$6 billion in outstanding contracts, the federal government drastically cut overall spending in fiscal year 1919 from $18 billion to $6 billion. Domestic markets already saturated with product were additionally burdened by the relatively quick recovery throughout much of Europe, which only added to the excess. The result was an immediate slowdown in American production across the board. Total industrial output fell by one-third. As inventories piled up, prices nosedived. By 1921, wholesale prices had dropped by 37 percent, with key farm products the lowest. Investments in new factories and machinery declined precipitously, causing unemployment to rise sharply as the decline in demand for industrial workers was made worse with the decommissioning of nearly four million servicemen returning home in search of work.15 As great as war had been for American capitalism, the coming of peace brought just the opposite.
THE GREAT BOOM
The postwar downturn did not last long. As Lewis Corey would explain, a normal process of general liquidation of prices, wages, and accumulated goods quickly wiped out fixed capital. Eliminating the disproportionate accumulations of capital and goods that had caused the downturn then made possible a new phase of accumulation based on rising demand for consumer goods. Corey likened the process to “the blood-letting of medieval medicine.” The point at which the bleeding weakened the patient, who then required the first of several transfusions to regain his vigor, resembled the beginning of recovery as consumer demand rose again. But here, Corey argued, was the real challenge for leading capitalists. To satisfy rising demand for consumer goods required renewed investment in capital goods to replace equipment in old industries or for use in new industries. As Corey said, “The speed of revival and the scope of recovery and prosperity depend upon an increasing output of capital goods and the opportunities it provides for capital investment and accumulation.” On this basis industry revived and wages rose, giving workers more purchasing power. The recovery that began in 1922 set the stage for the New Era of prosperity to come, though it never would deliver its promise of uninterrupted prosperity and universal wealth.16
Yet, the aggregate numbers gave full force to those who were trumpeting its arrival. GNP climbed from $74 billion to $104 billion from the beginning of the recovery in 1921 to the stock market crash in October 1929.17 In the same period, the output of all manufactures rose 64 percent, though there were wide variations of growth within the industrial complex; for example, the petroleum and coal products industry topped all other producers with a gain of 156 percent.18 Electric motors rapidly replaced steam engines; by 1927, 70 percent of American industry was electrified.19 Automobiles and electrification, the twin pillars of growth and prosperity, fueled tremendous expansion beyond the cities with new highways that connected urban centers with new areas of concentric growth, the suburbs. By 1929, there were 26.7 million autos in use, one for every 4.6 Americans. As the automobile revolutionized transportation and redefined social existence, a range of new household appliances rolled off the assembly lines in record numbers.20 Inside the home, life became more manageable, comfortable, and leisurely. The percentage of households with flush lavatories more than doubled between 1920 and 1930, while the number of homes with radios went from zero to 40 percent. Cheap electricity facilitated new appliances that made cooking and cleaning less burdensome.21 From this remarkable surge in economic growth emerged a culture of mass consumption based on increasing purchasing power. Total U.S. income rose from $67.9 billion in 1923 to $82.4 billion in 1929, an increase of 21 percent.22
By any measure, overall economic growth between 1922 and 1929 was phenomenal. But what was behind it? Writing from the vantage point of the Depression in 1934, Corey explained that the prosperity during those years depended on rising opportunities for capital accumulation, which ultimately depended on sustaining investment and output of capital goods. This, in turn, required that the goods produced for consumers would continue selling at profitable levels. But there was a caveat. As long as sales of consumer goods kept pace with the investment and output of capital goods, capitalist accumulation would proceed on a generally upward path. On this basis, new construction (mainly commercial and industrial building) played a major role in fueling the boom, rising 31 percent. Equally important, the wholesale value of automobile output averaged over $3 billion yearly. Then again, integral to the expansion of capital goods was increasing productivity that provided more impetus for capitalists to invest in new industrial machinery and electrification. Investment in electric machinery more than doubled. Large amounts of capital were also absorbed in investment aimed at technological innovation, such as radios, motion pictures, rayon, chemicals, aviation, mechanical refrigeration, and the power laundry. All this activity came full circle to more construction of industrial and commercial structures, from factories to movie palaces to service stations. As Corey noted, the expansion of new or relatively new industries was especially significant because it required greater levels of capital investment than similar expansion in older industries.23
Driving all this was the capitalist imperative to continuously expand production, increase productivity, and create a standard of wages based on factory discipline that turned workers into consumers. Two ways to achieve these ends lay in the systematic organization of mass production and a “scientific” approach to industrial management. The first, known as Fordism because it flowed from the pioneering approach to auto production by Henry Ford, involved the division of assembly-line processes performed by workers engaged in successive stages of the manufacturing process. Based on the rational use of labor operating in systemic cohesion, production became as interchangeable as the different parts of the commodities produced, and like the parts just as easy to replace.24 But Fordism established more than a new organization of work. It was also, as the historian Michel Beaud succinctly described it,
a new model for producing the capitalist commodity (with relatively high wages for a fraction of the working class, and a strong increase in productivity due to mass production and rationalization), and a new model for realizing the value thus created (with development of mass consumption, which spread to part of the working class, whose conditions of living approached those of the middle strata).
No one saw this more clearly than Ford himself, whose managers systematized production by stationing workers on the assembly line, because, as Ford noted, “walking is not a remunerative activity” and because even the “most stupid man” could learn his one defined task in a couple of days. In 1926, 79 percent of the workers in all of Ford’s factories went through less than a week of training. But for this level of skill, Ford began paying his workers $5 per day and lowered the working day from nine to eight hours. The daily wage continued to go up, to $6 in 1919 and $7 in 1929.25
As Fordism became the norm in mass production, industrialists recognized the need for a more disciplined worker who had a better grasp of the job and therefore was more capable of adhering to the dictates of “scientific management.” This approach, according to the historian Tom Kemp, was implicit in the ideas of “Taylorism,” which sought to give management undisputed control over the workplace and consequently the leverage it believed it needed to mitigate the influence of unions and the tendency of workers to control their own labor processes. According to Kemp, these efforts did not entirely succeed. “Workers did not give up trying to enforce their concept of work.”26
The benefits derived from these rational approaches to production made U.S. corporations like Ford, DuPont, and General Electric global models of capitalist enterprise. Turning the least skilled worker into a highly efficient cog in the wheels of production was no mean accomplishment, especially if it justified paying higher wages just so the worker could buy what he made. In the end, however, industrial capitalist ownership reaped the benefits of rising productivity. According to George Soule, output per man-hour in industrial production grew 32 percent from 1923 to 1929, which resulted in lower labor costs but not higher wages. Instead, for much of the decade, the biggest rise in income from productivity increases went to stockholders, whose dividends rose to 65 percent by 1929.27 The rich got richer. But the disparity carried ominous consequences for the future, though hardly anyone cared.
Meanwhile, U.S. capitalism
