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America’s Economic Condition (1900-1925)

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The duration of time between 1900 and 1925 spans across two periods in American history referred to as ‘The Progressive Era’ and ‘The New Era’. The progressive era covers the first two decades of the nineteenth century while the new era, also known as ‘the roaring twenties’ constitutes the remaining five years. This paper seeks to identify key features of the American economy during the first quarter of the twentieth century.

      The end of the American civil war that lasted between 1861 and 1865 marked the beginning of development of the United States as a great industrial power[1]. There was the rise and rapid expansion of previous industries. New fields such as electricity generation, steel manufacturing and petroleum processing also came to the fore. The transport industry was also boosted by expansion of the railway network.

      The result of this was the development of new social classes ranging from an extremely rich proprietor class to laborers. The less privileged classes earned very little, leading to their participation in trade union activity. The main complaint was the low wages and poor working conditions in factories. There was also a fall in price of agricultural produce due to improvements in technology and therefore rise in supply. This made farming less feasible, making most people move to urban areas in search of jobs. Exploitation was common and small businesses and unions made calls for the government to intervene.

      Within this background, one can say that by the year 1900, the economic state of most people was terrible. There was overcrowding in cities, with many living under inhumane conditions. Corruption was also rampant. As from around 1900, there was the development of a middle class of citizens which was displeased with the dominant wealthy class and labor and farmer movements. They vigorously advocated for the regulation of business by the government, promotion of competition and elimination of corruption in government services. These, were the progressivists. Their agenda, According to Olson[2] was to push for reforms and eliminate unfair domination by the large players in the markets.

      As a result of the agitation, a number of significant reforms through legislation were affected. Laws such as the interstate commerce act, which was to administer railways and the Sherman antitrust act, that was meant to prevent monopolies and trade cartels both of which had been passed during the preceding century did eventually come into full effect during the administrations of progressive-sympathetic presidents. In this case these were Theodore Roosevelt and Woodrow Wilson who served as presidents between 1901-1909 and 1913 -1921 respectively

      According to Amazon,[3] the first quarter of the twentieth century was characterized by a spurt in business in the country. It was also marked by progressive economic reform spearheaded by the prevailing leadership. Initially, governments used to be to as much as possible avoid direct participation in business activity involving the private sector. However, with time there was a shift in perspective. The administration of President Woodrow Wilson for instance, did embrace progressivism to a great extent. There was the heeding of progressivism’s calls for government intervention. This entailed an effort to improve society and through regulations and legislation, tried to control large corporate firms by trying to instill responsibility. The promotion of transparency and accountability were also pursued. This was in addition to promotion of competition and fair play among businesspeople through the necessary regulatory measures.

      There was the move to promote transparency and accountability in the economy through progressive activists especially in the media. Roosevelt and other leaders in various sectors of the economy led the move to improve the situation. From the year 1916, laws at various levels aimed at improving lives of the poor as a policy. Business ethics was promoted and laborer incomes gradually improved. This was in addition to environmental conservation. The general economic situation was therefore improving with increase in demand for consumer goods and with it employment. The progressive era dating from around 1900-1916 is credited with stabilization in the United States economy that enabled the country to steer away from possible turmoil as at that time.

A highly notable event of the period that significantly impacted on the economy was the onset of the First World War. This occurred in Europe as from August 1914. Officially, America was to take a neutral position in the war. Practically however, this was not the case. American banks during the period increased their lending to ally countries up to ten-fold, thus creating a major interest of the economy in the war. As from April 1917, the interest became more direct, with America being fully drawn into the war. Consequences of participation were diverse. The demand for supplies, such as clothing and food for the thousands of conscripted soldiers meant a further expansion in industry. Household incomes also rose as more people were involved in the production process. Females, who used to stay back at home for the first time ever had to go and work in factories as the number of young men reduced as they joined various military units.

Another event was a panic by bankers in 1907. According to Greenway,[4] This provided a challenge to the progress attained so far. It was characterized by many firms going into bankruptcy. This was precipitated by the collapse of the knickerbockers trust company, one of the largest in the country, panic withdrawals that led to a fall in stocks by up to fifty per cent. However, this was adequately remedied and did not leave a great dent in the economy.

