What was the gnp in 1929

But the growing size of businesses was one of the convenient scapegoats upon which to blame the Great Depression. However, the rise of large manufacturing firms in the interwar period is not so easily interpreted as an attempt to monopolize their industries. Some of the growth came about through vertical integration by the more successful manufacturing firms.

Livesay and Porter suggested a number of reasons why firms chose to integrate forward. In some cases they had to provide the mass distribution facilities to handle their much larger outputs; especially when the product was a new one. The complexity of some new products required technical expertise that the existing distribution system could not provide.

The producers of automobiles, petroleum, typewriters, sewing machines, and harvesters were typical of those manufacturers that integrated all the way into retailing. In some cases, increases in industry concentration arose as a natural process of industrial maturation.

Of the several thousand companies that had produced cars prior to , were still doing so then, but Ford and General Motors were the clear leaders, together producing nearly 70 percent of the cars.

During the twenties, several other companies, such as Durant, Willys, and Studebaker, missed their opportunity to become more important producers, and Chrysler, formed in early , became the third most important producer by Many went out of business and by only 44 companies were still producing cars.

The Great Depression decimated the industry. Dozens of minor firms went out of business. Ford struggled through by relying on its huge stockpile of cash accumulated prior to the mids, while Chrysler actually grew.

By , only eight companies still produced cars—GM, Ford, and Chrysler had about 85 percent of the market, while Willys, Studebaker, Nash, Hudson, and Packard shared the remainder. The rising concentration in this industry was not due to attempts to monopolize.

As the industry matured, growing economies of scale in factory production and vertical integration, as well as the advantages of a widespread dealer network, led to a dramatic decrease in the number of viable firms.

Chandler, and ; Rae, ; Bernstein, It was a similar story in the tire industry. The increasing concentration and growth of firms was driven by scale economies in production and retailing and by the devastating effects of the depression in the thirties. Although there were firms in , 5 firms dominated the industry—Goodyear, B.

Goodrich, Firestone, U. During the twenties, firms left the industry while 66 entered. The share of the 5 largest firms rose from 50 percent in to 75 percent in During the depressed thirties, there was fierce price competition, and many firms exited the industry.

By there were 30 firms, but the average employment per factory was 4. French, and ; Nelson, ; Fricke, The steel industry was already highly concentrated by as U. Steel had around 50 percent of the market. But U. However, the initiation of the National Recovery Administration NRA codes in required the firms to cooperate rather than compete, and Baker argues that this constituted a training period leading firms to cooperate in price and output policies after McCraw and Reinhardt, ; Weiss, ; Adams, A number of the larger firms grew by merger during this period, and the second great merger wave in American industry occurred during the last half of the s.

Figure 10 shows two series on mergers during the interwar period. The FTC series included many of the smaller mergers. The series constructed by Carl Eis only includes the larger mergers and ends in Stigler, This merger wave created many larger firms that ranked below the industry leaders.

Much of the activity in occurred in the banking and public utilities industries. Markham, In manufacturing and mining, the effects on industrial structure were less striking. Eis found that while mergers took place in almost all industries, they were concentrated in a smaller number of them, particularly petroleum, primary metals, and food products.

In the s there was relatively little activity by the Justice Department, but after the Great Depression the New Dealers tried to take advantage of big business to make business exempt from the antitrust laws and cartelize industries under government supervision. Though minor amendments were later enacted, the primary changes after that came in the enforcement of the laws and in swings in judicial decisions. Their two primary areas of application were in the areas of overt behavior, such as horizontal and vertical price-fixing, and in market structure, such as mergers and dominant firms.

Horizontal price-fixing involves firms that would normally be competitors getting together to agree on stable and higher prices for their products. As long as most of the important competitors agree on the new, higher prices, substitution between products is eliminated and the demand becomes much less elastic.

Thus, increasing the price increases the revenues and the profits of the firms who are fixing prices.

Vertical price-fixing involves firms setting the prices of intermediate products purchased at different stages of production.

It also tends to eliminate substitutes and makes the demand less elastic. Price-fixing continued to be considered illegal throughout the period, but there was no major judicial activity regarding it in the s other than the Trenton Potteries decision in In that decision 20 individuals and 23 corporations were found guilty of conspiring to fix the prices of bathroom bowls. The evidence in the case suggested that the firms were not very successful at doing so, but the court found that they were guilty nevertheless; their success, or lack thereof, was not held to be a factor in the decision.

