The American Economy in the 1920s

The Great Depression - The Rise of the American Economy

Example

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This activity will examine the economic culture of the 1920s. This context is fundamental to understanding the causes and effects of the Great Depression. Students will be able to identify and explain the many reasons for economic success that occurred following the first World War, and lasting through the 1920s. With a strong stock market, expanded employment, exploding industries, rising credit, and a technological boom, citizens in 1920s America experienced tremendous prosperity. However, this same prosperity would eventually become a major cause of America’s Great Depression.

1920s American Economy

Technological Advances

Throughout the 1920s, America experienced tremendous technological advances. Refrigerators, washing machines, and the availability of electricity were just some of the major examples in newer products. Along with this, growths in medicine, transportation, and luxury aided the rise in consumer products.

Consumerism

Consumerism is the economic term to define individuals spending their income on goods and services, or consumption of products. For America, this was, and still is, the driving force behind our capitalist economy, as the consumer powers the market and businesses.

The Stock Market Boom

As businesses experienced more success, so did the stock market. Stock values soared to over $87 billion in 1929. Many became rich quick by investing their own new-found wealth in the market. However, the already wealthy prospered most from this boom, as big business corporations dominated the economic landscape.

Buying on Credit

As consumerism grew, so did Americans' desire for material goods. However, many new products were simply too expensive for most middle class citizens. A great surge in buying on credit resulted, as consumers could now pay back big purchases on installment plans. Soon, many Americans became entrenched in debt.

Rise in Productivity

To meet the massive need for products demanded by the American people, productivity rose greatly. Any and every industry, from cars to vacuums, began mass producing their products to meet this demand. From 1921 to 1929, the GNP, or Gross National Product (the total value of a country's production) rose 6% a year.

Expanding Industry

Many industries expanded greatly during the 1920s. With new technologies and high demand, many companies and businesses experienced tremendous growth. Inventive methods, like Henry Ford's assembly line to make cars, also aided this major spike in industrial growth. With this growth, employment also rose.

Extended Activity

Have students identify the major economic factors of today’s markets. Students can identify and explain modern technological improvements, the nature of the stock market, improving and expanding industries, and employment figures. Students should grasp what America’s economy is like today and why it could both continue to boom, or eventually bust.

The Role of the Dust Bowl in the Great Depression

The Great Depression - The Dust Bowl

Example

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The Dust Bowl of the 1930s hurt not only farmers, but the American economy in general. Crop failures caused great stress on the trade and sale of many consumer goods. This in turn caused even greater stress on the economy as a whole. Using a spider graph, students will be able to identify and explain the 5 Ws using a spider map that defined the Dust Bowl and its role in the Great Depression. This will provide further insight into how many average American workers and farmers were affected by it.

Extended Activity

Have students research and identify the 5 Ws of another major market failure. It can be any event or market failure, whether related to farming and food production, or to the failure of a technology or business. Students should draw connections between the Dust Bowl and the failure or crippling of this modern market.

FDR’s New Deal Initiatives

The Great Depression & New Deal FDR

Example

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With a spider map, students will outline in detail the major initiatives that made up Franklin Delano Roosevelt’s New Deal. FDR’s New Deal was comprised of several different initiatives to help tackle the many different problems that existed during the Great Depression, from unemployment to the failure of banks. By focusing on the New Deal programs, students will be able to state the parts of FDR’s New Deal and summarize how they attempted to solve the most prevalent problems of the Great Depression.

FDR: The New Deal

Public Works Programs

FDR initiated many public works programs to help ease unemployment and reinvest in the American economy and infrastructure. With the Tennessee Valley Authority (TVA), the Civilian Conservation Corps (CCC), and the Workers Progress Administration (WPA), citizens found work and a wage. This also increased buying confidence.

Stabilizing Banks

FDR wanted to restore the public's confidence in banks. To do so, he passed the Emergency Banking Act, which allowed the government to inspect banks' "health". It was determined over two-thirds of banks were healthy, restoring people's confidence to save their money again and make bank deposits. This helped restore banks and their lending powers.

Regulating the Economy

To regulate the economy, FDR instituted the National Industrial Recovery Act in 1933. This act helped regulate wages, competition amongst businesses, production, and prices. The act also allowed workers to negotiate working terms. However, such regulation was met with opposition, and many businesses fell back into depression.

Assistance to Farmers

Farmers and the agriculture industry were hit hardest by the depression. To assist them, FDR attempted to help farmers manage their mortgages, although this proved to be difficult. In addition, FDR set up the Agricultural Adjustment Administration to regulate farm prices and production, to bolster sales and hopefully rise prices.

Extended Activity

Have students create a spider graph to detail the initiatives taken by President Barack Obama in 2008 to solve the recession crisis. Students should state how the president attempted to solve many of the same issues that existed during the Great Depression, including unemployment and the revitalization of businesses. This will help connect the politics of the 1930s with that of the 2000s.