Unit 1.4: The Changing Quality of Life & the Economic Environment Flashcards
(26 cards)
What were the reasons/factors behind the post war depression after WWI?
- Farming
- Industry
- Government reaction
What were the reasons/factors behind the economic boom in the 1920s?
- Mass production
- New Management techniques
- Federal policies
- Hire purchase and loans
- Changing industry
How did farming contribute to the post war depression?
-Farmers given subsidies to produce wheat - some took out loans which meant they made a profit during the war but they produced too much so after the war, prices fell - farmers went bankrupt and fired workers and there were already fewer of these due to mechanisation, leading to high unemployment
-Boll weevil at cotton plants causing a 34% drop in cotton production by 1921
How did industry contribute to the post war depression?
-There were strikes which led to some businesses failing, causing unemployment
-Older industries were declining in the north and east e.g. coal was replaced by water power and electricity - coal produced 90% of every in 1900 but by 1930 this was 60%
How did government reaction contribute to the post war depression?
-Rep gov was Laissez faire so didnt try stop depression - thought it woudl fix itself, which is a factor why they didnt do anything during Great Depression
-They were also isolationist which meant that retaliatory tariffs were placed on US goods by other countries, decreasing exports
How did mass production contribute to the boom?
-One worker, one step on production line - esp. shown by Ford’s cars - sold at a lower prices due to less skilled workers, only black cars etc. - more poeple bought goods esp. cars and radios which led to the booming of many industries that were all needed in this process
-1917, there were 4.7 million passenger cars registered but by 1929 there 23 million
-Ford: model T cost $825 in 1914 but were $260 10 years later, workers paid $5 a day which was half the usual wage for industrial workers and unions were banned which took advantage of Laissez faire and had negative imapcts for workers BUT, once all who could afford a model T bought one, the demand fell rapidly which meant that the last model T was made in 1927 (the 15 millionth)
How did new management techniques contribute to the boom?
-Some employers like Ford used scientific management developed by Fredrick Taylor - made the production line workers as effective as the line itself - broken into series of movements which workers were trained in
-Good working conditions, good pay which made them stay
How did federal policies contribute to the boom?
-Gov avoided intervention but kept some wartime subsidises on farmer
-Tax cuts on businesses to encourage buying American
How did hire purchase and loans contribute to the boom?
-Borrowing no longer seen as last resort like before the war - companies in 1920s pushed for hire purchase (paying in fixed instalments) - companies like sears sent catalogues
-More people bought homes and farms on mortgages that banks were willing to lend - 1920 and 1929, consumer debt rose form $3.3 billion to $7.6 billion which allowed boom to continue and a doubling of the amount people borrowed as a percentage of their income - 5% to 10% from 1920 and 1929
How did changing industry contribute to the boom?
-New industries were more efficient and used more mechanisation and were run on electricity so older industries like textiles were less improtnat than manufactured goods
-Electricity helped the boom too - 1917 there were 7.8 million homes and businesses wired to electrify but by 1930 there 24.5 million which increased efficiency
Dividend
A regular, usually yearly, payment made by companies to their shareholders.
Bull market
This is when share prices rise and people expect this to continue
Buying on the margin
Buying shares with borrowed money to sell quickly at a profit
The Federal Reserve Board (Fed)
This was set up in 1913 to regulate banking
Bear market
This is when the prices of shares falls and people expect the fall to continue.
What were the causes of the Wall Street crash?
- speculation boom (1920s there was a rapid growth with a 400% increase and stock traders nought on margin which meant they became over leveraged so when prices fell
- they had to force sell loans and the banks extended these loans on the margin which meant banks lost money too), stock market overvaluation (stock prices exceeded value of companies)
- federal reserve tightening (1928, federal reserve increase interest rates to 8% which made it more expensive to borrow money to buy stocks)
- panic selling (viscous cycle, when prices fell, investors sold more, which meant prices fell more leading to even more selling etc.)
What were the consequences of the wall street crash?
-Declined public trust and confidence in markets which meant they were fearful of investing at the risk of losing everything
-factories shut down leading to unemployment which decreased consumer spending, banks and businesses failed - these led to the government changing the system
-introducing new regulations to stabilise it like the glass steam all act 1933 which reduced risk by separating commercial and investiment banking
-the securities and exchange commission was also set up which oversaw and regulated the stock market
-the percentage of stocks sold: Black Thursday 11%, black Monday 13%, black Tuesday 12%
-1932 stock market lost 90% of its value - $50 billion worth of stocks lost
Stagflation
A period of time when the economy is not moving (stagnating), unemployment rate is high, high inflation, which originate din the 1970s - not regular trend as you have low inflation when economy is doing well and employment is high and vice versa
Why did stagflation happen in the 1970s in the US?
-This happened because oil price doubled in months due to the 1973 opac embargo and the 1979 Iran Revolution which meant production costs were higher which companies didn’t adapt to properly
-Or it happened (ass suggested by freeman) due to central banks not being aggressive enough to fight inflation - this was implemented by Paul Volcker in 1979 when he became the chairman of the federal reserve, this led to a decrease in oil prices
-Political tensions like the Arab Israeli war which led to the OPAC embargo because the US began to resupply military equipment to Israel which the Arab countries responded to using the embargo
What were reasons why there was boom after WWII?
- Demand for consumer goods
- Increased employment and wages
- Government response to strikes
- Baby boom
- Farmers
- ‘Fair Deal’
How did demand for consumer goods cause a boom after WWII?
Production increased from $213 billion in 1945 to $284 billion in 1950 which kept unemployment low, this was because of goods that people didnt need during the war began to be bought
How did increased employment and wages cause a boom after WWII?
Employers expanded their workforces and raised wages due to the business boom, which encouraged more spending (cycle of prosperity).
How did gov response to strikes cause a boom after WWII?
When coal miners went on strike, Truman took control of the mines and anyone who joined them n strike, Truman took control of that industry too like rail whereby 90,000 passengers were affected and 25,000 trucks with perishable food were impacted to the point congress drafted strikers into the army which limited strikes in the future - hard stance
How did the baby boom cause a boom after WWII?
Child centred goods were in demand e.g. 1947, nappy were $32 million then rose to $50 million and toy manufacturers made $2 billion profits by 1961, this was because births rose by over 1.5 million from 1940 to 1955 (2.5 mil to 4 mil) which had a long term impact as there were more teenagers, so more school needed
