ADVANCED PLACEMENT 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 (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 modeled 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.

*Hoover 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.

 

*Hoover 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 reduce 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)).  However, 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, 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 2 November, 2018.
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