Quick questions on The 1920s economy: HSC Modern History USA Republican policies

The Republican party dominated the 1920s. Warren G. Harding (Republican, Ohio) won the 1920 election by 60 to 34 per cent over the Democrat James M. Cox with the slogan "a return to normalcy".

Treasury Secretary Andrew Mellon served from 1921 to 1932, longer than any holder of the post. He was the third richest man in America. His doctrine ("scientific taxation") held that high rates produced lower revenue because they discouraged investment.

The Emergency Tariff Act (May 1921) and the Fordney-McCumber Tariff (21 September 1922) raised average tariffs from around 16 per cent (under Wilson) to around 38 per cent. The 1922 Act gave the President discretion to vary rates by up to 50 per cent on the recommendation of the Tariff Commission.

The Federal Reserve, established in 1913 and operating without strong central direction in the 1920s, kept the discount rate low (around 3 to 5 per cent) through most of the decade. Cheap money fed consumer credit, mortgage lending, and (from 1927) stock market speculation.

The American economy doubled in size between 1921 and 1929. Real GDP rose around 42 per cent. Industrial production rose around 64 per cent. Real wages rose around 20 per cent.

Below the boom were structural weaknesses that the Republican policy mix did not address.

John Kenneth Galbraith (The Great Crash 1929, 1955) is the foundational popular account.

Ford and GM produced around 5 million cars a year by the late 1920s. The Model T fell to 290 dollars in 1924. Registered cars rose from 8 million in 1920 to 23 million by 1929.

Around 68 per cent of homes were electrified by 1929. Appliances (refrigerators, washing machines, radios) created new industries. Per capita electricity consumption doubled.

Chemicals (DuPont, plastics), aviation, radio (RCA), and Hollywood all expanded rapidly. Consumer credit doubled from 1925 to 1929; around half of all major consumer goods were bought on instalment plans.

Wartime demand collapsed after 1920. Wheat prices fell from 2.20 dollars a bushel in 1919 to 1.00 dollar by 1922. Farm income halved between 1920 and 1932.

Real wages rose 20 per cent in the decade; the top 5 per cent's incomes rose around 75 per cent. By 1929 the top 1 per cent held around 36 per cent of national wealth. Underconsumption set in as production capacity outran working-class buying power.

Stock prices on the New York Stock Exchange roughly doubled between 1926 and 1929. The Dow Jones Industrial Average rose from 191 (3 March 1928) to 381 (3 September 1929). Brokers' loans (margin) reached 8.5 billion dollars by September 1929.

Around 800 banks failed annually in the late 1920s, mainly small rural banks. The system was fragmented; there were over 25,000 banks, most of them state-chartered and unbranched.

Agriculture, textiles, and coal were depressed for most of it.