Scherer and Ross, Though criticized by some, the decision was precedent setting in that it prohibited explicit pricing conspiracies per se. The Justice Department had achieved success in dismantling Standard Oil and American Tobacco in through decisions that the firms had unreasonably restrained trade.

These were essentially the same points used in court decisions against the Powder Trust in , the thread trust in , Eastman Kodak in , the glucose and cornstarch trust in , and the anthracite railroads in The criterion of an unreasonable restraint of trade was used in the and decisions that found the American Can Company and the United Shoe Machinery Company innocent of violating the Sherman Act; it was also clearly enunciated in the U.

Steel decision. This became known as the rule of reason standard in antitrust policy. A series of court decisions in the twenties and thirties further reduced the possibilities of Justice Department actions against mergers. The search for energy and new ways to translate it into heat, light, and motion has been one of the unending themes in history. From whale oil to coal oil to kerosene to electricity, the search for better and less costly ways to light our lives, heat our homes, and move our machines has consumed much time and effort.

The energy industries responded to those demands and the consumption of energy materials coal, oil, gas, and fuel wood as a percent of GNP rose from about 2 percent in the latter part of the nineteenth century to about 3 percent in the twentieth. Changes in the energy markets that had begun in the nineteenth century continued. The evolution of energy sources for lighting continued; at the end of the nineteenth century, natural gas and electricity, rather than liquid fuels began to provide more lighting for streets, businesses, and homes.

In the twentieth century the continuing shift to electricity and internal combustion fuels increased the efficiency with which the American economy used energy. These processed forms of energy resulted in a more rapid increase in the productivity of labor and capital in American manufacturing.

From to , output per labor-hour increased at an average annual rate of 1. The productivity of capital had fallen at an average annual rate of 1. As discussed above, the adoption of electricity in American manufacturing initiated a rapid evolution in the organization of plants and rapid increases in productivity in all types of manufacturing.

The change in transportation was even more remarkable. Internal combustion engines running on gasoline or diesel fuel revolutionized transportation. Trucking began eating into the freight carried by the railroads. These developments brought about changes in the energy industries. Coal mining became a declining industry. As Figure 11 shows, in the share of petroleum in the value of coal, gas, and petroleum output exceeded bituminous coal, and it continued to rise.

These changes, especially the declining coal industry, were the source of considerable worry in the twenties. Income in the industry declined, and bankruptcies were frequent. Strikes frequently interrupted production. Anthracite or hard coal output was much smaller during the twenties. Real coal prices rose from to , and bituminous coal prices fell sharply from then to Figure 12 Coal mining employment plummeted during the twenties. Annual earnings, especially in bituminous coal mining, also fell because of dwindling hourly earnings and, from on, a shrinking workweek.

Figure The sources of these changes are to be found in the increasing supply due to productivity advances in coal production and in the decreasing demand for coal. The demand fell as industries began turning from coal to electricity and because of productivity advances in the use of coal to create energy in steel, railroads, and electric utilities.

Keller, In the generation of electricity, larger steam plants employing higher temperatures and steam pressures continued to reduce coal consumption per kilowatt hour. Similar reductions were found in the production of coke from coal for iron and steel production and in the use of coal by the steam railroad engines.

Rezneck, All of these factors reduced the demand for coal. Productivity advances in coal mining tended to be labor saving. Mechanical cutting accounted for By the middle of the twenties, the mechanical loading of coal began to be introduced. Between and , output per labor-hour rose nearly one third in bituminous coal mining and nearly four fifths in anthracite as more mines adopted machine mining and mechanical loading and strip mining expanded.

The increasing supply and falling demand for coal led to the closure of mines that were too costly to operate. A mine could simply cease operations, let the equipment stand idle, and lay off employees.

When bankruptcies occurred, the mines generally just turned up under new ownership with lower capital charges. When demand increased or strikes reduced the supply of coal, idle mines simply resumed production. As a result, the easily expanded supply largely eliminated economic profits. The average daily employment in coal mining dropped by over , from its peak in , but the sharply falling real wages suggests that the supply of labor did not fall as rapidly as the demand for labor. Soule notes that when employment fell in coal mining, it meant fewer days of work for the same number of men.

