I believe President Coolidge was the most successful president in the 1920s. It was during his presidency the American economy boomed and America became the richest country in the world. Though the economy didn’t boom because of Coolidge he did help people by lowering taxes and having less people pay them, which helped people as they had more spending money. Unlike Harding who gave important jobs in the cabinet to his friends who later kept money dishonestly in their greedy hands, in which $200 million disappeared. Hoover was also not successful as he did not do enough to deal with the continuing depression. When the recovery that Hoover continued to promise did not arrive, people started to lose faith in him and the government.
There were many causes of the economic boom in the 1920’s. One reason for the boom was the policy of the Republican Party. From 1920 to 1932 all the US Presidents were republicans. Republicans believed the government should interfere as little as possible in the everyday lives of people. When the republicans came to power they introduced tariffs, this made it expensive to buy foreign goods. The tariffs protected US businesses from competition. The republicans kept taxation as low as possible because of this people had more money and they would buy American goods because they were cheaper or invest it in the American economy. More Americans also invested money to buy shares in companies as they had more of it. Industry shares were booming, this provided extra finance for industry shares and helped businesses prosper further as well as making the investors richer. The Republican attitude was to interfere as little as possible and let people handle it they way they like, the result of this was a happier and richer America. The new government also added a rise in production and consumption.
Another reason for the boom was the new industries in America. Americans loved new products such as the automobile, by 1929, 23 million people owned cars. A massive programme of road production began, this produced jobs and unemployment fell and people were earning more money. Another factor that allowed new industries to develop was electricity. Many new products such as washing machines, refrigerators and toasters ran on electricity. These new industries boomed, owners of these businesses got richer and people’s lives became easier as well as the economy was improving.
Another cause for the boom was the rise of credit and advertising. People receiving improved wages but they still needed money to buy certain goods. Advertising made people think they needed these products. Advertising came in many forms such as radios, posters, cinema and newspapers. One of the most effective ways of advertising was the ideal home. This made many Americans believes there home was incomplete without certain products; people used credit to buy these products. Credit was when banks and finance houses lent money to people and agreed to pay it back once a week or month but with interest added on top. Credit meant people were buying more and paying more for it, this meant more money was going into the economy. Advertising and credit led to a rise in consumption and more money going into the economy.
Another cause for the boom and perhaps one of the important reasons was mass production. Mass production was 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 passes on an assembly line, at the end it would be a finished car. The advantage was work was completed very quickly. This increased the output of production, making it cheaper to buy cars, which increased consumption. Henry Ford’s car industry also helped other businesses, as more people had cars this helped petrol stations and oil companies. The car production was being a catalyst for the boom.
All the causes of the boom can be linked together in the cycle of prosperity. This is where more people have money and because of advertising they spend it on goods. To buy these goods people used credit. People also had more money as a result of the low taxes and their businesses doing well because of the republican policies. Then more goods need to be made and this was made by mass production. Mass production was only able to occur because America had raw materials readily available as America suffered the least in the first world war. The cycle than starts all over again, it was a cycle that got better and better. This was because it was a cycle that kept producing and consuming thus keeping the economy going and booming. Money was flowing around the economy.
Though the 1920s had been a time of prosperity for many, there were major structural problems with the economy. Continued prosperity depended on people who continued to spend more and more. But in order to buy consumer goods people had to run up large debts, and by late 1920s many of those who were able to buy cars had already done so. This meant in the late 1920s there was a downturn in demand. This situation was made worse by a number of reasons.
Wealth was distributed unequally which meant rising profits were not passed on to workers, so most people could not afford to spend more. This meant demand did not rise as fast as production.
There was overproduction which meant industries were producing more than people wanted to buy. By 1929, unsold stock was building up and manufacturers were forced to cut back on production and warehouses began to fill with unsold goods. This led to workers being laid off and unemployment began to rise.
Heavy borrowings, millions of Americans were in debt. Everyone was so confident about the future that companies, stockbrokers, speculators and individuals all borrowed heavily from banks. The American banking system was weak so if a large number of investors wanted to withdraw funds at once, banks would be forced to close. They were not national banks but local state banks with insufficient funds to cover unusual demands. They had lent too much and also used depositor’s money to make a quick profit for themselves on the stock market.
Brokers provided expensive loans to enable investors to buy shares. When the stock market crashed, investors could not pay back their loans.
Imported duties had been placed on various European goods. Other nations found it difficult to sell their products in the US. This meant they had lower income and therefore had to borrow money from US and became increasingly dependent on the US economy. When the US went down others would follow.
The Wall Street Crash led to the great depression. The depression hit all walks of life. Almost 32,000 US businesses folded in 1932 alone. Many schools were forced to cut terms, release teachers or close down. From 1929-32 5000 banks folded losing $3.2 billion of deposits. The national income fell from $80b in 1929 to $40b in 1932. The price of goods continued to fall. Industrial production was cut. Wages fell and workers were laid off. A ¼ of the workforce about 13 million were unemployed in 1932. This meant anger turned on the Republicans under president Hoover his tax cuts and support for the banks failed to help the situation. The Republicans didn’t believe interfering with business or welfare.
Many European countries felt the effects of the depression. Germany, the new Weimar government broke down between 1929-1933. By 1933, conditions were serious in Germany. 6 million people were unemployed, and the country was desperate for a strong government. People saw hope in groups like Hitler’s Nazis who promised a strong government and a better life.
Italy, the Italian leader Mussolini wanted to take people’s mind off the economic problems by increasing the power of Italy abroad. He wanted to create a new Roman Empire.
Britain, democracy survived but there were 3 million people unemployed. Extreme groups like Oswald Mosley’s ‘Blackshirt’ fascist party became popular in some areas after 1931.
France, the effects of the depression hit France later than most countries, when they could no longer sell luxury goods like wine. There were over 1 million people unemployed, and extreme political groups began to become more important there too.
Japan, goods like silk wouldn't sell and Japan’s economy was badly affected, so Japan decided to take over other countries.
Most industrial countries were affected, banks failed, industries struggled, and trade ground to a halt. The least affected country was the USSR, which had a communist system.
