*** automobile car United States America economic importance inter-war era

The Automobile and America: Economic Importance--Inter-War Era (1920s-30s)

American family car
Figure 1.--Henry Ford and his Model-T Tin Lizzie opened an unexploited niche in the American market. He was the first auto maker to mass produce an automoblile. As a resuklt the Fird Motir Comopany dominted the markt in he 1910s. American comsumers soon began demanding more sych as colors other ghan blaxck and stylistic changes. Ford resisted this. His attutude was that he had reached perfection and and that changes for mere stylistic reasons were unreasonanle distractions. This gave competiors the opportnity to eat into Ford's market dominance resulting in the Big Three--Ford, General Motors, and Chrysler. Here we see a Chrysler from the early-20s with stylistic changes that Fird resisted.

In a little more than a decade in the 1920s, the American automobile industry was becoming one of the largest industries in the country. Passenger car production increased from less than 0.2 million (1910) to 4.5 million (1929). The consequences of this were enormous. To produce 4.5 million cars, the American heavy industry had to expand to build these cars. There was an enormous growth of the steel industry--the rock bed of an industrial economy. The same was true in other areas such as copper and rubber and other elements of heavy industry. The United States developed the largest industrial economy in the world (late-19th century). But largely thanks to Henry Ford and the automobile, the American economy was not just the great industrial power, it had the industrial capacity approaching that of much of Europe. Precise estimates on the world economy are complicated, but economists estimate that the American economy was larger than that of Britain, France, and Germany combined. 【Harrison】 This huge America industrial dominance would play a major role in the direction of the 20th Century, especially World War I, World War II, and the Cold War. This was because European countries continued to be focused on making expensive cars for the well-to-do. This mean that they only made small numbers of cars. And the industry had a minimal impact on the economy. Owning an automobile was beyond the dreams of most European workers. And automobiles did not just create industrial jobs, there were jobs for retail and service operations, including car dealerships, filling stations, repair shops, and tire and automobile accessories stores. In addition, the automobile affected other industries. Trucks for example reduced the cost of moving goods. The automobile helped increase agriculture productivity, not only by creating tractors, but by improving the transport of farm equipment and supplies like fertilizer and improving farm life by providing greater access to city markets, stores, and entertainment. The automobile was at the heart of the Roaring Twenties. Ford dominated the automobile industry. But his intransigent resistance to non-mechanical innovation such as color and styling, opened the way for competitors like General Motors and Chrysler--the Big Three. The American automobile industry was centered in Michigan, but gradually began to spread out.

The 1920s

The automobile sector was of huge economic importance. No invention so affected American life and the history of the 20th century more than the automobile--especially Henry Ford's Tin Lizzie. Ford after World War I was producing half of the automobiles in America. Ford had very definitive ideas about producing his cars. His focus was on reducing production costs. He was less interested in what the public wanted. Options were an anthma, increasing prioductiion osts. He fmously said that public could choose whatever color car they wanted — so long as it was black. There were over 8 million Ford registrations by 1920. And regisdtrations contuinued to grow from there, reaching 23 million by the end of the decade. Ford was more than half of all the cars in the world at the time. Ford made a serious mistake at the time. He thought with his succes that he could ignore consumer demand. His competitoes, especially General Motors were able to break into Ford's dominance by, in contrasdt to Ford, castering to consumer demand including flashy new models. Thry began offering colors and oher consumer amernities. This began the tradition of annual model changes. The 1920s has been called, the style-conscious luxury decade. Ford would have to evntually do the same. He didn't like it becasuse options and annual model changes cost money snd made entailed productions costs, but he had to bend to conumer demand. Th industry becasme dominasted by the Big Three--Ford, GM, and Chrysler. (Ford and GM had about a third of the market each. The other third was smaller compnies with Chrisler the lsrgest.) The automotive indusdtry was the driving force of the Roaring Twenties. People were making money in the expanding industrisl economy and wanted to spend it. And a major item they wanted was a flashy new car. Even Ford had to fall in line. We see large, powerful, fast cars coming on the market, dripping with amenities and chrome trim. They became a mist hjsve for the well-to-do, including gangsters like Al Capone. Cars like the Duesenberg epitomized the era. The automobile industry was not important only by itself. It created while nbew industries and expanded existing industries. The rubber indstry in particulsr hd to be expanded, vucanized rubber was needed in large quantity. Cars used far more rubber than bicycles. And the internal combustion engine demanded enormous quantities of gasoline leading to a major expansion of the petro-chemical industry. Highay construction became a major industry as car owners demanded improved and well-designed roads. We also see gas stations, motels/motor-lodges, road-side diners springing up all asround the country. Metal industries expanded, including aluminum, chrome, copper, steel, and others. The automobile industry was the major mover. The automobile had become commonplace in America by the end of the decasde. Then Wall Street ceashed -- Black Tuesday (October 1929).