Social and cultural characteristics tended to tie many to their home region. The local alternatives were few, and ignorance of alternatives outside the Appalachian rural areas, where most bituminous coal was mined, made it very costly to transfer out.

In contrast to the coal industry, the petroleum industry was growing throughout the interwar period. By the thirties, crude petroleum dominated the real value of the production of energy materials. As Figure 14 shows, the production of crude petroleum increased sharply between and , while real petroleum prices, though highly variable, tended to decline.

The growing demand for petroleum was driven by the growth in demand for gasoline as America became a motorized society. The production of gasoline surpassed kerosene production in The development of oil burners in the twenties began a switch from coal toward fuel oil for home heating, and this further increased the growing demand for petroleum.

The growth in the demand for fuel oil and diesel fuel for ship engines also increased petroleum demand. But it was the growth in the demand for gasoline that drove the petroleum market. The decline in real prices in the latter part of the twenties shows that supply was growing even faster than demand. The discovery of new fields in the early twenties increased the supply of petroleum and led to falling prices as production capacity grew. The Santa Fe Springs, California strike in initiated a supply shock as did the discovery of the Long Beach, California field in New discoveries in Powell, Texas and Smackover Arkansas further increased the supply of petroleum in New supply increases occurred in to with petroleum strikes in Seminole, Oklahoma and Hendricks, Texas.

The supply of oil increased sharply in to with new discoveries in Oklahoma City and East Texas. Each new discovery pushed down real oil prices, and the prices of petroleum derivatives, and the growing production capacity led to a general declining trend in petroleum prices. McMillin and Parker argue that supply shocks generated by these new discoveries were a factor in the business cycles during the s.

The supply of gasoline increased more than the supply of crude petroleum. In a chemist at Standard Oil of Indiana introduced the cracking process to refine crude petroleum; until that time it had been refined by distillation or unpressurized heating. In the heating process, various refined products such as kerosene, gasoline, naphtha, and lubricating oils were produced at different temperatures.

It was difficult to vary the amount of the different refined products produced from a barrel of crude. The cracking process used pressurized heating to break heavier components down into lighter crude derivatives; with cracking, it was possible to increase the amount of gasoline obtained from a barrel of crude from 15 to 45 percent.

In the early twenties, chemists at Standard Oil of New Jersey improved the cracking process, and by it was possible to obtain twice as much gasoline from a barrel of crude petroleum as in The petroleum companies also developed new ways to distribute gasoline to motorists that made it more convenient to purchase gasoline. Prior to the First World War, gasoline was commonly purchased in one- or five-gallon cans and the purchaser used a funnel to pour the gasoline from the can into the car.

These spread rapidly, and by gasoline companies were beginning to introduce their own filling stations or contract with independent stations to exclusively distribute their gasoline. Increasing competition and falling profits led filling station operators to expand into other activities such as oil changes and other mechanical repairs.

Though the petroleum firms tended to be large, they were highly competitive, trying to pump as much petroleum as possible to increase their share of the fields. This, combined with the development of new fields, led to an industry with highly volatile prices and output. Firms desperately wanted to stabilize and reduce the production of crude petroleum so as to stabilize and raise the prices of crude petroleum and refined products.

Unable to obtain voluntary agreement on output limitations by the firms and producers, governments began stepping in. Led by Texas, which created the Texas Railroad Commission in , oil-producing states began to intervene to regulate production. The purpose was as much to stabilize and reduce production and raise prices as anything else, although generally such laws were passed under the guise of conservation. Although the federal government supported such attempts, not until the New Deal were federal laws passed to assist this.

By the mid s the debate over the method by which electricity was to be transmitted had been won by those who advocated alternating current. The reduced power losses and greater distance over which electricity could be transmitted more than offset the necessity for transforming the current back to direct current for general use.

Widespread adoption of machines and appliances by industry and consumers then rested on an increase in the array of products using electricity as the source of power, heat, or light and the development of an efficient, lower cost method of generating electricity.

General Electric, Westinghouse, and other firms began producing the electrical appliances for homes and an increasing number of machines based on electricity began to appear in industry. The problem of lower cost production was solved by the introduction of centralized generating facilities that distributed the electric power through lines to many consumers and business firms.

