Post the First World War the US experienced a massive economic boom. Being the only power, after the war, with a stable economy, Government and infrastructure, people saw the US as an investment. However, the economic boon was not only due to the First World War. The motor industry experienced rapid development, alongside the economy, in the 1920’s to keep up with the demand of the changing American population. But to what extent was the motor industry responsible for the economic boom? A critical factor in the motor manufacturing industry was the vast number of vehicles which were manufactured and sold, with the Ford Motor Company being the catalyst for this.
Henry Ford Established the Ford Motor Company in the early 20th century and quickly started selling his famous Model-T motor car. Alongside Frederick Taylor, Ford perfected the assembly line and made mass production a reality. A Model-T could be produced in 90 minutes and as a result the price for one dropped from $825 to $575 in four years. Fundamentally, this meant that anyone could afford a car, including the working class, with a few months’ wages. This supported the economic system and kept it rising well into the late 20’s. Another supporting factor was that other US companies were able to copy Fords production technique and therefore increasing the revenue of the companies.
This shows the massive economic growth caused by the development of mass production. A combination of the efficiency of the production, and the high number of car sales, Fold was able to increase the wage of factory workers from $2 a day to $5. This had a number of positive consequences. First, the increase of salary hugely increased the number of workers who wanted to work for Ford, which led to Ford acquiring a huge workforce. For example the River Rouge Plant in Detroit, had at its peak, over 100 000 workers. As a result, workers had a more disposable income and therefore supported the economy by living a higher quality of life and causing a consumer boom.
Secondly, Ford could demand the maximum out of his work force. If they didn’t deliver the required level of work, they could easily be replaced by any amount of workers. This caused the quality of his product to increase and therefore, the sales of cars increased. The amount of cars which the Ford Company sold and produced was staggering. In the late 1920’s, a fifth of Americans had cars most produced. The River Rouge Plant alone produced 2500 cars a day with its 1.5km2 of factory floor space. It was the first factory which converted raw materials into cars in the factory itself. This slashed production costs dramatically, leading to the Ford Company earning much more revenue.
The manufacturing industry of cars used a large portion of the US’s raw materials. For example: 15% of all steel production into the manufacturing of cars. This shows that the industry fundamentally affected many other supporting industries, including raw materials, which all helped to boom the economy. However, the motor manufacture industry was not an independent reason for the economic boom. The First World War was also a crucial factor. The war had left the US essentially unscathed unlike many European countries. It had no debt, no physical damage and had a casualty rate of only 7% of its forces. Before entering the war, the US was the main manufacturer and seller of weapons and munitions to both Allied and Axis forces.
It also lent money to foreign Governments to fund the war, which afterwards the foreign Governments had to pay back with interest. As a result, the US was the only international power which benefited financially from the war. As power shifted from London to Washington, many investors saw the US economy dominance as a safe and worthwhile investment causing new industries to grow, develop and contribute to the rapidly growing economy.
The massive consumer and economic boom were not only financed by the growing wages of the American workforce. Easy Credit increased the supply of money into the banking system which made it easier for banks to lend money. By 1929 almost $7 billion worth of goods were sold using easy credit. As a result, more people could afford luxuries as cars and home appliances and more were being sold, meaning the manufacture of the goods earned more money and the cycle of the consumer boom increased.
This undoubtedly supported the economy in the short term. However, the manufacture received money that never existed to begin with and was ultimately the reason for the economic crash in 1929. The American population had masses of confidence by the end of the 1920’s. They believed their economic system worked and could keep the population living a higher quality of life. The confidence originated from the end of the First World War – the War to end all Wars. It was debt free and a creditor nation, there was a growing rise of population and the housing market was strong while only growing stronger and critically the attitude of the US Government enforced the idea of confidence.
The Presidents at this time believed in “Rugged Individualism” which ultimately left the American population to themselves. This supported and grew the confidence already blooming in the populations mind. This confidence supported the economy because it made people loss the fear of spending money. In conclusion, I believe the Motor Manufacturing Industry was the primary reason for the US economic boom in the 1920’s. However, many other reasons contributed towards the boom, which all link and support each other.
For example, the continuation of Easy Credit was only due to the confidence of the US population, but also the continuation of Easy Credit also enabled many people to buy motor cars – over 75% of all cars were brought on credit. Despite this, the development of the assembly line and mass production saw that all American industries would boom and develop the economy, especially the motor industry. The huge amount of car sales reinforces the developments made in the factories. Finally, I believe the motor manufacturing industry was the heart of the US economy boom in the 1920’s.
Courtney from Study Moose
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