| The Consumer Economy | ||
By the end of the 1920s, Americans were overwhelmed by the rise of a modern consumer culture. In response, many of the bitter cultural tensions that had divided Americans had begun to subside. The growth of exciting new opportunities to buy cars, appliances, and stylish clothing made the country's cultural conflicts seem less significant. The collapse of the new economy at the decade's end would generate economic debates as intense as the cultural conflicts of the early and mid-1920s.
Americans in the 1920s were the first to wear ready-made, exact-size clothing. They were the first to play electric phonographs, to use electric vacuum cleaners, to listen to commercial radio broadcasts, and to drink fresh orange juice year round. In countless ways, large and small, American life was transformed during the 1920s, at least in urban areas. Cigarettes, cosmetics, and synthetic fabrics such as rayon became staples of American life. Newspaper gossip columns, illuminated billboards, and commercial airplane flights were novelties during the 1920s. The United States became a consumer society.
Two automotive titans, Henry Ford and Alfred Sloan, symbolized the profound transformations that took place in American industry during the 1910s and 1920s. In 1913, the 50-year-old Ford had revolutionized American manufacturing by introducing the automated assembly line. By using conveyor belts to bring automobile parts to workers, he reduced the assembly time for a Ford car from 12 ½ hours in 1912 to just 1 ½ hours in 1914. Declining production costs allowed Ford to cut automobile prices six times between 1921 and 1925. The cost of a new Ford was reduced to just $290. This amount was less than three months wages for an average American worker. It made cars affordable for the average family. To lower employee turnover and raise productivity, Ford introduced a minimum wage of $5 in 1914 (twice what most workers earned) and shortened the workday from nine hours to eight hours. Twelve years later, Ford reduced his work week from six days to five days. Ford demonstrated the dynamic logic of mass production: that expanded production allows manufacturers to reduce costs, and therefore, increases the number of products sold; and that higher wages allow workers to buy more products.
Alfred Sloan, the president of General Motors from 1923 to 1941, built his company into the world's largest automaker, not by refining the production process, but by adopting new approaches to advertising and marketing. Sloan summed up his philosophy with these blunt words: "The primary object of the corporation was to make money, not just to make cars." Unlike Ford, a farmer's son who wanted to produce an inexpensive, functional vehicle with few frills (Ford said that his customers could have any color that they wanted as long as it was black), Sloan was convinced that Americans were willing to pay extra for luxury and prestige. He advertised his cars as symbols of wealth and status. In 1927, he introduced the yearly model change to convince motorists to trade in old models for newer ones with flashier styling. He also developed a series of automobile divisions, differentiated by status, price, and level of luxury. Hence, Chevrolets were less expensive than Buicks or Cadillacs. He set up the nation's first national consumer credit agency in 1919 to make his cars affordable. If Henry Ford demonstrated the efficacy of mass production, Sloan revealed the importance of merchandising in a modern consumer society.
Cars were the symbol of the new consumer society that emerged in the 1920s. In 1919, there were just 6.7 million cars on American roads. By 1929, there were more than 27 million cars--or nearly one car for every household in the United States. In that year, one American out of every five owned a car, compared to one out of every 37 English and one out of every 40 French car owners. Car manufacturers and banks encouraged the public to buy the car of their dreams on credit. Thus, the American love affair with the car began. In 1929, a quarter of all American families purchased a car. About 60 percent bought cars on credit, often paying interest rates of 30 percent or higher.
Cars revolutionized the American way of life. Enthusiasts claimed that the automobile promoted family togetherness through evening rides, picnics, and weekend excursions. Critics decried squabbles between parents and teenagers over use of the automobile and an apparent decline in church attendance resulting from Sunday outings.
The automobile also transformed the American landscape, quickly obliterating all traces of the horse and buggy past. During the 1920s, the country doubled its system of roads and highways. The nation spent over $2 billion annually building and maintaining roads. By 1929, there were 852,000 miles of roads in the United States, compared to just 369,000 miles in 1920. The car also brought pollution, congestion, and nearly 30,000 traffic deaths a year.
The automobile industry provided an enormous stimulus for the national economy. By 1929, the industry produced 12.7 percent of all manufacturing output, and employed one out of every 12 workers. Automobiles, in turn, stimulated the growth of steel, glass, and rubber industries, along with the gasoline stations, motor lodges, campgrounds, and hot dog stands that dotted the nation's roadways.
Accompanying the rise of new consumer-oriented businesses were profound shifts in the ways that businesses operated. To stimulate sales and increase profits, businesses expanded advertising, offered installment credit, and created the nation's first regional and national chains.
The nation's first million-dollar advertising campaign (Uneeda Biscuits in a waterproof box) demonstrated advertising's power. Before the 1920s, most advertisements consisted of vast expanses of print. Absent were brand names, pictures, or catch phrases. During the 1920s, advertising agencies hired psychologists (including John B. Watson, the founder of behaviorism, and Edward Bernays, Sigmund Freud's nephew) to design the first campaigns. They touted products by building-up name brand identification, creating memorable slogans, manipulating endorsements by doctors or celebrities, and appealing to consumers' hunger for prestige and status. By 1929, American companies spent $3 billion annually to advertise their products--five times more than the amount spent on advertising in 1914.
Installment credit soared during the 1920s. Banks offered the country's first home mortgages. Manufacturers of everything--from cars to irons--allowed consumers to pay "on time." About 60 percent of all furniture and 75 percent of all radios were purchased on installment plans. In contrast to a Victorian society that had placed a high premium on thrift and saving, the new consumer society emphasized spending and borrowing.
A fundamental shift took place in the American economy during the 1920s. The nation's families spent a declining proportion of their income on necessities (food, clothing, and utilities) and an increasing share on appliances, recreation, and a host of new consumer products. As a result, older industries, such as textiles, railroads, and steel, declined, while newer industries, such as appliances, automobiles, aviation, chemicals, entertainment, and processed foods, surged ahead rapidly.
During the 1920s, the chain store movement revolutionized retailing. Chains of stores multiplied across the country, like Woolworth's, the five-and-dime chain. The largest grocery chain, A&P, had 17,500 stores by 1928. Alongside drugstore and cigar store chains, there were also interlocking networks of banks and utility companies. These banks and utilities played a critical role in promoting the financial speculation of the late 1920s, which would be one of the causes for the Great Depression.
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