Though initially several firms competed in generating and selling electricity to consumers and firms in a city or area, by the First World War many states and communities were awarding exclusive franchises to one firm to generate and distribute electricity to the customers in the franchise area.

Bright, ; Passer, The electric utility industry became an important growth industry and, as Figure 15 shows, electricity production and use grew rapidly. Generally these court decisions favored the reproduction cost basis. Because of the difficulty and cost in making these calculations, rates tended to be in the hands of the electric utilities that, it has been suggested, did not lower rates adequately to reflect the rising productivity and lowered costs of production.

The utilities argued that a more rapid lowering of rates would have jeopardized their profits. Whether or not this increased their monopoly power is still an open question, but it should be noted, that electric utilities were hardly price-taking industries prior to regulation.

Mercer, In fact, as Figure 16 shows, the electric utilities began to systematically practice market segmentation charging users with less elastic demands, higher prices per kilowatt-hour. The changes in the energy industries had far-reaching consequences. The coal industry faced a continuing decline in demand. Even in the growing petroleum industry, the periodic surges in the supply of petroleum caused great instability. In manufacturing, as described above, electrification contributed to a remarkable rise in productivity.

The transportation revolution brought about by the rise of gasoline-powered trucks and cars changed the way businesses received their supplies and distributed their production as well as where they were located. The suburbanization of America and the beginnings of urban sprawl were largely brought about by the introduction of low-priced gasoline for cars. The American economy was forever altered by the dramatic changes in transportation after The advent of low-cost personal transportation led to an accelerating movement of population out of the crowded cities to more spacious homes in the suburbs and the automobile set off a decline in intracity public passenger transportation that has yet to end.

Massive road-building programs facilitated the intercity movement of people and goods. Trucks increasingly took over the movement of freight in competition with the railroads. New industries, such as gasoline service stations, motor hotels, and the rubber tire industry, arose to service the automobile and truck traffic. With the end of the First World War, a debate began as to whether the railroads, which had been taken over by the government, should be returned to private ownership or nationalized.

The voices calling for a return to private ownership were much stronger, but doing so fomented great controversy. Many in Congress believed that careful planning and consolidation could restore the railroads and make them more efficient. The ICC was allowed to prescribe exact rates that were to be set so as to allow the railroads to earn a fair return, defined as 5.

To maintain fair competition between railroads in a region, all roads were to have the same rates for the same goods over the same distance. With the same rates, low-cost roads should have been able to earn higher rates of return than high-cost roads. To handle this, a recapture clause was inserted: any railroad earning a return of more than 6 percent on the fair value of its property was to turn the excess over to the ICC, which would place half of the money in a contingency fund for the railroad when it encountered financial problems and the other half in a contingency fund to provide loans to other railroads in need of assistance.

In order to address the problem of weak and strong railroads and to bring better coordination to the movement of rail traffic in the United States, the act was directed to encourage railroad consolidation, but little came of this in the s. In order to facilitate its control of the railroads, the ICC was given two additional powers.

The first was the control over the issuance or purchase of securities by railroads, and the second was the power to control changes in railroad service through the control of car supply and the extension and abandonment of track.

The control of the supply of rail cars was turned over to the Association of American Railroads. Few extensions of track were proposed, but as time passed, abandonment requests grew. The ICC, however, trying to mediate between the conflicting demands of shippers, communities and railroads, generally refused to grant abandonments, and this became an extremely sensitive issue in the s.

As indicated above, the premises of the Transportation Act of were wrong. Railroads experienced increasing competition during the s, and both freight and passenger traffic were drawn off to competing transport forms.

Passenger traffic exited from the railroads much more quickly. As the network of all weather surfaced roads increased, people quickly turned from the train to the car. Harmed even more by the move to automobile traffic were the electric interurban railways that had grown rapidly just prior to the First World War. Hilton-Due, Not surprisingly, during the s few railroads earned profits in excess of the fair rate of return.

The use of trucks to deliver freight began shortly after the turn of the century. Before the outbreak of war in Europe, White and Mack were producing trucks with as much as 7.

Most of the truck freight was carried on a local basis, and it largely supplemented the longer distance freight transportation provided by the railroads. However, truck size was growing. In Trailmobile introduced the first four-wheel trailer designed to be pulled by a truck tractor unit. During the First World War, thousands of trucks were constructed for military purposes, and truck convoys showed that long distance truck travel was feasible and economical.

