(Foreward: I know we have already made a post about the economy of the 1920s, but we think that it is important and needs to be expanded on more in our blog, so we are making another post about it.)
The Real Gross National Product, or GNP, of the United States between 1920 and 1929 was 4.2 percent a year, and Real GNP per capita grew 2.7 percent per year, both relatively rapid rates for the nineteenth and twentieth centuries. However, the 1920s still faced economic downturns. There was a year recession between 1920 and 1921, partially initiated by the Federal Reserve’s monetary policy at the time, but rapid recovery reestablished full employment by 1923. There were two mild recessions, in 1924 and 1927, which may be related to oil price shocks, but generally from 1923 to 1929 economic growth was relatively smooth. Consumer prices fell 11.3 percent from 1920 to 1921, and fell another 6.6 percent from 1921 to 1922, but became relatively constant from 1923 onward. The impressive economic growth in the 1920s is mostly due to increasing numbers of Americans owning cars, buying new household appliances, and buying houses. These new products and the processes of producing these products drove this economic growth. The expanding use of electricity in production and the growing implementation of the moving assembly line in manufacturing combined to bring about a continuing rise in the productivity of labor and capital. The average workweek in most manufacturing, however, remained relatively the same throughout the decade; although, in a few industries, such as railroads and coal production, it declined. The new products and services, such as radios, refrigerators, electric irons, fans, electric lighting, vacuum cleaners, and other labor-reducing household appliances, created new markets for manufacturing and advertisement companies to become invested in. The stocks of those companies assisted in creating the stock market boom of the late 1920s. Radio Corporation of America, one of the most popular of the decade, paid no dividends but the value of the stock appreciated because of the public’s expectations for the young company. In other words, the electricity boom of the 1920s, paired with the generally stable prices of the decade, Americans were willing to take risks in stock, which led to the rapid expansion of the stock market. However, while overall production was growing, population growth was declining; from an annual rate of increase of 1.85 to 1.93 percent in 1920 and 1921, population growth rates fell to 1.23 percent in 1928 and 1.04 percent in 1929. The population growth decrease can be contributed to changes in the birth rates of the country’s population and a decrease in foreign immigration; birth rates fell sharply the entire decade, mostly due to an accelerated rural-to-urban migration (urban families generally had less children), and the expansion of career opportunities for women (working women generally had less children). Immigration also fell sharply, mostly due to the federal government’s limitations on immigration in 1917 and a 1921 immigration act that limited the number of immigrants allowed to become citizens of any nationality entering the U.S. to no more than 3 percent of the nationality’s resident population. Citation: Smiley, Gene. “US Economy in the 1920s”. EH.Net Encyclopedia, edited by Robert Whaples. June 29, 2004. URL http://eh.net/encyclopedia/the-u-s-economy-in-the-1920s/
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