The USA was also incredibly rich in natural resources. There was much Iron mined in Iowa, Minnesota, Wisconsin and Chicago, whilst vast amounts of coal were mined in Illinois, Missouri and Kentucky. Due to the resources found in Texas, America became the world's leading oil producer. The textile industry, which had appeared around the time of the industrial revolution, had been growing, and the newer chemical industry bloomed.
A boom in credit facilities and their use is another factor in the reason for the economic boom. For the consumers, a new innovation appeared: the instalment plan, which encouraged Americans to build up debt in order to buy the desirable consumer goods. As long as the boom continued, there was confidence that the regular wages would allow the loans to be paid off, therefore Americans borrowed and banks lent happily. In business, the wealth creation process seemed only to be limited for the owner of a business by how quickly the business could be expanded. So businesses too took out loans to build more factories. The income from the goods sold would easily repay the loans. Again, this made sense, as long as the boom continued, though it would cause severe problems for the future, after the collapse of financial confidence in 1929. Even the stock market brokers resorted to the extension of credit to share purchasers with the system which came to be known as ‘buying on the margin’. This extension of credit relied on the fact that share prices always went up, so that everyone could always pay later what they owed for the shares which they had bought with a single down payment of 10 %. The idea was to pay off debts when the shares were resold at a higher price. This encouraged and fuelled rising share values as well as encouraging middle income people to buy shares for the first time.
New techniques meant that goods could be produced cheaply on a large scale. Henry Ford, founder of Ford Motor Company, pioneered “mass-production” in the car industry before the war. In the boom, this technique grew, and this meant that more goods were affordable for ordinary Americans.
Due to technologic advances, new production techniques, and changes in the nature of factory workers, goods were cheaper to buy, and more people had more money to spend on them. This caused great confidence in spending, and is a major factor in the economic boom. There was a wide variety of goods on which to spend money too. The radio is a product and service that expanded during the boom. The first commercial radio station opened in the 1920s in Pittsburgh and the first public radio station was right here in Madison. By 1922, 3 million American households had radios, and by 1929, purchases of receivers had increased by 2,500%, giving the industry annual sales of $850 million. The film industry was only a small growing industry before World War I, but it took off in the 1920s, becoming one of the ten largest industries in the U.S. In 1922, theatres sold 40 million tickets a week; by 1929, that number had grown to 100 million a week. One of the capitalists who cashed in on Hollywood was Joseph P. Kennedy, who, during eight months in Hollywood, made $6 million. A flood of new electric appliances lightened the load of the middle-class American housewife: vacuum cleaners, toasters, washing machines, refrigerators. Women became America's greatest consumers, purchasing new items, such as cosmetics – sold to them by more exposure to media and more sophisticated marketing. Old products such as furs, that a generation ago would have been considered a luxury also saw a rise in sales.
Nowhere was the confidence of consumers more evident than in the automobile industry. Annual car production rose from 2 million in 1920s to 5.5 million in 1929. By the late 1920s, there was one automobile for every five Americans. Two factors led to the rising popularity of cars. The first one was cost - the price of cars declined steadily until the mid-1920s, so that the car came to be within reach of any well-paid working family. For example, the 1926 Model T cost $290. Secondly, credit - in 1925, 75% of all automobile sales were on the instalment plan.
The chief figure in this expanding industry was Henry Ford (1863-1947). Ford did not invent the automobile, but he did the most to promote the car by developing more efficient and cheaper means of production. He built his first car in 1896 at home in his garage. Perceived as a shining model of the American success story, Ford was so trusted by the American public, that in 1928, when he announced the development of the new Model A, half a million Americans made a down payment on the car without having seen it, without having taken it for a test drive, or even knowing its final cost.
The car is a huge part of the boom. It promoted growth in other industries, especially petroleum, rubber and steel. A national system of motorways was created, as cars required better roads. After World War I, Government funds became available for building motorways and a major industry was born. It also created new service facilities, like petrol stations, garages and roadside restaurants. Motels catering to the needs of motorists began replacing hotels.
During the 20s, the three Presidents, Harding, Coolidge, and Hoover, were all Republican, and supported capitalism and business. They didn’t believe in “welfare states”. President Harding spoke for himself and for his successors Coolidge and Hoover when he asked for "Less government in business and more business in government." Businessmen had two major channels: the Chamber of Commerce and the National Association of Manufacturers. Both groups preached a return to “laissez-faire” economics, less regulation of business, and less support of labour unions. The National Association of Manufacturers labelled this program as "The American Way." There were four major ways in which the federal government supported big business. The first was high tariff policies, with the Fordney-McCumber Act (1922) & Hawley-Smoot Act (1930), the latter creating the highest-ever tariffs for foreign-made goods. Andrew Mellon was Secretary of the Treasury 1921-1932. In response to his demands, Congress repealed the excess profits tax and reduced the rates for corporate and personal income taxes. Mellon provided business leaders with a list of tax loopholes which were drawn up, at Mellon's request, by the IRS. Another way was the Federal Trade Commission (FTC). The FTC had been created to regulate big business and to look into unfair trade practices, but did less and less of this in the 1920s. The last way was Herbert Hoover, who first as Secretary of Commerce and then as President encouraged price-fixing, and believed that the government was responsible for helping businesses profit.
All these factors on there own would have made a difference, but together, they made a huge impact on the American economy, and the way of life for millions of Americans. There were some major ones, such as the car, which helped boost many other industries, but without the First World War, less money would have been spent on technology, so maybe the advancements in the automobile industry would not have happened. This is just one example of why this boom was a result of many factors, and due to the number of different factors, it was so big.
