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Why did the American economy grow considerably in the 1920s?

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Coursework: Why did the American economy grow considerably in the 1920s? After its reluctant participation in the First World War, America was once more ready to concentrate on internal affairs, principally business and money matters. This led to a massive increase in industrial production, prosperity and improvement in living conditions all over the nation, and in the 1920s America's wealth rose to unprecedented levels. So why was there an economic boom in the 1920s? It was due to a combination of factors which had been present over a long period of time, and ones which acted as a trigger for the boom. I will discuss and explain these in my essay. The fact that American industry had been thriving for over half a century meant that an economic boom was feasible in the near future. By the 1920s, America led the world in most areas of industry, including steel, coal and textiles, and it was the leading oil producer. This success was due to America being rich in natural resources and having the ability to utilise them efficiently. America had plenty of coal, oil and iron and also farming land, so there was no need to import materials, and because of America's large and rising population there was no need to export goods either - the home market was already large and growing. ...read more.


They predicted that the economy would grow faster if businessmen were left to manage things their own way and it did indeed cause industrial expansion because it made it easier for these industries to spread and become successful. This idea of not interfering was also reflected in another Republican view - isolationism. By staying out of European affairs and refusing to trade with other countries, American companies grew quicker and the country became entirely self-reliant, meaning that America had power over its own economy. The introduction of import tariffs reinforced this; by making it very expensive to bring foreign goods into the country American businesses were protected against foreign competition and left to grow more rapidly. The Republicans lowered taxes as much as possible with the idea that the money would be recycled back into industry. This worked to alter the state of mind of the people - with lower taxes, the people had more money to spend on consumer goods made by American industry and stimulate more production. Very wealthy people would also have more money to invest into industry, therefore both the economy and industry would be stimulated. The Republican policies made it easy for industry and the economy to grow, so acted as a trigger for development in these. In the 1920s, many new industries and methods of production were introduced meaning that America was now able to exploit its vast resources to a greater extent. ...read more.


Previously the common approach was to be very sparing with money, and saving was seen as being a good quality. But in the 1920s, due to the increase of prosperity, this opinion was replaced with a belief that spending money was a better idea. People began thinking that they had a claim to 'prosperity' and the right to own a nice house, good job and the latest consumer goods, and so people began buying more and more. The increasing demand stimulated industrial production, and it was this attitude which spurred industry and enabled growth in the economy. It can be seen that the economic boom in the 1920s was caused by a combination of factors. America's industrial strength combined with the circumstances of the First World War provided a good situation for a growth in economy to occur, and it was the short-term factors such as the Republican policies, new industries and state of mind, which really gave rise to the boom. However, it was America's industrial strength combined with the policies of the Republican Party which was the most significant cause of the boom; no economical boost could have occurred without a productive industry. The Republican policies consequently made new industries grow, made the country self-reliant and altered the public attitude and this was the main reason for the considerable growth in the American economy in the 1920s. Gayle C. Stewart ...read more.

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