‘The Roaring Twenties’ was a phenomenon that arose after the First World War. It was marked by an intermeshing between the economies of North America and those of Europe. For instance at some point, Germany was unable to make payments for war. The United States’ stock exchange had to invest in European debts because they acknowledged Europe as being a large market for American goods and a crash would hurt them too. There was an increased emphasis on technology, considered to be the solution to all challenges faced by humanity. Vehicles, radio and movies took centre stage.

Beginning from 1920 to 1925, there was full characterization of ‘The Roaring Twenties’. During this period, the economic growth characterizing the formative years of the century extended further, leading to greater prosperity of America as a country.  According to DuPont1 the previously disadvantaged lower income brackets in industry continued experiencing an increase in wage levels just like the richer classes. The greatest spurt in growth was experienced in the motor vehicle industry. More people could afford vehicles, leading to change in lifestyles. During the early to mid 1920s also, the pace and vigor of reforms reduced compared to the earlier years of the century.

 The economic prosperity of the period was fuelled by the availability of several categories of previously nonexistent goods. The national economy changed from that of war to that of peace. There was therefore a major boom. American wealth would during this period grow in leaps and bounds. Mass production became a way of life in industry and consumerism was embraced as a culture.

There were policies fronted by the republican administrations of the time that greatly boosted the boom in economy. There was for instance the Fordney-McCumber tariff that was put in place in 1922. This provided to a large extent for cushioning American trade goods from competition from outside countries. There was also the significant reduction of taxes, which would act to facilitate the domination of markets by firms.

The effect of mass production was affordability to all classes of essential goods. There was for the first time the availability of mass produced vehicles became highly commonplace on the roads. These were cheap and bearing in mind the growth in incomes, affordable to a growing segment of the population. Such a growth also affected the petroleum industry and spurred growth in it. Marketing of products was made easier with the affordability of the radio and the advertising industry was all set to flourish.

As the vehicle production industry expanded, so did the need for roads. Roads were therefore upgraded in various places. Electricity production also reached unprecedented heights, with industries switching from to it from coal.  Growth was also evident in the telecommunication as the telephone was introduced. Other previously rarely required services such as plumbing also experienced growth with materials used experiencing a rapid growth in demand. However, according to some scholars, the benefits did not really impact on African Americans, new immigrants and most of the lowest earning laborers.

In conclusion, the emergence of the United States as the dominant economic power in the world can be traced to the mid nineteenth century. Changes relating to industrial development during the time led to an agitation to improve the livelihoods of the poor in society. There were also calls for the protection of small players in the economy. Rise of the progressives in the early twentieth century and the support of their ideas by the first two administrations of the century marked a starting point for major changes that would positively impact on the economy. Legislations that had previously been ignored were implemented upon demand by the progressives. Government increased its involvement in ensuring that the peoples’ aspirations were attained.

 As a result, there was the onset of economic expansion that was further stimulated by the First World War. One of the challenges faced by the economy at the time was the banker’s panic of 1907. This caused a scare in the stock markets but did not really negate the progress that had been made at the time. By 1925, the United States was experiencing a boom, with reforms in place, increased purchasing power among workers and remarkable infrastructural development. It can therefore be said that the first twenty five years of the twentieth century marked an important stage in the development of the modern economic power that would establish the country’s rise as a world superpower.

Works Cited

Buenker, J. & Kantowcz, E. (1988) Historical Dictionary of the Progressive Era, 1890-1920.     New York: Greenwood.

DuPont, A. (1999) The A-Z of  Modern America.  New York: Routledge.

Greenway, H. (2008). ‘Greenway: The panic of 1907’, Herald Tribune. Retrieved October 14,   2008 from

            < http://www.iht.com/articles/2008/09/23/opinion/edgreenway.php>

Olson, J. (1988) Historical Dictionary of the 1920’s: From World War I to the New Deal, 1919-            1933 New York: Greenwood.




[1] The war pitted 11 southern secessionist states against the federal government.

[2] Olson, J. (1988) Historical Dictionary of the 1920’s: From World War I to the New Deal, 1919-1933 provides a concise explanation of the progressives, their agenda and influence on history.

[3] The website www.amazon.com provides details of president Wilson’s term, legacy and policies.

[4] Greenway’s article in The International Herald Tribune provides details as to the Banker’s Panic. Details are found in bibliography.

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