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ECONOMIC ENVIRONMENT - BOOM,BUST, AND RECOVERY, 1917-41 - Coggle Diagram
ECONOMIC ENVIRONMENT - BOOM,BUST, AND RECOVERY, 1917-41
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BOOM YEARS, 1920s (factors contributing to the boom).
Mass production:
- E.g. Henry Ford's car factories:
-1917: about 5 million cars registered in the USA. By 1929 it was about 23 million.
- Mass-produced goods were produced more quickly and cheaply, so could be sold at a lower price.
Increase in productivity:
- Industrial production almost doubled during the 1920s.
- US chemicals industry did well.
- Electricity consumption more than doubled during the 1920s.
Federal policies:
- Govt generally avoided intervention in business.
- But, it kept some of the wartime subsidies to farmers in place.
- Govt also cut taxes for business to encourage 'buying American'.
- Decreased federal taxes 1924,1926,1928.
- Didn't impose regulations on industry.
Hire purchase and loans:
- Companies supported hire purchase (paying for something in a series of fixed payments).
- Banks more willing to lend mortgages, more people used this.
Changing industry:
- New industries more efficient.
- Older industries became less important than new industries that were producing consumer goods.
The 'bull market'
Ordinary people began buying shares as they became aware that they could make profit from them in the short term.
BUST - WS CRASH, GD
- US trade fell from $10 billion in 1929 to $3 billion in 1932.
- By 1932, industrial output had halved from its 1929 figure.
- 1932: 25% of the workforce unemployed.
- As businesses and banks went bankrupt, unemployment rose rapidly.
- Lots of people lost their jobs.
- Those who could not keep up payments on mortgages lost their homes.
- Increased homelessness and poverty.
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- Little to no help from local, state, or the federal govt.
- Unemployed people relied heavily on charities, but charities could not cope with the unprecedented demand.
Some groups hit harder than others:
- 1931: 4-6 times more black Americans unemployed than white Americans.
Recovery
Situation in 1934:
- FDR halted the banking panic
- created new institutions to reconstruct industry and farming.
- Authorised the largest public works programme in US history.
- But, about 11 million people still unemployed.
Situation in 1937-39:
- FDR re-elected, shows public thought his policies were working.
- FDR tried to balance the budget by cutting govt spending, but this caused the economy to decline.
- 1938: 11.5 million workers unemployed.
- 1938: FDR asked congress for $3.75 billion for relief/public works and congress agreed.
The new deal only brought partial recovery:
- USA less successful at reducing unemployment than Germany or UK.
- 17% of the workforce still unemployed in 1939.
Situation by 1941:
-USA benefitted economically from the outbreak of WW2.
- US businesses broke into markets previously dominated by European manufacturers.
- More jobs as the USA began to prepare for war.
- But, unemployment remained high until America entered the war in 1941.