The 1930s

After two decades of rapid growth, the market for autmobiles collapsed with the Wall Street crash. The automotive industry was industry was among the sectors most adversely affected by the Depression. It was not so much the Wall Stree Crash. It was Governmen policies. The Federal Reserve and the Government turned a normal market decline into the Great Depression. By 1932, automobile sales hade plummeted by an incredable 75 percent. The industry reported an astonishing loss of over $190 millionn --an astonishing sum in 1932. By that time, unemployment was at record levels and banks and other business had begin to fail. Intereatingly GM and Chrrysler did a good job of weathering the storm. GM actually reported a profit in every year of the Great Depression. Chrysler did nearly as well, only reporting a loss in one year snd increasing their market share. Workers and suppliers did less well, but GM and Chrysler remained profitable. Part of their success was shifting to smaller less expensive models. Ther luxury end of the market collapsed, but did not disappear. Ford’s market share was permanently eroded and most smaller competitors had to close down. Ford did less well and msny smaller companies closed down. 【Rhodes and Stelter】 The 1930s saw a renewed focus on engineering--the mechanical chsrscteristics. Many imprtant innovations appeared in the 1930s and had become standard euipment by the end of the decade. We see synchromesh transmissions (for smooer shifting), low-pressure balloon tires, automatic chokes, built-in trunks, hydraulic brakes, and gear shifts on the steering columns known as 'stick-on-a-tree'. Heaters and radios appeared. There was a decided shift in styling, but it was a utilitarian change. Cars by mid-decade had made the transition, becoming smoother aerodynamic shapes as oppoosed to the boxy shapes of the 1920s. Chrysler even came up with the Airflow (1934). President Roosevelt's New Deal stabilized the economy, but there was no significant recovery until the end of the decade. The New Deal had little to do with the recovery,. In fact, the Roosevekt Recession undid some of the progress that had ben made. Whast did stimulate the economy was orders from Europe as Hitler began his aggresive moves. Curiosly, quite a number of the unemployed owned cars. This was especially the case on the Southern Plains where the Dust Bowl drove many farm families from their farms. People from Oklahonma and west Texas became known as the 'Okies' as they sttempted to ft to Oklahoma. Humorous/ social commentator Will Rogers quipped, "America was the first country to go to the poor house in the auromobile." The mass production of cars was still largely an American phenomenon, but Europe had made progress (mostly Britain and Francee). Germany had notably made little progress. The German commitment to high-quality manufacturing was an impediment to shifting to mass production. The American manufacturing industry in contrast had perfected mass production. And the asutomobile industry reported its first good year since the onset of the Depression, churning out sleek new cars using huge quantites of alluminim, chrome, copper, steel, and other ctritical metals (1939). While Detroit was only producing a fraction of its pre-Depression output, the plants and equiopmnt still existed meaning production could be rapidly expnded, creating what would become the great Arsenl of Democracy, the term coined by President Roosevelt in one of his most important Fire Side Chats (1940).


Harrison, Mark. "The economics of World War II: An overview," in "The Economics of World War II: Six Great Powers" in Mark Harrison, ed. International Comparison (Cambridge: Cambridge University Press, 1998).

Maddison, Angus. Contours of the World Economy, 1-2030 AD

Rhodes, David and Daniel Stelter. "How automakers accelerated out of the Great Depression," ECG (February 16, 2010).

Roberts, Andrew. A History of the English Speaking People--Simce 1900


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Created: 8:30 AM 5/29/2024
Last updated: 8:30 AM 5/29/2024