Economic Expansion

Despite the turmoil of the times and the dissatisfactions expressed by some of the nation’s best minds, the 1920s was an exceptionally prosperous decade. Business boomed, real wages rose, unemployment declined. The United States was as rich as all Europe; perhaps 40 percent of the world’s total wealth lay in American hands. Little wonder that business leaders and other conservatives described the period as a “new era.”

The prosperity rested on many bases, one of which was the friendly, hands-off attitude of the federal government, which bolstered the confidence of the business community. The Federal Reserve Board kept interest rates low, a further stimulus to economic growth. Pent-up wartime demand helped to power the boom; the construction business in particular profited from a series of extremely busy years. The continuing mechanization and rationalization of industry provided a more fundamental stimulus to the economy. From heavy road-grading equipment and concrete mixers to devices for making cigars and glass tubes, from pneumatic tools to the dial telephone, machinery was replacing human hands at an ever more rapid rate. Industrial output almost doubled between 1921 and 1929 without any substantial increase in the industrial labor force. Greater use of power, especially of electricity, also encouraged expansion—by 1929 the United States was producing more electricity than the rest of the world combined.

Most important, American manufacturing was experiencing a remarkable improvement in efficiency. The method of breaking down the complex processes of production into many simple operations and the use of interchangeable parts were nineteenth-century innovations; in the 1920s they were adopted on an almost universal scale. The moving assembly line which carried the product to the worker, first devised by Henry Ford in his automobile plant in the decade before World War I, speeded production and reduced costs. In ten years the hourly output of Ford workers quadrupled. The time-and-motion studies of Frederick W. Taylor, developed early in the century, were applied in hundreds of factories after the war. Taylor’s method was to make careful analyses of each step and movement in the manufacturing process. Then workers would be taught exactly how best to perform each function. Taylor described his system as “enforced standardization” made possible by the “enforced cooperation” of workers. “Taylorism” alarmed some union leaders, but no one could deny the effectiveness of “scientific shop management” methods.