Another Twenties

Another Twenties

By Tatsuhiko Yoshizaki

Chief Economist

Sojitz Research Institute Ltd.

A century ago, it was right after the United States had suffered a great loss: 110,000 people died in World War I (1917-1918) and 670,000 from the Spanish flu (1918-1919).  Given the fact that the country had a population of only 100 million at that time, the double blow obviously claimed an appalling number of lives.  This “sense of loss” had a significant impact on Americans’ mindset for the decade to follow.

Republican Warren Harding, who had advocated a “Return to normalcy” in his presidential campaign, won the 1920 election easily.  The policy ideals upheld by President Woodrow Wilson, who had led his country to war and created the League of Nations later, were quickly forgotten.  The United States refused to join the League, turning its back on international cooperation.  Far from “normalcy,” the following decade was called the Roaring Twenties.

A generation who have had a narrow escape from death tend to become bold risk-takers.  Take Charles Lindbergh, who successfully made the first solo nonstop transatlantic flight at the young age of 25, as someone who embodied the spirit of the 1920s.  On May 20, 1927, his single-seat propeller monoplane, the Spirit of St. Louis, arrived in Paris after 33-hour solitary flight across the Atlantic Ocean.  Lindbergh soon became a hero, although he had ventured the flight not to achieve his high ideals but to receive the US$25,000 cash awards and to become famous.

One of American literary masterpieces, The Great Gatsby by Scott Fitzgerald (1925) gives us a full description of the social atmosphere of the 1920s.  An enigmatic multi-millionaire Jay Gatsby hosts a luxurious party every weekend at his mansion, where many guests uplifted by the booming economy show up, but, in fact, it is Mr. Gatsby’s pathetic attempt to win back his sweetheart he broke up with before the WWI.  New inventions of that time, such as automobile and telephone, appear in the novel; so do many decadent drinking scenes although it was written in the Prohibition era.  The story of Mr. Gatsby committed to pursue true love in the midst of an economic bubble still resonates with us today.

The 1920s was the decade of many innovative products and technologies.  Mass production helped the Ford Model T become popular among American consumers, which led to construction of new highways, gas stations and motels.  The wider use of washing machines and refrigerators contributed to release many women from housework; they were eventually granted suffrage.  Then, thanks to the radio and sound films, popular culture flourished in this period, sometimes dubbed the Jazz Age.

A hundred years later, we face another pandemic, COVID-19, today.  In light of the past experiences, I suspect that we might see unexpectedly high economic growth in a post-COVID world.  Let’s recall this.  In Japan, it was the generation who had lived through World War II that achieved the highly growing post-war economy.  They made huge contributions to Japan’s economic recovery, dedicating their lives they might have lost in the war.  Those who have made significant sacrifices are not be afraid of going on business adventures.

In terms of technology, we now have various seeds, including artificial intelligence (AI), big data and digital money, as in the 1920s.  Also increasing is the demand for infrastructures, such as 5G and other high-speed, high-capacity wireless networks and renewable energy.  You may miss out on the wave of a new age if you assume a passive attitude, just hoping to go back to the pre-COVID life.  Let’s keep it in mind that a “Return to normalcy” may not happen in the post-pandemic era.

At the same time, we must also remember that people who had learned a hard lesson from World War I and the Spanish flu had an introverted mindset in the 1920s.  The United States went back to isolationism in foreign policy and laissez-faire in domestic politics.  The enactment of the 1924 Immigration Act was a turning point for the country that had vigorously accepted immigrants until then.  The act set an annual immigration quota for each country at 2% of the US population from that country based on the 1890 national census.  Immigration from Asia was strictly restricted, and this was the beginning of the deteriorating relationship between the United States and Japan.

As is well known, the Roaring Twenties came to an end with the New York stock market crash in October 1929.  Then, the Smoot-Hawley Tariff Act of 1930 paved the way for protectionism, which allowed the rise of economic blocs and nationalism in 1930s.  As movements of people, money and products across national borders gradually ceased, the Great Depression became aggravated.

In retrospect, the 1920s was the era of “peace and democracy,” as shown by the liberal Taisho Democracy movement in Japan and the Weimar Republic in Germany.  In the 1930s, however, both countries opened the door to the era of “war and fascism.”  So, the 1920s seems like a brief “moment of relief” before the gloomy days started in the 20th century.  We have much to learn from it.

COVID-19 is not the first pandemic that frightened the world; we had the same experience in the 20th century although we completely forget about it.  I’m sure that looking back on the 1920s will give us in the 2020s some suggestions on how to act in a soon-to-come post-COVID era.