lakes regions. Cities were expanding and changing in appearance.
In the city center, several skyscrapers were built (with 86 floors and 400 meters high like the Empire State Building of Manhattan in New York. It was for a long time the tallest building in the world). The floors were occupied by offices and the ground floors by shops.
The apartment buildings with a few floors were abandoned by the wealthy population. It was replaced by a poor population formed by blacks fleeing racial segregation in the southern states. There were also those rural folks who were uprooted by agricultural crises that had occurred since 1920.
Automobiles and electrical appliances
The automobile was common in the cities. Thanks to lower prices and bank credit, the car appealed to employees and workers who represented about 60% of vehicle owners. While creating new trades, the automobile favoured the migration of those who were better off to the suburbs and created a new urban landscape (paved roads, road signs).
Electricity allowed the introduction of household comfort in homes. The small size of the electric motor allowed it to operate vacuum cleaners, washing machines and refrigerators. This revolutionizes the housework. Electricity also allowed the development of new leisure.
The thirst for consumption promoted economic development but also lead to a huge waste of materials and space. The Americans, at least one who had the financial means, preferred to buy something new than to repair the broken ones.
The condition of women was changing, at least in cities. American women were granted the right to vote in 1920. Women gained their material independence through wage labour. More were liberalized, new ways of dressing and living were adopted. However, these changes did not shake a part of the population who remained attached to the traditional practices. The woman was considered to be the guardian of the home and pole of stability in the family.
Excluded from prosperity
The difficulties of agriculture
From 1925, part of the American farmers were in trouble. They went into debt to modernize their farms during the First World War in order to supply France and the United Kingdom during the war. But the competition of the “new countries” and the reconstruction of European agriculture once the peace returned, deprived them of customers. Overproduction and the consequent fall in agricultural prices occurred. Unable to repay their bank loans, farmers sold all their equipment and land.
At best they remained as agricultural wage earners, at worst they had to go to the cities where they hoped to find work. Those who remained for lack of sufficient income did not enjoy the material benefits of the economic boom.
Immigrants now unloved
Recent immigrants (those who arrived since the beginning of the century) were facing the hostility of the settled Americans. The territorial conquest at the expense of the Amerindians was completed. The new immigrants were thus forced to stay in the cities. They were concentrated in certain neighbourhoods: there were many “Little Italy” in American cities.
Immigrants were accused of taking jobs away from already established workers and accepting low wages. Late immigrants came from Southern Europe (mostly Italians) or Eastern Europe (Russians and Poles). The “old Americans” reproached them for introducing ideas, such as unbearable Catholicism to a society dominated by Protestantism.
They were accused of spreading dangerous ideas like socialism and anarchism. The unfounded trial made two Italian immigrants Sacco and Vanzetti in 1921 and their execution in 1927 testify to the violence of this hostility.
In order to “protect” the white and Protestant American society (the WASP, white Anglo-Saxon Protestants), the Congress passed two waves of laws in 1921 and 1924. By quotas based on ethnic origin, they hardened the conditions of entry of immigrants to “dry up” the arrival of Italians and Slavs, while promoting the entry of British and Germanic. Whereas before the First World War, every year nearly 680,000 Europeans from the South and East entered the United States, they were only 150,000 in 1921 and just under 22,000 in 1924.