What new techniques helped to create economic "boom" in the United States during the 1920's.

Michael Harroch 01/28/03

History

By the end of the First World War America was regarded as the richest and most powerful country in the world. The period that followed WWI, which was called the roaring 20’s, was a period of disillusion. The American economy enjoyed a period of “boom”. This was a time of economic prosperity; people were spending and earning more. Lets see what new techniques helped to create this “boom” in the United States economy in the 1920’s. These can be divided into two categories: political and industrial. First, we will talk about the new political techniques then we will discuss the new industrial techniques before concluding.

One of the main factors of this economic boom was the Republican Party’s policies concerning economy. From 1920 to 1932, all the US presidents were Republican. Republicans believed that the government should interfere as little as possible in the country’s economical affairs. This attitude was known as ‘Laissez-Faire’. One of the men with a most determining role during this period was Melon who was responsible for the treasury section under president Coolage. Melon was of clear republican tradition. His way of encouraging business was a tax friendly policy: he lowered taxes in a general way: he abolished the excess profit tax, gift tax, income tax and estate tax. The Republicans introduced tariffs, these were additional taxes on goods imported from outside the country; this made it expensive to buy foreign goods and encouraged people to buy goods manufactured in the country itself. The tariffs protected US businesses from competition. This encouraged Americans to invest capitals (this technique was Melon’s invention). As industry shares were booming, this provided extra finance for industry and helped big businesses prosper further as well as making the investor richer (it was calculated that if a man invested $15 a week in the stock market, he would become rich in 20 years). This created a large increase of business concentration (200 industries equalled 15% of the market). The new government added to a rise in production and consumption.

This is a preview of the whole essay

Another short-term reason for the boom was the new industries in America. Americans loved new products such as the automobile; by 1929 twenty-three million people owned cars. This started the process of mass production. Mass production methods were pioneered by Henry Ford, it made the manufacture of goods cheaper. Henry Ford trained every worker to do a simple task as a vehicle or engine passed on an assembly line, at the end of it would be a finished car. This allowed the worker to move and think as least as possible. The result of this was that work was completed much faster and by people that did not require any special training. This increased the output of production (The Ford industry produced a model T every three minutes which was incredible at that time), making it cheaper to buy cars, which increased consumption. Henry Ford’s car industry also helped other businesses, as more people had cars, garages opened everywhere, as well as gasoline stations. This helped the oil companies develop. A massive program of road production began; this produced jobs and made many people rich. As people could now travel, holiday resorts were also prosperous. Another important factor which allowed new industries to develop was electricity. Many new products such as toasters, refrigerators and washing machines ran on electricity. By 1927, sixty-three percent of houses in the United States had electrical power. These new industries boomed in America, the owners of the businesses got richer and ordinary people’s lives became easier as well as improving the economy. These productions were major catalysts for the boom.

In conclusion, it is clear to see that the basis of a boom is production and consumption. When a country is producing and its population is consuming there is money flowing in its economy. It is also clear to see that the Republican Party and their policies and “Laissez-Faire” attitude towards business triggered this cycle. This is because they lowered taxes therefore people could spend more and they made sure they spent it on American goods. Without this, the first part of the cycle of prosperity would be non-existent. Whilst it is clear that the American economy was booming at this time, not all Americans benefited from it (ex: farmers due to the very cheap price of their goods).