Americas involvement in the First World War was also a contributing factor of the economic boom of the 1920s. During the war, America sold weapons and arms to the Allies. This helped improve the economy of the country significantly as more money was being taken in during the war from these sales. Also as America came out of the war relatively unscathed as it was fought in Europe, their economy was not significantly damaged by the war, meaning that business could go on as usual. Also, during the war America became the ‘banker to the rest of the world’ as they were giving out loans to countries in need. By the end of the war Britain, France and Italy owed the USA $22 billion plus interest which would clearly bring about a significant boost in the economy, thus fuelling the economic boom. America had taken over Britain and Germany in the rate of industrial production during this time which lead to more overseas countries buying American goods even after the war, further fuelling the economy. It can however be argued that because of economic hardships the war had place on the Allies’ economies, they were largely unable to pay back the loans quickly and therefore America would not reap the benefits immediately. It is therefore evident that America’s involvement in WW1 was a contributing factor of the economic boom due to the money it made in selling arms and giving out loans. However due to the damage the war caused to the receivers of the loans, America were unlikely to be paid back quickly. It can be argued overall that the war played a more significant role than the introduction of mass production methods due to the improvement made on the economy being more significant.
The Republican government polices in America in the 1920s also played a significant role in the economic boom. The government adopted the policy of laissez-faire, one in which there is little government intervention in the lives of the people, which enforced the idea that businessmen, if left alone, could turn out higher profits and believed that more jobs and higher wages would be the result. They restored free enterprise after their intervention during the war which allowed more competition. This meant lower prices on goods and therefore more sales were made, boosting the economy. The government also made attempts at balancing the budget by cutting government spending down to equal the amount raised in revenue in taxes. This meant that more money could be kept and spent and therefore the economy benefited. Also, the government fuelled the boom further with introductions of higher tariffs through the Fordney-McCumber Act in 1922. This raised tariffs on foreign imports making them more expensive, and therefore less appealing, than American goods to customers. Foreign imports now did not compete with American produce on price and more people bought American goods further improving the economy and fuelling the boom. However, with these increased tariffs came annoyed foreign countries who decided to up their prices on American goods, having a knock on effect and limiting the significance of these raised tariffs. Willoughby states that “American economic prosperity was underpinned by the thinking of the Republicans” showing his belief that the Republican government played a vital role in causing the economic boom. However, these government polices mainly benefited those in big business and those with high incomes, meaning the poor were hardly helped at all. Therefore it is clear that the Republican government polices were significant in contributing to the economic boom however due to the focus on the higher classes, they were arguably less influential than the development of mass production methods.
The development of credit in the 1920s is a significant contributing factor to the economic boom. The introduction of credit enabled consumers to buy goods they otherwise would not have been able to afford and therefore meant more sales for companies fuelling the boom. By 1927, $7 billion of goods, such as 75% of all cars and half of all major household appliances, were sold on credit. This meant that more goods were being sold to working classes meaning companies were increasing their profits and they attracted a bigger clientele, thus selling more goods. It can be argued however that credit was more of a problem that a good thing. Due to credit, many people were now in debt, however at the time, there was little concern about this as their was no fear over the stability of the economy. Also, people were becoming increasingly more aware of the possibilities of people becoming overstretched or of them losing their jobs, resulting in them being unable to pay back any of the money borrowed to purchase the goods. Therefore, although it is clear that the introduction of credit contributed to the boom in the short term, due to the problems associated with it, it can be argued it is less influential than the introduction of mass production methods.
In conclusion, it is evident that mass production methods played a significant part in fuelling the economic boom of the 1920s, however other factors were an influence. The standardisation of production lines meant that more products could be made cheaply and efficiently, resulting in more goods beings sold and a larger profit. However many would argue that this lead in supply taking over demand and therefore less products were being sold over the years, limiting its significance. Also, due to America’s involvement in WW1, they made billions of dollars in selling arms and giving out loans to the Allies when in need, meaning they put a lot of money into the economy suggesting that it is arguably more influential than the mass production methods. However, due to the damage the war caused in Europe, many of the countries were unable to pay back the loans immediately meaning the US were losing out on money rather than gaining. Due to the policies of the American Republican government, the country was better off in many aspects with them balancing the budget and raising tariffs on foreign goods, improving the economy. However countries counteracted this by raising tariffs on American goods, damaging the economy and the governments significance is limited due to the focus on the higher classes. Also, with the introduction of credit, the economy was fuelled as more people are able to buy goods they otherwise would not have been able to afford, however the possibilities of people becoming over-stretched or losing their jobs were apparent and therefore it was arguably not as influential as mass production methods. Overall, the significance of the mass production methods is clear, however other, some arguably more important, factors were an influence.
