6.2 Economic Boom and Consumerism

The 1920s saw a massive economic boom in the US, driven by new tech like cars and radios. Mass production made goods cheaper, while pro-business policies and America's global power fueled growth. The stock market soared, reflecting widespread optimism.

Consumerism exploded as Americans embraced materialism. Clever ads and easy credit encouraged people to "buy now, pay later." But wealth inequality grew, with the rich getting richer while many struggled. This set the stage for the coming crash.

Economic Boom of the 1920s

Technological Advancements and Economic Growth

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• The United States experienced a period of rapid economic growth and prosperity during the 1920s, often referred to as the "Roaring Twenties" or the "New Era"
• Technological advancements revolutionized industries and transformed daily life, contributing to increased productivity and economic growth
  • Widespread adoption of electricity, the automobile, and the radio
• The rise of mass production techniques significantly reduced production costs and increased efficiency, making consumer goods more affordable and accessible to a wider population
  • Henry Ford's assembly line exemplified mass production techniques

Pro-Business Government Policies and Global Economic Power

• The Republican administrations of the 1920s implemented pro-business policies, which encouraged investment and economic expansion
  • Presidents Warren G. Harding and Calvin Coolidge led these administrations
  • Policies included tax cuts and tariffs
• The post-World War I era saw a shift in government policy from wartime regulation to a more laissez-faire approach, allowing businesses greater freedom to operate and expand with minimal government intervention
• The United States emerged as a global economic power following World War I, as European nations struggled to recover from the devastation of the war
  • American businesses expanded their markets and influence internationally
• The stock market experienced a significant boom during the 1920s, reflecting investor confidence and speculation in the growing economy
  • Dow Jones Industrial Average rose from 63 points in 1921 to a peak of 381 points in 1929

Consumerism in the 1920s

Advertising and Mass Media

• The economic prosperity of the 1920s led to a significant increase in consumer spending, as Americans embraced a new culture of consumption and materialism
• Advertising played a crucial role in promoting consumerism, with businesses investing heavily in marketing campaigns to create demand for their products and foster a desire for the latest goods and trends
  • The rise of mass media (radio and magazines) provided new platforms for advertisers to reach a wider audience and shape consumer preferences
  • Advertising techniques included celebrity endorsements, emotional appeals, and the promise of social status

Automobiles and the Transformation of American Society

• The automobile industry experienced tremendous growth during the 1920s, with car ownership becoming a symbol of middle-class status and freedom
  • The popularity of the automobile led to the development of suburbs, as people could now live further away from city centers and commute to work
  • The automobile industry stimulated growth in related industries (rubber, steel, and petroleum), creating jobs and contributing to overall economic growth
• The emphasis on consumerism and material possessions led to a shift in social values, with a greater focus on individual pleasure, leisure, and the pursuit of the "American Dream"
  • The 1920s saw the emergence of a new youth culture, characterized by a rejection of traditional values and a celebration of freedom, experimentation, and self-expression

Credit and Installment Buying

Expansion of Consumer Credit

• The widespread availability of consumer credit played a significant role in the economic boom and the rise of consumerism in the 1920s
  • Installment buying allowed consumers to purchase expensive goods (automobiles, household appliances, and furniture) by making small, regular payments over an extended period
  • Charge accounts, offered by department stores and other retailers, allowed customers to make purchases on credit and pay for them at a later date, often with little or no interest
• The expansion of consumer credit was facilitated by the growth of finance companies and the development of credit reporting agencies

Impact on the Economy and Consumer Behavior

• The availability of easy credit fueled a sense of optimism and a belief in the "buy now, pay later" mentality, which encouraged Americans to spend beyond their means and accumulate debt
  • The reliance on credit to finance consumer spending contributed to the formation of a "credit bubble" that would ultimately contribute to the economic instability and the stock market crash of 1929
• The growth of consumer credit during the 1920s had a significant impact on the American economy
  • Stimulated demand for consumer goods
  • Created jobs in manufacturing and retail sectors
  • Contributed to the overall economic prosperity of the decade

Wealth Inequality in the 1920s

Concentration of Wealth and Limited Purchasing Power

• Despite the overall economic prosperity of the 1920s, the distribution of wealth in the United States was highly uneven
  • By 1929, the top 1% of the population owned approximately 40% of the nation's wealth, while the bottom 93% of the population owned only 20% of the wealth
  • The disparity in wealth distribution was exacerbated by the rise of corporate profits and the concentration of stock ownership among a small group of wealthy individuals
• The uneven distribution of wealth limited the purchasing power of the majority of Americans, who did not benefit as much from the economic boom as the wealthy elite
  • Many struggled to make ends meet and accumulated significant debt, despite the use of credit and installment buying

Social and Economic Consequences

• The concentration of wealth among the top income earners contributed to a growing sense of social and economic inequality, fueling resentment and political tensions
  • The uneven distribution of wealth was a factor in the growing popularity of progressive political movements (Progressive Party and Socialist Party)
• The stock market crash of 1929 and the subsequent Great Depression exposed the underlying weaknesses of the American economy
  • The impact of the Great Depression was particularly severe for those at the lower end of the economic spectrum
• The experiences of the 1920s and the Great Depression influenced the development of New Deal policies during the 1930s, which sought to redistribute wealth, regulate the economy, and provide a social safety net for Americans