Changes in Economy in the Period of Roaring Twenties

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The wealth and luxury of the Roaring Twenties caused many people to forget to criticize the “evil” large corporations and forget about the overworked, underpaid workers.

During the Presidencies of Theodore Roosevelt and Woodrow Wilson, the federal government cracked down on large corporations and strictly “anti-business.” Known as the trust-buster, Theodore Roosevelt “restored” the Sherman Antitrust Act by busting the Northern Securities Company. The Northern Securities Company was simultaneously owned by the Great Northern, Northern Pacific, and the Chicago, Burlington and Quincy Railroads since the owners of these railroad companies decided to buy stock from all three companies in order to allow all three companies to enjoy the profits gained. Theodore Roosevelt would go onto bust Standard Oil Trust and the American Tobacco Company as well.

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During President Warren Harding’s term, the atmosphere changed and ushered in a pro-business atmosphere into the federal government. Secretary of Treasury Mellon and others in the Harding Administration wanted to benefit the rich through their policies. Mellon proposed eliminating inheritance taxes, reducing the tax on high incomes by two-thirds, and opposed lowering taxes for people earning less than $66,000 a year. Though Mellon could not get his extremely radical ideas across in Congress, he was able to receive a compromise in the Revenue Act of 1926. The Act called for lower tax rates for the rich, lower estate taxes, and a repeal of the gift tax (Shi 921). According to this “Tickle Down” economics, the idea was to stimulate the economy by stimulating the supply side of the economy or the capitalists/wealthy, because they had enough money to hire other people to do work.

The Roaring Twenties also ushered in a time of very high tariffs in order to protect American industries from foreign competitors. The Fordney-McCumber Tariff of 1922 increased the rates of chemical and metal products that predominately came from Germany to 38.5%!

Federal agencies that were meant to “regulate” large business during the Progressive Era radically changed their policies during the Roaring Twenties. The Interstate Commerce Commission, which during the Progressive Era regulated railroads, tried to ensure fair rates and eliminate price discrimination became a “business-friendly” government agency.

The introduction of muckraking journalism exposed many of the ills of large business and the terrible working conditions of workers.

Though during the 1920s, American workers were paid much better than in other countries and experienced an average of twenty percent wage increase between 1921 and 1928, workers’ unions faced severe setbacks (Tindall and Shi 933). Employers started requiring “yellow dog” contracts, contracts where workers agreed to not be members as unions, as a way to “control” workers. The use of labor spies, worker blacklists, and other tactics used to intimidate and repress workers were used more often.

Though overall beneficial to workers, “welfare capitalism” also led to the decline of unions. Companies practicing “welfare capitalism” would offer their employees health programs, recreational activities, and even share some of the company profits (Shi 934). In Chicago, the Western Electric Company found out that its settlement houses were of low-quality so instead they offered recreational activities such as golf, baseball, tennis, bowling, and dance to its employees (“Welfare”). Companies practicing “welfare capitalism” weren’t necessarily well-intentioned, because most of the activities and bonuses they offered just were tactics to deter unionization. In 1920, U.S. unions yielded 5 million members, but by 1929, U.S. unions dropped to 3.5 million members (Shi 934).

In cases such as Bailey v. Drexel Furniture Company (1922) and Adkins v. Children’s Hospital (1923), the Supreme Court ultimately failed those who were passionate about the labor reform movement. In 1919, Congress hoped to slowly reform child labor by enacting the Child Labor Tax Law, forcing companies who employed children under the age of fourteen to pay taxes equal to ten percent of their profit. When the U.S. government found out that the Drexel Furniture Company in Drexel, North Carolina violated the law by underreporting their profits while still employing children under the age of fourteen, the U.S. government demanded that the Drexel Furniture Company pay them $6,000. The Drexel Furniture Company took their case all the way up to the Supreme Court in Bailey v. Drexel Furniture Company (1922). In the case, the Supreme Court ruled that the Drexel Furniture Company did not have to pay the $6,000, because the Child Labor Tax Law violated the Constitution, because it intruded on states’ rights to regulate child labor codes (“Bailey”).

In Adkins v. Children’s Hospital and Children‘s Hospital v. Lyons (1923), the Supreme Court further downplayed labor reform by refusing minimum wages for women and children in Washington, D.C. In 1918, Congress enacted a law which guaranteed a minimum wage for women and children who were employed in Washington, D.C. Considering the freedom of individuals to make contracts, the Supreme Court declared the law unconstitutional (“Adkins”).

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