Government policies also helped the boom. The government supported businesses and helped raise wages which led to more money being spent and more new jobs becoming available. The government also imposed tariffs on any imported goods making sure that the American equivalent was cheaper so more people bought it. The government reduced taxes again meaning people had more disposable money to spend.
The American people appeared to be rich. Many household and electrical goods saw a big increase in purchase. Between 1915 and 1930 the amount of people with phones doubled from 10 million to 20 million. There were many new building being built. The car industry was revolutionised. Henry Ford the owner of the Ford car company introduced the production line into car factories. Each car was worked on by many people as it moved along a conveyer belt meaning more cars can be produced in a shorter time. This meant that the price of cars fell meaning more people bought them. In 1919 9million Americans had cars and by 1929 this figure had grown to 26 million. The multiplier effect on other industries was considerable and in many ways the automobile industry serviced the whole economy.
Other new industries grew in this time. Most were electrical goods like the washing machine and the Hoover. Hire purchase meaning people could buy more goods and pay for them over a long period of time. Catalogues also grew in popularity as well as poster and radio advertising that further fuelled consumer spending.
This prosperity did not affect all industries though. The farming industry was one which did not boom. This was largely due to the surplus amount of food grown during the war. The government encouraged the farmers to make more food but after the war the farmers had too much food meaning that prices dropped making some farmers became bankrupt and lost their farms. Farms which produced fruit, however, didn’t suffer to the same degree and they did actually gain from the boom.
Older industries like the coal, textiles and leather industries also did poorly. They suffered from the development of man made materials. They also struggled to compete with cheap labour in the southern states.
Not all American people shared in the boom either. The black community and immigrants suffered prejudice, poor employment opportunities, and a lack of formal education and health problems. Their wages were often pitifully low and certainly did not increase at the scale of company profits. Indeed, the image of prosperity in America was in many ways just a façade as many Americans still suffered abject poverty and limited opportunities. Statistically, 10% of American income in 1925 went to the poorest 42% of people and conversely 32% of the income went to the richest 5% of the people. So the rich were getting richer and the poor were getting poorer. So the divide grew as some groups benefited more than others. Clearly, the economy was based on a consumer boom in which many Americans were in fact excluded. The basis was created for a great collapse.
