ADVANCED PLACEMENT
UNITED STATES 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 cars ‘a picture of the arrogance of
wealth’) to costing $850 at first in 1908, a price that kept
dropping (reaching $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), eventually 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.
*In Tennessee, farmers who were accustomed to taking their goods
to market in wagons resisted attempts to pay for the construction
of paved roads until Governor Austin Peay proposed paying for all
highways with a tax on gasoline. Ever since, Tennessee's gas
tax has paid for some of the best maintained highways in America.
*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.
*Advertising became so influential that in 1925, Bruce Barton
published The Man Nobody Knows: A Discovery of the Real Jesus,
Jesus as the 'founder of modern business' whose self-confident
leadership modelled the best of executive skill with his apostle
and disciples as junior executives and a sort of traveling sales
force, and whose parables reflected the essentials of effective
advertising. Sincere and reverent throughout, Barton retold the
Gospel accounts of Jesus's life and preaching as a modern man's
guidebook to honest wealth and business success.
*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 buy). This allowed manufacturing to boom and
workers’ wages to rise (thus making them feel confident enough to
take on more debt).
*In 1879, Frank W. Woolworth opened his first five and dime store,
in which every product cost 5¢ or 10¢. This allowed
customers to look over products themselves and know what
everything cost without a trained sales force to assist them, so
that shopping was not only affordable, but convenient.
Woolworth stores were soon found across the United States and
around the world, and when Woolworth built a skyscraper to be his
corporate headquarters in 1913, it was the tallest building in New
York City and the world, a record it held until 1930.
*Piggly Wiggly, America's first true self-service grocery store,
was founded in Memphis, Tennessee in 1916 by Clarence Saunders. In
other grocery stores of that time, shoppers presented their orders
to clerks who then gathered the goods from the store
shelves. Saunders developed a way for shoppers to serve
themselves. There were shopping baskets, open shelves, and
no clerks to shop for the customer. Even grocery shopping
used the ideas of unskilled labour for a type of mass production
and certainly mass consumption. The increasing ownership of
cars also allowed people to take more groceries home so that they
began to buy more food in each trip to the store (but make fewer
trips).
*As old businesses grew and new businesses were created, people
invested more in the stock market, even people with relatively
modest incomes and little experience in investment. 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 buildings 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;
the World Trade Centre was surpassed in 1974 by the Sears Tower in
Chicago).
*This economic boom was strongly supported by the US
Government. When Warren G. Harding was elected in 1920 with
a promise of 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. Mellon cut taxes, but also cut government spending
significantly, and as the economy grew (partly, perhaps, because
his tax cuts gave businesses more money to invest and consumers
more money to spend) so did the government’s income.
*Harding and Mellon reduced government regulation of business, 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 American
products. Although America benefited in the short run, it
slowed down the world economy.
*Harding also appointed former Supreme Court justice Charles Evans
Hughes as Secretary of State and the Great Humanitarian, Herbert
Hoover, as Secretary of Commerce. Not all of his cabinet
appointments would be as distinguished, however.
*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 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 the Veterans’ Bureau 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), and the director himself went to jail.
*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 quietude that he
was known as ‘Silent Cal.’ He also supported big
business: 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 three treaties that reduced
the size of their navies and placed limits on the tonnage of
battleships and aircraft carriers they could have (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 Germany could have no air force at all)).
*Some Japanese leaders felt that being limited to a smaller navy
than the US or UK was insulting, but did manage to get the United
States to recognise that Japan had special interests in the
Pacific and the United States and Britain agreed not to build any
new fortifications in the Philippines or certain other Far Eastern
territories.
*Furthermore, many countries made up for these limits on large
ships by producing more small cruisers, destroyers, and
submarines. Within the limits available to them, the US and
Japan began building more aircraft carriers, although the US did
not keep up with other nations in the construction of the smaller
ships that let them skirt the letter of the agreement, nor respond
to instances of the Italians, Japanese, and French violating the
shipbuilding limits outright, because Americans were eager to
believe that the Great War really had ended all war.
*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 was
a major catch, of course--it only outlawed offensive war, and any
clever diplomat could describe any war as defensive.
*There were problems, though. Germany was having problems
paying all its reparations. To help, the US created the
Dawes Plan in 1924 (modified by the Young Plan in 1930), 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 and was still known as the Great
Humanitarian for his war relief efforts during and after the Great
War. Hoover promised to continue American prosperity.
This page last updated 29 March, 2021.
