The First World War helped tremendously throughout 1923-29 as businesses prospered by securing new foreign markets, during the war the US leant an approximate of $10 billion to the European Allies, and by the 1920s a further $1billion interest had accumulated. The increase and the shear scale of US markets meant that there was another continuous source of income for the US economy. Britain and France were almost dependant on American help following the war, but this meant that their markets almost dissolved and so America seized the opportunity and took control of their markets as well. America were in control of markets in Asia and Latin America, this led to an influx of trade and wealth where all the money was coming into America. The loans from the allies was generally spent on American goods, so not only were they loaning money to collect interest, but the money was coming straight back into their economy to industries such as ammunitions, thus they potential for tax cuts and huge investments in new industries such as ceramics, chemicals and plastics. The war had affected America’s infrastructure, and as a result the improvements in communication, transport and the workforce were still in place in order for the American economy to boom throughout 1923-29.
After the war, a sense of isolationism coupled with businesses wanting less intervention meant that a Republican Government was in power during the boom. Republican policies favoured the growth of big business, the promotion of US goods, and cheap US made products. These factors helped to keep the boom’s bubble afloat during 1923-29. The Republican policy of “L’aissez faire” literally meant “leave alone”, this led to big businesses being able to pay workers pitiful amounts, whilst keeping them massively overcrowded leading to mass production at a fraction of the cost. Since this meant that American-made products were very cheap, it promoted growth in the industry, which led to economic boom. The Republican Government were seen to back big business and were extensively opposed to Unions as was seen in 1921 when a minors strike was broke up by US armed forces causing the loss of innocent lives, this allowed workers to be exploited during the boom. Republican fiscal policy favoured conditions prerequisite for a sustained economic boom, the lowering of taxes further reduced the cost of goods, and a decrease in the cost of loans, which meant more Americans could purchase these goods or invest in the American economy. More Americans also invested money to buy shares in companies as they had more of it. Like industry shares were booming, this provided extra finance for industry and helped big businesses prosper further as well as making the investor richer. Coupled with this, the US government taxed goods imported into the country, which made foreign goods more expensive, this tax was called the Fordney-McCumber Tariff (1922). Ultimately the Republican attitude was to interfere as little as possible in business and let people handle it the way they saw necessary, the result of this was a richer and happier America. The new government added to a rise in production and consumption.
Compared to the late 19th century industry being focused on railroads and steel, the prosperity of the 1920s rested on the growth of newer industries and on a building boom. Following on from World War One, the American chemical industry was promoted and encouraged the manufacturing of synthetic textiles and plastics. Coupled with the growth in electricity, where new sources of power such as steam turbines and hydroelectric plants, improvements in generator design and transmitting power, all led to the consumption of electricity doubling during the 1920s. Coupled with this was the falling price of electricity, which led to 63% of Americans having electrically lit dwellings compared to the 16% in 1912. These markets were able to fuel the American economy and promote household appliances such as electric cookers, irons and refrigerators. These products were made cheaper because of the chemical industries now inexpensive plastics, this led to women spending less time on common household chores, which led them into the workplace and add to the economy. . People had more money to spend and they spent it on consumer goods rather than saving it.
Department stores introduced a new way of shopping and credit introduced a new way of paying for the shopping. Mail order catalogues reached the country, allowing companies to sell their goods to a wider market. The increase in consumerism led to industrial production to increase. The car’s popularity shaped American society and it also shaped American industry. Henry Fords “Model T” is probably the most important aspect of the boom, during the 1920s, by 1930 the car industry was contributing 13% of US manufacturing production and employing 4 million workers, it was using 96% f the nations oil, most of the leather, glass, rubber and steel. The Assembly lines provided a breakthrough in cheap mass production eight cars were now being made in the time it took to make one, since the job was monotonous unskilled workers were needed and so this would help to decrease unemployment across the nation. The assembly lines speed could be dictated so the rate of production would also be affected depending on how many cars they might have wanted on that day. The increase in population also gave industries like Ford’s a constantly increasing stream of workers and new men, “Detroit’s population grew fourfold during the 1920s”. By the mid 1920s 1 in 5 workers had a car this led to increases in several fields such as commuting, shopping, travel and holiday businesses. The Aviation industry began to prosper, by 1930 50,000 miles of air routes were in operation in the US and the airlines were carrying nearly half a million passengers annually, which was stimulated by the aviation exploits of people like Charles Lindbergh. The new industries simply helped the boom by creating more jobs, lowering unemployment and increasing the money flow of the economy, this meant that it promoted more markets, however the workers were in need of services from the new industries.
From the evidence above, it can be deduced that, a number of factors helped to cause a boom during 1923 to 1929, the accumulation of these factors not only helped to cause a boom but also led to sustain the boom. Whilst long term factors can include the impact of the war, natural resources and new technologies meant that America would be able to support a boom. However it was in fact the short-term factors such as Republican policies and the new methods of production, which meant that America were able to support this boom for that extensive time.