THE AMERICAN ECONOMY BETWEEN THE WORLD WARS

THE AMERICAN ECONOMY BETWEEN THE WORLD WARS

THE AMERICAN ECONOMY BETWEEN THE WORLD WARS REVISED EDITION JIM POTTER M MACMILLAN

Jim Potter 1974,1985 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended). Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1974 Revised edition 1985 Published by Higher and Further Education Division MACMILLAN PUBLISHERS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Potter,Jim The American economy between the World Wars. Rev. ed. I. United States-Economicconditions-1918-1945 I. Title 330.973'091 HCI06.3 ISBN 978 1-349-08320-6 ISBN 978-1-349-08318-3 (ebook) DOl 10.1007/978 1-349-08318 3

Contents List of Tables 7 Preface 9 Introduction I 3 1 From Tanks and Torpedoes to Tractors and Tin Lizzies 1918-21 17 1 Post-war boom and recession I 7 11 Structure of the United States economy after the First World War 21 2 Common Features of the Inter-war Years 25 1 The United States in the world economy 25 11 The terms of trade 26 III Agriculture 27 IV Population 30 v The consequences of technological change 36 VI Structure of employment 38 vn Government and the economy 40 3 Prosperity 1922-g 42 I Politics in the 1920s 43 II Social improvement 46 III Urbanisation 50 IV Economic expansion 55 v Are the causes of the Great Depression to be found in the prosperity of the xg2os? 59 4 Depression 1929-33 go I Herbert Hoover go u The first phase of the depression 92 111 The course of the depression 94 IV Government and the depression 1931-2 g6 v The American depression compared with the British xoo VI Suggested explanations of the Great Depression 102

5 The New Deal: Origins and Measures III I Franklin Delano Roosevelt III II Election, interregnum and inauguration II3 Ill Roosevelt's assumptions and aims IV The Hundred Days Il5 II6 v Subsequent measures I23 6 The New Deal: Success or Failure? I29 I Introduction I29 II Political achievements 131 III Economic effects of the New Deal 134 IV Analysis of the economic failure 140 v Fiscal policy 142 VI Monetary policy I47 VII Reform 149 VIII Conclusion 154 Chronology of Events 157 The Alphabetical Agencies and other abbreviations 166 References 171 Further Reading 174 Subject Index 177 Name Index 183

List of Tables 1. Summary of economic trends, I922-39 I5 2. Structure of employment in the United States in I920 22 3 The American balance of foreign investment 25 4 U.S. farm labour and land, I8go-1940 29 5 Farm equipment, Igio-40 29 6. Population of the United States, Igio-70 3I 7. Rural population, I g2o-4o 33 8. The American black population, Ig1o-40 34 g. Employment by sectors in Ig2o, 1930 and I940 39 10. The election results, 192o-3o 44 11. U.S. urban population, Igoo-1940 52 12. Population of certain cities in 1920 55 13. Indexes of economic expansion, I922-g 57 I4. Regional changes in industrial employment in the 1920s 63 15. Employment and wages in cotton manufacturing, New England and South Atlantic compared, I9I9 and I929 63 16. Total realised income from different sources, 19Io-2g 66 17. Unemployment in the United States, I9I9-29 6g I8. Consumers' Price Index for moderate-income frunilies in large cities, Ig2o-g 7I 19. Federal Government finances, I923-g 82 20. Indicators of depression, I929-33 95 21. Deaths and death rates, I92I-38 g6 22. The election results, 1932-8 I 14 23. Indexes of economic recovery, 1933-9 137 24. New construction activity, I929-37 139 25. Federal income and expenditure, I929-39 143 26. Sources of federal revenue, I929-39 144 27. Effective rate (per cent) of U.S. income-tax 145 28. Share of total taxation raised by different governments 146

Preface THIS book was originally commissioned as one of the 'Studies in Economic History', edited by Professor M. W. Flinn on behalf of The Economic History Society. The size and range of the subject matter made it impossible to restrict the length of this survey within a volume short enough for the 'Studies'. Nevertheless the original purpose of that series has been retained in this book. It has been written as an introductory guide to a very large subject. It does not set out to be comprehensive, but is intended to provide students with a fairly simple factual outline and with suggestions of differing interpretations. It is assumed that British readers, for whom the book is primarily written, are not familiar with many aspects of American life. Where necessary for an understanding of economic conditions, problems and events, an explanation has been given of the relevant American political institutions and historical background. Since the approach is primarily analytical, the discussion is usually topical rather than chronological; to offset the lack of a systematic narrative account, a brief 'Chronology of Events' is given at the end of the book (pp. 157-65) The book therefore aims firstly at providing basic information about the American economy between the two World Wars and a great deal of data (not all of which is exhaustively discussed) is presented in tabular form throughout the text. Secondly, it attempts to indicate the main interpretations and controversies involved. But thirdly, in the belief that distance can sometimes provide different perspectives, the book from time to time suggests new views and approaches. Comparisons are made, for example, with contemporaneous British conditions and problems. Attention is also drawn to important demographic data which have been largely neglected in previous accounts of this period. Despite its extended length, the book remains no more than a summary account, often of exceedingly complicated matters. Much 9

detail has been omitted and many topics, worth a whole chapter to themselves, have had to be treated in two or three paragraphs. It is hoped that this compression has been achieved without undue simplification, but it has necessitated the omission of much which might have been deemed worthy of inclusion. The areas treated the most sketchily are generally those for which a large literature already exists: for example, the Wall Street crash, trade unions and business o:-ganisations do not receive the attention devoted to them in other works; several important New Deal innovations, such as the Tennessee Valley Authority (T.V.A.) are no more than mentioned in passing. It should also be emphasised that this book does not attempt to explore the complex problems of international banking and finance in the twenties and thirties; it is intentionally concerned almost exclusively with the American internal economy. Similarly the account deliberately stops short before the outbreak of the Second World War in Europe. If such gaps are to be regretted, the author can merely plead that considerations of length made it necessary to limit the range of the book. Rather more emphasis has been placed on the 1920s than on the 1930s, partly because of the abundance of literature about the New Deal, partly because of the belief that an understanding of the twenties is essential to an understanding of the thirties, partly because of the prevalence of serious misinterpretations of the 1920s (revealed annually in examination scripts), but also because of the enormous intrinsic interest of that neglected and misrepresented decade. In its manner of composition also, the book varies somewhat in its treatment of the two decades, if only in the fact that the earlier chapters have more references than the last two! This results from the circumstance that the two chapters on the New Deal are based on a series of seminars for third-year graduate students held at the London School of Economics for several years past. These seminars have been addressed by many eminent visitors, some reflecting on their own memories of Washington D.C. in the 1930s, others (especially more recently, as the passage of time has made personal reminiscences more difficult to obtain) speaking from the viewpoint of their own academic expertise. Since the evidence is not always clearly identified, a collective acknowledgement must be given here to the contributions of this long line of guest speakers, as well as those of past and present colleagues in London : Charlotte Erickson, 10

R. C. Estall, W. Letwin, E. J. Mottram, R. H. Pear and L. H. Pressnell. London School of Economics February 1974 jim POTIER II