The Roaring 20s that Await

Can America recreate the greatest party in history?



By Brendan Wilson


Twenty twenty was the year a bevy of black swans dumped their seedy pay loads on our windshields. We flicked on the wipers only to smear the impenetrable white blotch of the year's calamitous events. A deadly pandemic killed over 300,000 Americans, a recession wiped out 20 million jobs, racial unrest forced us to question our nation's collective identity, and an ugly election cycle is now seared into our memories like a cattle brand on the hindquarters of our republic. It is a miracle that we've managed to reach the end of this dreadful highway at all, but here we are.


As we bid adieu to this annus horribilis, we should consider the footing on which we begin the new year. Will we descend further into the pit of despair? Or will we crawl out, knife between clenched teeth, ready to fight for a better, more prosperous future?


Optimists, such as your devoted blogger, believe that brighter days lie ahead. History tells us that tumult as we’ve seen in 2020 usually brings about positive change. Exempli gratia: the Roaring 20s.


The late 1910s were bleak. America was drawn into the trenches of Europe’s Great War, losing 116,000 of its sons to artillery fire and the deadly fog of mustard gas. The massive mobilization of the war effort and global urbanization facilitated the spread of the Spanish Flu, a respiratory virus five times deadlier than Covid-19 that was estimated to have killed 50 million people worldwide.


Medics with masks at Fort Porter, NY - 1918 - Source: Shutterstock

These twin tragedies conspired to deprive the global economy of both workers and consumers, resulting in recessions in 1918 and 1920. The economic bust wiped out businesses across America, including future president Harry Truman’s haberdashery business, Truman & Jacobson.


But our nation, comprised of strong, resilient men and women, was destined to reverse course. From the ashes rose a decade of ferocious economic growth, cultural rebirth, and technological innovation that would become known as the Roaring 20s. The wealth and prosperity born out of this period gave rise to a decade-long party that F. Scott Fitzgerald would later characterize as the “most expensive orgy in history.”


It began with the 1920 presidential election, a decision billed as a pivotal moment in our democracy. Republican Warren G. Harding, campaigning on a “return to normalcy,” defeated Democratic challenger James M. Cox. He used his time in office to enact tax cuts that provided critical stimulus to the private sector and passed the Fordney-McCumber Tariff Act, making American goods more competitive against imports and jumpstarting the domestic industrial engine.


Developments such as the conveyor belt, the concrete mixer, and Henry Ford’s assembly line enabled factories to significantly boost output. Nationwide electrification made technological innovation possible, springing forth cutting edge products like the refrigerator and the washing machine. The radio permitted direct marketing and, thanks to historically low interest rates, Americans were now able to use credit to buy the things they previously could not afford.


The resulting increase in both supply and demand created jobs for the skilled and unskilled alike. The unemployment rate dropped from 11.3% in 1921 to 2.0% in 1929 while real GDP growth increased an average of 4.7% during the same period.


Unemployment Rate and Change in Real GDP 1921-1929 - Source: 5 Minute Economist

After a decades-long fight, the 19th amendment finally granted women the right to vote. This power, combined with new products like contraception, created a more independent woman that could now delay childbirth to don high heels, lipstick, and short skirts and dance to jazz music while drinking gin in the speakeasies that sprang up in cities across the nation. Most importantly, women found work. In lieu of having children, they earned incomes of their own as secretaries, typists, and telephone switchboard operators.


A woman driving in 1921 - Source: Shutterstock

This confluence of events begat confidence, which begat consumerism, which begat enormous profits for business, sending the stock market into the stratosphere. After emerging from the dark days of war and disease, a generation of thrill seekers just wanted to have fun. A little bathtub gin-induced blindness seems like child's play to someone that has seen the trenches, the infirmary, or the soup kitchen line.



Mercifully, the conditions that launched the economic rocket of the 1920s are recognizable today.


While this year's election saw a different outcome than the one discussed above, the tax cuts and tariffs enacted by the Trump administration will cast a long shadow into the decade to come and their immediate reversal is likely.


Further, the Federal Reserve has promised a near-zero Fed Funds Rate until 2024, providing Americans with the cheap credit necessary to make large household purchases and borrow money to start businesses. This policy has already borne fruit. Julia Pollak of the Wall Street Journal reported that 1,600,000 new business applications were filed in the 3rd quarter this year, compared with only 860,000 during the same period last year. This bodes well for innovation, employment, and output.


5G and AI in the 2020s will play the role that electrification played one hundred years prior. Thomas Friedman of the New York Times discussed the importance of this emerging technology: “With the two telecom giants Verizon and AT&T now beginning to deploy 5G technology across the country, the metabolism of business, entertainment, education and health care will dramatically accelerate in the next America, beginning around 2020.” The significance of 5G is difficult to overstate. It will enable enormous amounts of data to be quickly transmitted, massively accelerating the deployment of artificial intelligence in our cars, factories, and homes. Because of these implications, Friedman argues, 5G could be as “revolutionary as the internet” itself.


Finally, the emergence of work from home policies will enable people to join the workforce that are currently on the sidelines. People caring for children or loved ones and those that are disabled and unable to commute to brick and mortar offices can now find gainful employment thanks to laxer corporate policies and software like Zoom and Teams.


After the virus is corralled by vaccination and reliable at-home testing, there will be an explosion in consumer spending, the main driver of GDP growth. The Wall Street Journal reported last week that “Americans have accumulated $2 trillion in new savings deposits since February according to the Federal Reserve,” amounting to 10% of our national GDP. These deposits represent money just waiting to be spent.


Of course, as we speed down the avenue toward a more prosperous future, the next disruptive black swan always lurks in the shadows of the alley just ahead. But the surge in growth awaiting us will be strong enough to overcome any unforeseen surprises.


As this awful year drew to a close, I kept returning to Buster Moon's mantra in the hit movie Sing, "You know what's great about hitting rock bottom, there's only one way left to go, and that's up!"


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