American History
The Business of America

*The decade after World War I was a period of great prosperity for most of America (although for farmers it was a period of bad fortune, as food prices fell shortly after World War I ended).

*Manufacturing was the basis of this growth, particularly because of the innovations of Henry Ford.  Although he did not invent the automobile, he did develop a new way to produce them.

*Mass production was not a new idea, but Ford developed it to its logical end:  the assembly line.  Manufacturing was broken down into its simplest steps, and every person on the assembly line performed one out of 84 single steps—each installing a single part of a new car.  To keep things simple, his Model T cars were available in any colour, as long as it was black (a cheap, durable, and fast-drying colour).

*Ford was able to do this because he hired experts in scientific management, based on the ideas of Frederick Taylor’s time and motion studies.  These studied how quickly a worker could perform his job and found ways to make their actions even more efficient.  Some workers say this as insulting and dehumanising, but it worked. 

*Mass production allowed cars to be made so quickly (one car every 90 minutes by 1910) and so cheaply that cars went from being toys for the rich (Wilson called them ‘a picture of the arrogance of wealth’) to costing $850 at first in 1908, a price that kept dropping (reading $290 by 1927).  Ford said part of the reason for his success was that he made a car that the men who built it could afford to buy.  While 10% of Americans owned cars in 1919, 56% did by 1927.

*Ford also more than doubled his workers’ wages (from $2.35 to $5.00 a day), reduced their working day to 8 hours, and in 1936 began giving his workers both Saturday and Sunday off, creating the idea of the weekend.  With more money and more time to drive around, his workers bought his cars.

*This meant people needed gasoline.  Americans searched for oil deposits, and found them throughout the southwest.  The nation spread out, too.  Motor hotels (or motels), roadside diners, gas stations, and roadside tourist attractions spread across the country.  People began to use railroads and streetcars less, and people moved away from city centres to suburbs.

*People did not just buy more cars, but more of many things, as mass consumption became even more massive.  Advertising became more widespread and more creative.  Furthermore, people were often able to buy things on instalment plans, making a down payment and then monthly payments on the things they wanted (but once would have had to save for months or years to but).  This allowed manufacturing to boom and workers’ wages to rise.

*As businesses grew and new business were created, people invested more in the stock market, even people with relative modest incomes and little experience in business.  Many of them made fortunes, but it was a gamble, as stocks could fall as well as rise in value.  The risks (and rewards) were made greater by the system of buying stocks on margin.  This allowed investors to put down part of the price of a stock (perhaps as little as 10%), and pay off the rest of it as the stock rose in value.  However, if the stock fell, the investor still had to pay the full value of the stock at the time he bought it.  This had the potential to ruin investors (particularly those that depended on just one or a few stocks), but for most of the 1920s, so many stocks rose that it seemed a great system, and by 1929, about 4 million Americans (almost 4%) owned stock.

*As businesses boomed, so did the need for office space, and a new wave of skyscrapers were built in the early 1900s.  In 1931, the Empire State Building was finished.  However, by then the economy had collapsed, and no more building of that size were built for decades.  At 1250 feet high (1,435 feet, 8 ½ inches including the spire on top), it was the tallest building in the world from 1931 until 1972 (when the World Trade Centre was built).

*This economic boom was strongly supported by the US Government.  When Warren G. Harding promised a return to normalcy he also returned American government to a period before it supported the numerous reforms of the Progressive Age.

*Harding appointed Andrew Mellon, a rich banker, Secretary of the Treasury.  He cut taxes, but also cut government spending from $18 billion to $3 billion, and as the economy grew (partly, perhaps, because his tax cuts gave businesses more money to invest and consumer more money to spend) so did the government’s income.

*He reduced government regulation of businesses, and also helped American businesses by raising the tariff, making foreign goods more expensive and making American goods more competitive—but causing foreign countries to raise their tariffs on American goods, making it harder to export our products.  Although America benefited in the short run, it slowed down the world economy.

*Harding was friendly, popular, likeable, and not very smart.  He did not like the hard work of being president, and allowed his Cabinet and other advisors to do most of the work for him.  Unfortunately, many of them (aside from Mellon and Herbert Hoover) were deeply corrupt.  Many of them spent fortunes in taxpayer money on things made by their own businesses or those of their friends.

*The most infamous of these scandals came when the Secretary of the Interior, Albert Fall, took control of the navy’s emergency oil reserves in Elk Hills, California and Teapot Dome, Wyoming.  He leased the oil to businessmen in exchange for bribes.  Eventually this was discovered and Fall went to jail.  An aide of the Attorney General committed suicide after destroying government papers and an assistant to the director of Veterans Affairs committed suicide after helping his boss skim money off their accounts and run illegal drug and alcohol smuggling businesses (at a time when all alcohol was illegal).

*Harding did not personally profit from any of this, but he did not stop it.  When Harding died in office, no autopsy was performed, and there were rumours that he was poisoned (perhaps even by his wife).

*Harding was replaced by Calvin Coolidge, who was quiet, careful, and honest.  He had such a reputation for quiet that he was known as ‘Silent Cal.’  He also supported big businesses:  he said the Business of America is Business, and that ‘the man who builds a factory builds a temple, and the man who works there, worships there.’  He continued to keep taxes and government spending low, and the tariff high, and during his six years as president (he was elected to a term of his own in 1924), America enjoyed great prosperity.

*America, despite many people’s desire for isolationism, was involved in the world.  To help prevent future wars, America hosted the Washington Naval Conference in 1921-1922.  The major world powers met and agreed to reduce the size of their navies and placed limits on their sizes (although different nations had different limits:  America and Britain could have five times what France and Italy could, while Japan could have three times what France and Italy could; Germany’s navy (and army) had already been severely limited by the Treaty of Versailles (and could have no air force at all)).  However, many countries made up for these limits by making the ships they did have bigger and more powerful.  The US and Japan also began building more aircraft carriers.

*In 1928, America and France created the Kellogg-Briand Pact, which did not just try to limit war, it outlawed war completely.  Eventually 62 nations signed it.

*There were problems, though.  Germany was having problems paying all its reparations.  To help, the US passed the Dawes Act, which allowed the US to lend money to Germany so that it could pay that money to Britain and France (who also owed money to the US, and paid America back with the money they had gotten from Germany, who had gotten it from the US).

*Coolidge was followed by Herbert Hoover, who had been in Harding and Coolidge’s cabinets.  He promised to continue American prosperity.

This page last updated 28 September, 2009.