The automobile has long played a pivotal role in the history of our nation’s economy. A former chairman of General Motors once said, “What is good for GM is good for the country.” That may have been true in the Roaring ’20s, but is certainly less so today.

However, it was interesting to note that recently when GM, the world’s largest automaker and holder of a large portion of the market, announced their declining sales figures, they also reverted to a sales inducement strategy, dating back to the brief depression that occurred in 1920-21.

In the early part of the innovative 20th Century, the automobile was seen as the answer to the nation’s number one environmental problem of the day—too many horses and their resulting by-products. The automobile was cleaner, faster, and more chic among the urban population.

Not so in the farmlands, where more than one-third of the agricultural lands in 1900 were used to produce fodder for the nation’s millions of horses. When faced with a declining demand, the nation’s farmers turned their farmlands into food production for humans. The increasing food supplies caused agricultural prices to drop and farm incomes to decline. This condition continued well into the Great Depression that followed the Roaring ’20s.

The increased speed and mobility of the automobile brought the cities and better, more competitive shopping closer to the countryside. Soon, the economies of small rural towns were under duress, as families moved into cities to work in factories. Those that stayed bought more from larger, urban-centered stores.

In 1921 the number of banks in the country peaked at 29,788 and most of them were located in these smaller communities. These banks were heavily dependent on making local agricultural loans. As the 1920s progressed, these banks began to fail in increasing numbers, averaging over five hundred a year by the end of the decade, according to author John Gordon, in his book “The Great Game.” These failures went largely unnoticed as the great growth boom of the Roaring ’20s took off.

Financier William C. Durant—who parlayed his ownership of the Buick Company into what was soon to become the world’s dominant automobile manufacture—founded General Motors. Durant took the proceeds from his early successes and went on a buying spree, acquiring other automobile companies and parts suppliers. It wasn’t long before his buying excesses got him into financial trouble as the nation went into a recession in 1910.

Durant rescued his company with a marketing coup. When Henry Ford automated the manufacturing process, and chose to sell his cars at rock bottom prices (in any color so long as it was black), Durant rolled out his Chevrolet, slightly more expensive but with different colors. Within a decade, GM’s mass marketing tactics moved them past Ford as the number one automobile manufacturer.

In 1920, the nation’s economy went into a brief but sharp depression. GM’s stock plummeted. Again, it was marketing to the rescue with the unheard of idea of allowing buyers to purchase using installment credit. Car sales took off and the economy roared.