Friday, August 14, 2015

Before the crash -- 1927 (Part 2)

1927 GE refrigerator

If anything about the middle part of the 1920s is unique, it's that Americans had begun to imagine the future being much different from the past.

Consider the attitudes of a century earlier, most commercial investors saw the canal boat system as superior to the one that replaced it - the railroad. Life in the 1800s simply did not move very fast and the people who lived in those times adapted. Nobody, save a few eclectic authors, envisioned machines that could fly.

Somewhere during the 1880s, at least one congressman advocated closing the patent office because he said it was foolish to fund the agency because everything had been invented.

Except. ...

After the Wright brothers conquered the air and the military perfected its killing value, all bets were off.

By 1925, it was safe to dream. (It wasn't legal to drink alcohol, however.)

You could make a phone call from New York to London, though the average Whitewater valley farmer probably didn't know anybody in London, so what was the point?

The point was, those who could invest in ideas for the future stepped up in droves to do just that. They bought stock, more stock, and even more stock. And they paid for it with promisory notes that claimed that when they sold one stock for an enormous profit, they'd buy even more less-expensive stock and watch it soar through the roof.

Meanwhile, the presidency of Calvin Coolidge sustained the policies of the late Warren G. Harding (Harding died in office) ... and that was to basically let the past sort itself out in Europe. The war was over and no more were being scheduled.

As improvements in air traffic leaped forward, the nation's love affair with the automobile began to expand exponentially. People could travel now and they could spend money.

For millions of others in the underclass, poverty was like a stain on the wall. It had been there forever and was expected to remain.

But 1927 was a wonderland year.

Gerald Leinwand, in his book about 1927, explains:

"The automobile was not alone in spearheading the Coolidge prosperity. Coolidge was the first president to speak to the nation by radio."

Radio: By no means a small achievement!

By 1927, Leinwand says, about one in three American households owned a radio, which became a source of news, entertainment and a whole new concept in capitalism: mass advertising.

"Labor-saving household appliances proliferated, including the wall-mounted can opener, toasters, vacuum cleaners, heating pads, refrigerators, coffee percolators, waffle irons and washing machines."

Americans had become consumers.

Advertisers spent close to a billion dollars, employing thousands of workers ... and the assembly line factory worker found shift work abundant.

There was no ceiling and, the higher we rose, the farther below lay the floor.

The floor was very real, however. As the nation became consumer-oriented, it left behind the advice they'd probably have learned 40 years earlier: If you don't have it, do you need it?

Well, yes.

Advertising agencies and market research firms began studying the American consumer and finally decided that of the 118 million people in the country in 1927, with simple math, extracting killers in prison, kids under 12 and really poor people, that about 90 million consumers were waiting to be plucked.

But illiteracy was rampant, poverty was observable but difficult to define in areas where a barter economy produced no working labor-consumption numbers.

In short, market research worked on raw numbers. About a third of American children were not even attending school, Leinwand reveals. Nearly half were functionally illiterate.

Radio, for the good it did, shoved people farther away from reading. The motion picture industry introduced new slang and "a whole series of bad habits."

Most people who lived outside the cities didn't even have electricty. A new refrigerator was of little value.

The marketing gurus gathered macro-data, converted it to a process and assumed that "the farmer was becoming a business person."

But the farmer was not, despite the transluscent illusion. "They knew that they were not sharing in the general prosperity," Leinwand writes. Millions of farmers, as a result, left the rural areas and plodded into towns to work in industry.

As it turned out, that wasn't always the best place to make a living.

In fact, by the end of 1928, making a living was user-defined. A lot of it was on paper.

The crash was inevitable.



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