1.4 IMPACT OF ECONOMIC CHANGE 1917-80

Post-War depression causes. (AFTER WW1)

INDUSTRY- There were many strikes between 1919 and 1920 and working conditions did not improve, this caused unemployment to increase and businesses to fail.


The old industries in the North and East (Coal) started to decline as water and electricity picked up.
In 1900 coal had produced 90% of energy.
1930 coal had produced 60% of energy.

GOVERNMENT ACTION- The Republicans stayed stoic in Laissez Faire policy.


-However, US put isolationist policies which made other countries do the same so US exports fell.


-Eventually the economy fixed itself.

FARMING- During the War farmers were given subsidies and higher mechanisation meant some farm workers were made unemployed. They made profits and took out loans for more machinery.


After the War there was a surplus of crops which caused prices to fall, they continued to produce more which further decreased the prices and they had to take out loans in order to cover the costs. The farmers went bankrupt and had to sack workers.

POST WAR BOOM

(MASS PRODUCTION)- businesses introduced moving assembly lines which allowed them to decrease costs.


Henry Ford created the first moving assembly line: In 1920 there were 4.7 million cars and 23 million in 1929.

(FEDERAL POLICIES)- Despite the government kept intervention low it did keep in some of the war time subsidies and cut taxes for businesses to buy American.

-(HP and Loans)- Taking out loans became the new normality and was no longer just banks. Companies like "Sears" offered catalogues where people could buy now pay later and promised 'easy payments'


-Between 1920 and 1929 Consumer debt rose from 3.3 billion to 7.6 billion. They borrowed 5% of income by 1929.

CHANGING INDUSTRY- New industries were more efficient as they used higher levels of mechanisation. Old industries started to decline.


These industries only took off when the power grid improved. In 1917 there were 7,889,000 homes and businesses wired for electricity and 24,500,000 in 1930.

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THE STOCK MARKET

Previously share trading had only been for the rich. In 1920s people realised they could "BUY ON THE MARGIN" which meant taking out loans to make a profit on the share increasing in price.


This then caused a bull market as prices continued to rise. Banks also used customer's shares to make investments.

F6M_6mm Feints _ Red Margin

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BOOM

BUST

In 1929 people who wanted consumer goods had already bought them which led to a contraction in demand. This caused goods to pile up in workhouses.


Businesses started to lay off workers and the Government did nothing. Businesses and Banks were both in debt.


The Fed tried to control this by tightening the money supply.


In September shares were seen as dangerously high which caused investors to start selling this encouraged other people to panic sell shares and media caused panic.
Consequently, it turned into a bear market and the stock exchange eventually closed.(BLACK MONDAY)

THE GREAT DEPRESSION

-Wall Street Crash worsened the depression as businesses going bankrupt meant that people lost their jobs and the housing market failed.
-The bank also failed as people could not pay loans back.


-Hoover tried to push federal actions but it was opposed by republicans in congress.

ROOSEVELT RECOVERY

FDR introduced the "NEW DEAL" and his other methods of intervention.


Roosevelt closed all the banks and had the FED inspect them and reopen when they were fit for purpose. He also used federal agencies to increase employment.

However, natural disasters hampered recovery as the Great Plains became dustbowls and the New Deal put the government into a deficit.

Closing of banks

1937 Wagner-Steagall National Housing Act. To provide low income housing

Second Agricultural Adjustment Act provided subsidies to farmers.

The SWW had a positive impact on increasing recovery

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(NEW MANAGEMENT TECHNIQUES): Employers like Ford began to use scientific management techniques as set out by Frederick W. Taylor, which advised paying good working wages and good working conditions.

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