Consumer Economy
The growing consumer economy mainly catered to the growing middle class, however it appealed and assisted most of america for the majority of the decade. ("A Consumer Economy.") The government was in support of the big corporations and encouraged economic growth. (Lapsansky-Werner 212) Products became more affordable due to new techniques, such as Henry Ford’s assembly line and electrical power in factories. The car industry began to boom and the rest of the economy followed. (Lapsansky-Werner 213) The automotive industry was revolutionary and an exemplar for today. Henry Ford began to appeal to the average american. He paid his workers five dollars a day, and have them 8 hour workdays. Therefore, they began to purchase his new Model T- they had the money and the time to drive it. Americans then began to spend more on other industries, consequentially, the gas business boomed and americans began to spend more money on travel. (Lapsansky-Werner 213-215) As Americans obtained more material goods, new job opportunities with higher wages popped up. The economy worked full circle. Consumers had more money and spent it opening up new opportunities and benefitting the economy and industry. ("A Consumer Economy.") Most significantly, the lives of American Housewives dramatically changed during the roaring twenties. Referred to as the consumer revolution, household appliances became readily available for purchase and began to fill the homes of Americans. (Lapsansky-Werner 236) New devices such as vacuum cleaners, irons, washing machines and refrigerators decreased tedious chores exponentially. ("A Consumer Economy.") However, appliances weren’t the only thing that made their lives easier, the increased popularity of canned/ frozen foods, supermarkets and clothes off-the-rack greatly reduced the amount of time women spent on cooking and shopping. This revolutionized their lives and allowed them to work while still taking care of their family and home. Companies began to buy and sell things, eliminating the middleman and making products more accessible and affordable than ever. ( Blackford, and Kerr.) However, not all americans got to reap these benefits, while urban Americans spent more and more money on goods made by others, rural americans continued to suffer financially while trying to survive on their self reliant farms. (Lapsansky-Werner 217) Despite the lull in rual america, urban cities boomed and many Americans began to invest in the stock market. The bull market, as it was often called, seemed stable and stock prices continued to rise. However, the market was actually on shaky ground. Americans were buying their stocks on loans that they couldn’t pay off. This created a falsely positive outlook on the economy, and citizens continued to invest their savings hoping to get rich quickly. (Lapsansky-Werner 216)
Check out this video about Hennry ford to learn more about his immense contributions to society. (from history.com)
Advertising
Due to the booming consumer economy, the advertising industry grew exponentially. As more and more products were introduced to the market, competition between companies increased and a need for advertising to set the brand apart emerged. ("A Consumer Economy.") Companies shifted from advertising for informative purposes, to convincing the consumer to buy their product. ( Blackford, and Kerr.) Many companies employed social scientists to perform commercial research to get a better understanding of which marketing techniques to use. ( Blackford, and Kerr.) Marketing became an industry of its own and companies began to dedicate a large percentage of their funds to pay for advertising resources. ( Blackford, and Kerr.) Brands used psychology methods to get into consumers brains and make them think that they needed products that they didn’t. ("A Consumer Economy.") For example, the mouthwash company Listerine claimed that the key to a successful business and relationships was fresh breath and scared Americans with advertisements about Halitosis. Halitosis is simply bad breath, however Americans scrambled to purchase Listerine as they believed it would save them from the scary disease. The marketing ploy worked and Listerine is still a successful company today. ("A Consumer Economy.") Advertising also played a major role in the radio. Companies would pay for commercial times which subsidised the cost of the broadcasts and allowed the brands to get more exposure. ("A Consumer Economy.") Newspapers and magazines also assisted the advertising industry. As color printing became accessible, brands would pay for color advertisements in publications that would not only help the media outlet, but also attracted viable customers. ( Blackford, and Kerr.) As the advertising world grew, they began to reach a broader group of americans using famous Hollywood stars to sell their products. ("A Consumer Economy.") Americans were buying what they saw in advertisements, which were produced in local factories, bringing the money full circle. ("A Consumer Economy.") Advertising was truly a crucial piece of the 1920s economy.
Buying on credit
Buying on credit was also a major piece of the economy during the roaring 20s. Americans still didn’t have the funds to purchase expensive things on their own all at one time, however, new savvy approaches helped citizens pay for goods and services that they couldn’t before. They strategy was that they could buy goods but pay for them in parts rather than all up front. All of a sudden, people could buy things that they never dreamed they could afford in the past. They did this in several ways. Department stores opened up lines of credit so that more people would purchase their products. Consumers wouldn’t pay up front but had to show that they had the means to pay it off. Another was investment plans. Consumers would pay for the product in 12 easy payments. However, these processes lead to American’s drowning themselves in tremendous debt. In fact, in between 1920 and 1930, consumer debt doubled. Over half of all cars sold were paid for using some sort of consumer credit. But material goods weren’t the only things that americans used credit to pay for. ("A Consumer Economy.") People borrowed money from banks to invest in the stock market, this was referred to as buying on margin (Lapsansky-Werner 216). Americans could pay little up front to the broker, if the stock went up, they could easily pay off the loan, butif the stock dropped, they had to pay off the money they borrowed from the bank. (Lapsansky-Werner 215-216) They weren’t investing their own assets and didn’t have the means to pay back these loans. ("A Consumer Economy.") This was a major cause of the stock market crash at the end of the decade and consequently the great depression. Despite its later downfalls, buying on credit was a popular and useful way to obtain products and money during the roaring 20s.
Primary source
Above is a chart depicting the stock market during the 1920s. As you can see, through most of the century, stock prices were rising so people felt comfortable purchasing stocks or even loaning out money to buy them. With such promising rises, it is easy to understand how they believed that the good times and economic prosperity would last forever. However, The graph also depicts the turn in the stock market on black tuesday in 1929. These charts help us to understand what information people had at the times and assist us in understanding how the economy fell apart. (y axis shows Dow Jones Industrial Average and x axis indicates years) (chart from Macrotrends)
Background photo: Young men working at the prosperous NYSE during the 1920s. (Library of Congress)
Page by: Mara Sabin