The use of trucks to haul freight had been growing by over 18 percent per year since , so that by intercity trucking accounted for more than one percent of the ton-miles of freight hauled. As early as , the National Association of Railroad and Utilities Commissioners issued a call for the regulation of motor carriers in general. In the ICC called for federal regulation of buses and in extended this call to federal regulation of trucks.

Most states had began regulating buses at the beginning of the s in an attempt to reduce the diversion of urban passenger traffic from the electric trolley and railway systems.

However, most of the regulation did not aim to control intercity passenger traffic by buses. As the network of surfaced roads expanded during the twenties, so did the routes of the intercity buses. In a number of smaller bus companies were incorporated in the Greyhound Buslines, the carrier that has since dominated intercity bus transportation.

Walsh, A complaint of the railroads was that interstate trucking competition was unfair because it was subsidized while railroads were not. All railroad property was privately owned and subject to property taxes, whereas truckers used the existing road system and therefore neither had to bear the costs of creating the road system nor pay taxes upon it.

Beginning with the Federal Road-Aid Act of , small amounts of money were provided as an incentive for states to construct rural post roads. Dearing-Owen, However, through the First World War most of the funds for highway construction came from a combination of levies on the adjacent property owners and county and state taxes.

The monies raised by the counties were commonly 60 percent of the total funds allocated, and these primarily came from property taxes. In Oregon pioneered the state gasoline tax, which then began to be adopted by more and more states.

A highway system financed by property taxes and other levies can be construed as a subsidization of motor vehicles, and one study for the period up to found evidence of substantial subsidization of trucking. Herbst-Wu, However, the use of gasoline taxes moved closer to the goal of users paying the costs of the highways.

Neither did the trucks have to pay for all of the highway construction because automobiles jointly used the highways. Highways had to be constructed in more costly ways in order to accommodate the larger and heavier trucks. Ideally the gasoline taxes collected from trucks should have covered the extra or marginal costs of highway construction incurred because of the truck traffic. Gasoline taxes tended to do this.

The American economy occupies a vast geographic region. Because economic activity occurs over most of the country, falling transportation costs have been crucial to knitting American firms and consumers into a unified market. Throughout the nineteenth century the railroads played this crucial role. Because of the size of the railroad companies and their importance in the economic life of Americans, the federal government began to regulate them. But, by it appeared that the railroad system had achieved some stability, and it was generally assumed that the post-First World War era would be an extension of the era from to Nothing could have been further from the truth.

Communications had joined with transportation developments in the nineteenth century to tie the American economy together more completely. As the cost of communications fell and information transfers sped, the development of firms with multiple plants at distant locations was facilitated. The interwar era saw a continuation of these developments as the telephone continued to supplant the telegraph and the new medium of radio arose to transmit news and provide a new entertainment source.

Telegraph domination of business and personal communications had given way to the telephone as long distance telephone calls between the east and west coasts with the new electronic amplifiers became possible in The impact of inflation and deflation on the distribution of income to these two types of capitalists is noteworthy.

Profits are derived from purchasing something at a particular time and selling it later at a higher price. Accordingly, deflation shifts income from profits to interest. The Great Depression was one of the most extraordinary episodes in U. To compare the current crisis to the Great Depression is stretching the facts beyond the breaking point.

In fact, the Great Depression was followed by a spontaneous recovery, with the unemployment rate falling from Economy Average annual earnings for full-time employees in the UK Aaron O'Neill.

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Please log in to access our additional functions. Yes, let me download! Exclusive Corporate feature. Corporate Account. Statista Accounts: Access All Statistics. Basic Account. The Smoot-Hawley Tariff passes on June With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.

Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside. The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U. Supreme Court rules that the monopoly U. Steel does not violate anti-trust laws as long as competition exists, no matter how negligible.

The GNP falls 9. The unemployment rate climbs from 3. The GNP falls another 8. For , GNP falls a record Industrial stocks have lost 80 percent of their value since GNP has also fallen 31 percent since Over 13 million Americans have lost their jobs since International trade has fallen by two-thirds since Top tax rate is raised from 25 to 63 percent.

Popular opinion considers Hoover's measures too little too late. Franklin Roosevelt easily defeats Hoover in the fall election. Democrats win control of Congress.

A third banking panic occurs in March.