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The story of business in the 1920s is one
of a sea change in American politics and culture--it's very difficult
to separate any of these threads. The same consumerism driving
the fads and fashions of the Twenties also drove the economic engine of
the country. After a brief dip in 1920-21, when the economy
shifted from wartime to civilian production, the economic indicators
began a precipitous climb that would last for most of the decade.
The initial boom was based on real gains in worker productivity:
machines making it more easy to make more machines.
Concomitantly, profits rose and so did did stock prices. However,
workers' wages did not keep pace with profits. This was "bad
news" in an economy dependent upon consumer spending. So how
would the business leaders raking in record profits keep theur
underpaid workers buying theur products? One answer was
borrowing. New advances in banking and the emergence of finance
companies facilitatede easier borrowing. "Fast and loose"
practices in banking as well as stock brokerage allowed people to get
into debt way over theur heads, because all of the business leaders
promised them that the prosperity would never end.
Why did everyone trust these business leaders, when just a decade
before, businessmen had been characterized as "robber barons" and the
corporations they operated as threats to the public good? Part of
the answer lay in the transormation from within of the Republican
Party. As you will see, the GOP underwent an internal "coup" of sorts
between 1920 and 1924, where new businessmen pushed out the old guard
of statesmen, and then elected politicans (like Calvin Coolidge) who
would do whatever these party leaders said was good for business--and
what they said was that business no longer needed government
regulation. Consequently, GOP leaders appointed businessmen to
take charge of the regulatory agencies established by the Progressives,
were they proceeded to pervert the original function of these agencies
as "watchdogs" of business to lapdogs of business. Another factor
was the "sacralization" of business and businessmen. Prominent
Republican leaders like Herbert Hoover argued that, far from being a
threat to society, businessmen represented the best qualities of
American character: rugged individualism. Businessmen were
likened to the pioneers venturing forth and taking risks to establish
wealth for their communities and their country. The moral
character of this individualism, the public were told, would serve as
the only safeguard necessary to check any untoward forces in the
economy.
And so businessmen ruled. Yet without any checks and balances on
their power--checks and balances, you'll recall, being an important
feature of American government--they were free to pursue their raison
d'être (reason fo being), production of profits. That
became the be all and end all of business. This presented a
problem when, around 1925, gains in worker productivity began to level
off, indicating that the economis engine was slowing down.
However, like drug addicts, business leaders devised increasingly
complex schemes (a massive shell game) to keep the profits, or at least
the appearance of profts, going up. One way in which they
accomplished this was by spreading the risk: convincing average
Americans to risk their savings by investing in the stock market.
They used appeals to equality and fairness to lure small investors into
the market. "Why should only Morgan and Rockefeller and Mellon
get rich? Why shouldn't you?" they said. "You can't
lose." So Americans flocked into the market, sometimes borrowing
money just to get a "position" they were promised would pay off
handsomely in the near future. A second way business kepty
profits up was through merging with other businesses. Bigger was
better; it was more efficient. So with each new merger, stock
prices rose, even though some more skeptical observers wondered how the
new monstrosities would cover the costs of the merger itself, let along
turn a profit at producing consumer goods.
It was all a giant house of cards built upon shifting sands, and
everywhere, those in authority sang the same tune: "All is
well. Don't worry! Be happy" So Americans drank their
illegal booze, bought the latest fashions and engaged in the latest
craze, danced the night away to jazz, unaware of the imminent disaster
roaring down on them. The Twenties would roar, alright, but it
was a roar amlplified by an echo chamber of conformity, denial, and
unchecked optimism. In the end, it wouldn't take much to knock it
all over and silence the Decade That Roared.
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