• Military Menu                       

• Introduction
• Systems
• Facilities
• Agencies
• Industry
• Operations
• Countries
• Hot Documents
• News
• Reports
• Policy
• Budget
• Congress
• Links

• WMD
• Intelligence
• Homeland Security
• Space

Recession of 1921

The 1921 recession was severe, with unemployment peaking at about six million or 11.9 percent and gross national product (GNP) had fallen by 24 percent. Many economists, including Friedman and Schwartz, view the 1921 economic downturn as a classic monetary recession.

The nationwide economic recession of 1921-1922 drastically lowered prices of farm produce and manufactured goods. Farmers lost out badly. So did businessmen, whose inventories dropped in value while orders went down dramatically. Recession of prices started in May 1920, while a high point in ‘liabilities of failed concerns was not reached until March of the following year, and was again exceeded at the close of 1921 and opening of 1922.

Bankers met the situation more adequately than ever before, carrying concerns that were in difficulties until it became certain that they could not be saved. The organization of creditors’ committees, created to give bankers and others a participation in the operation of enterprises that were financially embarrassed, had the effect of giving time for the extrication of these concerns from their difficulties if they held out prospects of future recovery. It undoubtedly avoided great numbers of industrial catastrophes which would have occurred under the old system and which would have entailed great losses. It was at one time felt that this process might go too far and result in preserving a good many concerns that actually had no claim to existence. Study of the figures of failures and consideration of the relatively long period of months over which they have been protracted shows that such a fear was without foundation.

During the year following World War I, a combination of events occurred which led to an increase in the number and severity of industrial disputes. Following a brief downswing in business immediately after the war, there was a quick revival, accompanied by rising prices. By mid-1919, labor was faced with the mounting cost of living. Real wages lagged. At the same time, withdrawal of the Government's limited protection of labor's right to organize and the termination of wartime governmental labor agencies removed restraints which had kept industrial relations running more or less smoothly during the war years. As a result, numerous employers refused to recognize labor unions which had been organized in their plants. So, to protect their recently won gains, many labor leaders called for more aggressive action.

The economic recession in 1921 and 1922 resulted in many serious work stoppages, such as the railroad shopmen's strike in the summer of 1922. These protests, however, failed to check a general wage reduction movement which also marked the beginning of a decline in union strength. Many unions continued to lose ground despite the rise in business activity, which occurred in the late 1920s.

During the Great War the promoters and financiers for a number of years had not been permitted to operate without a certain amount of Government restraint. During the war, due to the high cost of construction. The building program of the country had been neglected and there was a great shortage in housing and buildings of all kinds. It was estimated there was a shortage in dwellings alone of over a million.

In face of the sharp decline in price of farm land to a low level in the years 1920 and 1921 and the resulting serious condition of the agricultural interests during the depression of 1921 and 1922, the country started on a huge building program, encouraged and spurred on by the war method of propaganda. This program checked temporarily the depression and brought a return to moderate prosperity.

Harry S. Truman started a haberdasher's shop in Kansas City with his Battery D sergeant, Eddie Jacobson. When Truman & Jacobson failed during the recession of 1922, bankruptcy turned Harry Truman from business to politics. Another army buddy, Jimmy Pendergast, introduced Truman to his uncle Thomas Pendergast, the Democratic political boss of Kansas City. In 1922 the Pendergast machine endorsed Truman for county judge in Jackson County.

Coal and textiles remained in a slump after the recession of 1921. But most manufacturing, retail trades, transportation, the growing service industries, and other segments of the labor force were earning good wages and spending freely. After the recession of 1921, the construction industry built new houses in unprecedented numbers, rising from 449,000 in 1921 to 937,000 in 1925. A total of nearly 6.3 million new homes appeared during 1921-1928.

After the recession of 1922, industry and Commerce grew at a phenomenal rate. The earnings per share for most companies, like rail roads and steel doubled between 1922 and 1928. There was technology. About 35% of all homes had electricity in 1920, it had reached 70% by 1930. Once people go electricity in their house, they bought things like radio, electric fans, vacuum cleaners, refrigerators, electric griddles.

Real GNP grew steadily after the recession of 1921 until 1929, although short recessions occurred in 1924 and 1927. Even so, the period from 1923 to 1929 is regarded as one of the most prosperous in American history.