The American Dream and the Capitalist Boom (Grade 11 NSC Matric History): Revision Notes

The American Dream and the Capitalist Boom

What was the American Dream?

The American Dream was a powerful concept that attracted millions of people to the United States, promising that anyone could achieve success through hard work and determination. This dream had several key components that made America seem like a land of unlimited opportunity.

The promise of the American Dream

The American Dream emerged from stories of immigrants who went from "rags to riches" through their own efforts. It embodied the spirit of rugged individualism, where people believed they could make their own fortunes through hard work and entrepreneurship. This gave both Americans and potential immigrants great optimism, suggesting that all people could succeed and achieve happy, prosperous lives.

The dream traced back to America's first settlers in the 1600s, who came seeking:

• Land ownership opportunities
• Prosperous business ventures
• Religious freedoms

The reality behind the dream

However, American reality was quite different from the dream. Inequalities based on class, race and ethnic origin meant that many people remained poor and unsuccessful, despite the promise that hard work alone could guarantee success. This gap between the dream and reality would become particularly evident during the economic boom of the 1920s.

Understanding the capitalist boom of the 1920s

The 1920s boom revealed both America's economic strengths and weaknesses. As President Herbert Hoover declared, Americans were "nearer the final triumph over poverty than ever before in the history of mankind." This boom was driven by several interconnected factors.

Republican impact on the US economy

The Republican government of the 1920s introduced pro-capitalist policies that strongly favoured business interests over workers' rights:

Tax policies and tariffs:

• Tax deductions that particularly benefited wealthy Americans
• Encouraging businessmen to invest capital in factories producing new inventions like radios, cars, and refrigerators
• Entrepreneurs could keep most of their profits from investments
• High import tariffs were introduced to protect American producers from foreign competition

The role of technology and advertising

Technology transformed the American economy in two crucial ways during the 1920s.

Advertising revolution: Traditional American values emphasised thrift and saving, but advertising dramatically changed consumer attitudes. The new approach promoted spending as desirable, introducing credit and instalment plans that allowed people to buy luxury goods they couldn't immediately afford. This shift in values drove massive increases in consumer goods sales.

Stock Exchange speculation and investment

The New York Stock Exchange on Wall Street became central to the economic boom. As industries prospered, share values rose, attracting investors who made money through speculation.

This speculative bubble meant that many people were "trading on the margin" - if share prices continued rising, profits were made, but if they fell, investors could lose vast amounts of money.

Impact of trade policies

Trade tariffs were designed to encourage local production by making imported goods expensive for ordinary Americans. The goal was to force Americans to buy American-produced goods instead of foreign alternatives.

Wages, monopolies, and labour relations

The boom created mixed results for American workers:

Wage changes:

• Real wages rose for most workers
• However, wages for miners and textile workers actually dropped
• Technological advances created some new jobs but also destroyed others
• Automation in older industries meant fewer workers were needed

Monopoly power: Large companies became extremely powerful, with one huge company dominating the steel industry. US Steel had no competitors, giving workers no choice but to work for them. These monopolies banned trade unions and kept wages low, resulting in high prices for consumers.

Agricultural overproduction crisis

While industry boomed, agriculture faced serious problems that affected millions of Americans.

Technological impact on farming: New inventions like machinery, tractors, and combine harvesters caused farm production to increase dramatically just as prices were falling. This overproduction led to reduced prices for farm produce.

Impact on rural communities: Agriculture was one of the largest sectors of the US economy in the 1920s:

• Approximately half of Americans lived in rural areas
• Most either lived on farms or worked in businesses supplying farm machinery
• Problems affected millions of people
• The worst affected were farm labourers and sharecroppers
• Nearly 6 million people were forced off farms
• Unskilled workers migrated to cities, creating large-scale unemployment

Many workers from the Midwest moved to California, hoping to find work as farm labourers. The introduction of synthetic fibres also impacted cotton plantations, though farmers growing luxury produce were less affected. Wealthy Americans' demand for fresh vegetables and fruit throughout the year meant supply to cities rose steadily.

The overall impact of the 1920s boom

The boom created a complex economic situation with both benefits and serious problems.

Economic expansion: The boom was based on a cycle where:

• Factories would keep producing goods
• Consumers would keep buying products
• This created continuous economic growth

Growing inequality: The boom created massive wealth disparities:

• Huge profits went to big businesses and industry owners
• The top 5% of wealthy Americans received one-third of all personal income in the country
• 60% of Americans earned just enough for bare essentials
• This led to unemployment and poverty affecting all racial and ethnic groups

The wealth during the 1920s was not evenly spread, creating "two separate Americas" - one prosperous and one struggling. Farmers and farm workers were particularly not prosperous, and many rural families lived in poverty.