Key Terms You Must Know

📖 Key Terms You Must Know

Laissez-faire: French for "leave alone" — the Republican policy of minimal government interference in business. Presidents Harding, Coolidge and Hoover all believed the government should let business regulate itself. This allowed companies to expand rapidly but also meant dangerous practices like speculation went unchecked.

Mass production: Making large quantities of identical goods using machinery and an assembly line, where each worker performs one specialised task repeatedly. Ford's Highland Park plant was the first large-scale example. It dramatically cut production time and cost, making consumer goods affordable for ordinary Americans.

Assembly line: A manufacturing process where a product moves along a conveyor belt and workers (or machines) add one component at a time. Ford introduced this for cars in 1913. It reduced the time to build a Model T from 12 hours to 93 minutes and allowed prices to be slashed.

Hire purchase (instalment credit): A system of buying goods by paying a small deposit upfront and then making regular weekly or monthly payments. Also called "buy now, pay later." By 1929, 60% of cars and 80% of radios were bought this way. It expanded the consumer market enormously — but it also meant millions of Americans were carrying debt.

Tariff: A tax charged on imported foreign goods, making them more expensive than American-made products. The Fordney-McCumber Tariff (1922) raised tariffs to record levels, protecting US manufacturers from foreign competition. This helped American industry but also meant foreign countries retaliated with their own tariffs on US exports.

Overproduction: When factories produce more goods than consumers can actually buy. This is one of the hidden weaknesses of the 1920s boom — industries kept expanding output, but wages for ordinary workers did not keep pace. By the late 1920s, unsold goods were piling up in warehouses. Overproduction was a key underlying cause of the Wall Street Crash.

Speculation: Buying shares (or other assets) not because you expect a company to earn profits, but because you expect the price to keep rising so you can sell at a profit. During the 1920s boom, millions of Americans speculated on the stock market. Many borrowed money ("buying on the margin") to buy shares. The Dow Jones index rose 500% between 1921 and 1929 — but this was built on borrowed money and unrealistic expectations, not real economic value.

Consumerism: A culture in which buying and owning goods is seen as a central part of life and identity. The 1920s saw the birth of modern consumerism in America — driven by advertising, credit, and rising wages for many (though not all) workers. Americans were encouraged to see consumption as patriotic and modern.