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boom and bust

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Introduction

To what extent were the policies the Republican governments 1921-29 responsible for both the economic boom of the 1920s and the subsequent economic collapse 1929-33 The economic boom and bust of the 1920s would have occurred without the Republican economics policies that were introduced. The Republicans felt that it was necessary to allow the economy to 'grow' without state intervention unless it was urged upon by the industry. Such freedom did in fact allow for the likes of Henry Ford to innovate and take advantage of the beneficial circumstances brought about by the First World War. The significant increase in trade wasn't sustainable and for the reason that it wasn't stabilised the economic collapse took place in the absence of Republican policies to regulate growth. The Republicans built on the conditions that were provided by the First World War. After the War, Europe was dependant upon American industry to be provided by American products ensuring trade for America. However, credit can be given to the Republican government for the introduction of the Fordney-McCumber tariff. This raised import duties on farm products, chemicals, textiles, chinaware, cutlery, guns and other industrial goods. This move towards Protectionism ensure that there wasn't a two-way trade between America and Europe, allowing for a domestic market to grow whilst the Europe dependant on the US economy. ...read more.

Middle

This heightened the reliance on the growth of the economy and instigated further confidence, causing the economy to be uncontrolled by anyone, meaning that a small stumble would bring about total. The delicate nature that the economy wasn't completely due to the Republican policies, however, the Republicans didn't feel that there wasn't any need for state intervention since it wasn't seen to be a national issue. Therefore the lack of policy in regulation in the banking system that created an increase in 'buying on the margin' caused the fragile economy that collapsed precisely due to the lack of intervention. Although the Republicans were responsible the confidence and the increase in credit was due to the fact that it was probably the first time that the public had more money than required to survive and felt that it was to continue and didn't know what to do and thus brought about the lack of savings. The boom wasn't a long term growth that raised society than what could have been achieved by regulation. Using the word 'boom' it refers to the significant rise in a short space of time and therefore as a consequence means that it would have to fall suddenly unless the economy could be underpinned by a stronger infrastructure. ...read more.

Conclusion

In such light, it is perhaps unfair to judge Republican policies too harshly for their inability to anticipate the hitherto unknown. It is also clear that Republicanism was not responsible for initiating the 'Roaring 20s', but rather for adopting a policy of non-intervention which allowed the boom to proceed almost entirely unimpeded. As a result, Republican responsibility must be judged in terms not of what they did, but what they did not. In doing very little to regulate nor intervene in the boom from 1921-29, successive Republican administrations were, to the greatest extent, responsible for ensuring that what occurred was not a long-term trend of steady, social economic growth, but a short-lived boom. Furthermore, rather than making efforts to convert this into growth which permeated throughout, bringing even longer-term benefits to American society as a whole, these policies were content to sit back and allow America to become a gambling den on a majestic scale, almost entirely dependent on the fickle nature of human confidence and reliant on an impossibly limitless demand for new products which soon reached saturation point. As a result, Republican policies must be seen to a great extent responsible for shaping the nature of the economic boom, if not instigating it, and in doing do, directly responsible for the inevitable bust which followed. ...read more.

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