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Impact of the war on the US economy


Henry Ford
Henry Ford

World War I made the United States a world power. While European nations tried to recover from the war, the United States had overseas territories, access to markets, and plentiful raw materials. Formerly in debt to European investors, the United States began to lend money abroad. At home, the economy expanded. Assembly-line production, mass consumption, easy credit, and advertising characterized the 1920s. As profits soared, American zeal for reform waned, and business and government resumed their long-term affinity. But not all Americans enjoyed the rewards of prosperity. A mix of economic change, political conservatism, and cultural conflict made the 1920s a decade of contradictions.

As war production ended, the economy dipped, but only briefly; by 1922 the nation began a spectacular spurt of growth. Auto production symbolized the new potential of industry. Annual car sales tripled from 1916 to 1929; 9 million motorized vehicles on the road became 27 million by the end of the 1920s. At his Michigan plant, Henry Ford oversaw the making of the popular black Model T. New modes of production changed car manufacture.

A moving assembly line brought interchangeable parts to workers who performed specific tasks again and again. Assembly-line techniques cut production costs, which made cars less expensive and more available to average citizens. The effect of auto production spread beyond car factories. Auto building spurred industries that made steel, glass, rubber, and petroleum. Exploration for oil led to new corporations, such as Gulf Oil and Texaco. During the 1920s domestic oil production grew by 250 percent, and oil imports rose as well. State-funded programs to build roads and highways changed the nation’s landscape. Previously isolated rural areas filled with tourist cabins and gas stations.

New suburbs with single-family homes on small plots of land arose at the outskirts of cities; the construction industry soared. Finally, the car industry pioneered new ways to distribute and sell products. Auto companies sold cars through networks of dealers to customers who often used a new type of credit, the installment plan. With this plan, the purchaser made an initial payment, or down payment, and then agreed to pay the balance of the purchase price in a series of payments.

Cars were just one growth sector of the 1920s. Energy use tripled, and electricity reached 60 percent of American homes. Industry produced new home appliances such as refrigerators, washing machines, and vacuum cleaners. As incomes rose, families spent larger portions of their incomes to buy these durable goods; items previously considered luxuries now became necessities. Chain stores, such as A&P, put local retailers out of business; canned goods and commercial breads replaced homemade products. The young advertising industry, which had appeared in the late 19th century, fed a desire for consumer goods. Extensive credit abetted this desire, known as consumerism. During the decade, American corporations became larger. Some grew by securing markets abroad, as did the United Fruit Company in Latin America. Others grew through consolidation. Large companies came to dominate many industries. By the end of the 1920s, 100 corporations controlled nearly half the nation’s business.

The vast growth of business in the 1920s transformed many areas of life, but failed to distribute benefits equally. Industrial workers did not reap the profit of increased productivity. Wages rose but not as fast as prices. Unions competed with company unions (employer-established organizations) and battled the National Association of Manufacturers, which sought to break union power. Union membership dropped from about 5 million in 1920 to 3.4 million in 1930. Agriculture suffered as well. Markets for farm products declined after army purchases ended and European farming revived. Farmers produced more, and prices continued to fall. The annual income of farmers declined, and they fell further into debt. Like many other Americans, rural families became mired in a web of credit and consumption. "USA" © Emmanuel BUCHOT, Encarta, Wikipedia.

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