The opening up of new markets to America during the First World War was an important cause of the economic boom. America had supplied Europe with many goods during the war and had taken over European overseas markets. The USA provided Great Britain and France with loans to deal with the cost of the First World War. America had also loaned other countries money during the first world war and now that the war was over, the countries were starting to pay America back with interest. This was the main cause of America’s industrial strength, as the banks now had lots of money to lend to people setting up a business or for people to buy on the margin.
The rest of the world wasn’t producing as fast as America as they were still suffering the after effects of war. Since the USA was rich in natural resources, it started providing raw materials for new Latin America and Asian markets, which were still weak after the war. America overtook Germany as the world’s biggest provider of chemicals and plastic. Germany’s chemical industry suffered during World War 1. The Treaty of Versailles had made Germany’s economy almost incapable of recovering, allowing America to easily overtake them. People wanting to get out of European countries which were in ruins because of World War 1, had heard that America was a “land of opportunity”, and emigrated to America, causing a dramatic rise in the population – 1 million every year. In America, the immigrants most often did the hard, underpaid manual labour, which meant that businesses that needed manual labourers could employ immigrants and grow.
After Woodrow Willson died during his campaign to bring America into the league of nations, Warren Harding took over with the Republican party. The policies of Republican presidents – Warren Harding, Calvin Coolidge and Herbert Hoover changed the way that American business was run. The Republicans believed in laissez faire economics – meaning that the government did not interfere. This freedom allowed businesses to thrive. President Warren Harding imposed high tariffs on foreign goods, protecting against foreign competition. This meant, for example, that an American car would cost $200, whereas a similar car from France would cost $300. Americans would obviously buy the American car, allowing the American industries to thrive. The government kept taxation low. This benefited working Americans, but businessmen in particular. The government believed that the rich were responsible for America’s wealth and should be rewarded. Taxation was kept low and businesses and companies were able to keep much of their profits to invest in new efficient factories that produced goods at a cheaper price.
The development of new industries and new industrial ideas was a very important cause of the economic boom as new technologies allowed for the development of more consumer goods, which created a consumer boom. This was also created due to mass production, which meant that goods were being produced more cheaply and therefore more people bought them. Mass production was created when factories around the USA could use electricity to set up assembly lines and make objects quickly. The cars were designed to be identical to make. This meant easier assembly and a cheaper price.
The new car industry in Detroit created millions of jobs. By 1927 Henry Ford’s car plants were producing a car every 10 seconds, with over a million new cars in 1927. Henry Ford had the idea of making a car for the ordinary man and his family.
Henry Ford's assembly line in Detroit was the largest one in the country. When Ford first started making cars, the only car he made was a black Model-T. Almost everybody in the United States had a car. Three-out-of-four families owned one or more cars. With the assembly line they made a lot more cars in one day than they did before. Instead of paying for the cars with cash, people could now use credit to purchase items. Since most families didn't have the money, they would buy the car with credit and pay off the debt later. Over 23 million cars were made during the economic boom. The car industry was so important because it made the oil, steel, rubber and glass industries stronger as all these materials were needed to make cars. The car and train industries were the largest industries in America. The assembly line made mass production possible, and the industry boomed, again supporting to America’s industrial strength.
Other new goods produced in the 1920s were radios, washing machines, fridges, vacuum cleaners. The film industry also developed. The Technology, Industry, Music, Architecture, Arts and Science advanced to a great extent, and many things became available to all. So many new things were being produced at such a fast rate, due to mass production, that Americans acquired things on credit as they did not have enough money to actually buy all the new consumer goods. Advertising made them want all of the new consumer goods that were being created.
The last reason for the great success in the American industry was the consumer confidence. People believed that it was America’s destiny to be the most powerful country in the world. This led to patriotism among many Americans. People wanted to spend money – it was a sign of America’s prosperity. Advertising was used to increase consumer spending – radio, cinema and newspaper adverts were used, these convinced people to buy their items. Advertising encouraged people to buy more and more, and the families had many more items than the rest of the world. Americans were under pressure to buy goods from advertising. When something new had come along everyone had to buy it. Hire purchase was also introduced to enable people to have consumer goods straight away. It led to higher production, which meant that America’s industry kept growing. Hire purchase meant that people could buy things on credit (they didn’t actually own them) which helped the consumer boom.
America’s constantly growing industry, and the fact that America was one of the leading producers in the world increased the confidence of the American people. The confidence of the public helped them buy goods on cash or credit. It also encouraged them to buy shares. Tariffs were also placed on imported goods so the consumer would prefer to buy only American goods. This added to the increasing strength of the American industry.
In conclusion, there was an economic boom in the 1920s because America’s industrial strength led to new industries which created mass production and made Americans believe that America was the most important country in the world. The government policies of not interfering with business meant the American industries thrived. Lastly the First World War opened up new markets to America as the rest of the world was still recovering from it, and America took over as one of the leading producers in the world.
The evidence suggests that America’s industrial strength was the most important reason for the economic boom, as it led to America having money to invest in new industries. The First World War was the main reason for America’s industrial strength as many countries were paying America back money that they had loaned during the war, with interest. The First World War also meant that other countries were not strong enough to keep up with America’s industry. Republican policies were also contributory factors to America’s industrial strength, as one of the policies was to leave businesses alone. This meant that all industries thrived. New developments led to mass production, which allowed the average American to buy new items that were manufactured. Finally, this led to people believing that America was destined to be the strongest country in the world, encouraging them to buy more items and shares, which created the economic boom.