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Economic Prosperity in the 1920s

Why was there economic prosperity in American in the 1920s?

I know that America on its surface was prosperous during the 1920s. I know this because of the physical signs, and the evidence I have found supporting this concept. Some of the physical signs of the then prosperity are evident today, like the skyscrapers and Empire State building. There were the inventions of manufactured fabrics and materials such as Bakelite, artificial silk and Cellophane. Airlines carried almost half a million passengers a year, which compared to Europe at the same time, was a massive number of people. In this essay, I will analyze all the reasons behind the economic prosperity in 1920.

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World War 1 assisted America’s later prosperity. Throughout the war, American industry benefited, because countries that couldn’t buy goods from Europe, did so from America. And along with this Europe bought products from America, products that they weren’t producing while they were fighting. Furthermore, during the First World War, American banks lent money to their European Allies.

In the 1920s, this was being paid back with interest. The war had also led to advances in technology, such as mechanisms and manufactured materials. Production of Iron Ore, Coal, petrol and wheat and exportation of chemicals, wheat, iron and steel all had increased considerably by the end of the war. By the end of the war, America had decided to isolate itself from the problems of Europe and set itself about making the most profit in business. This isolationism built up the confidence of the American people.

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An increase in personal wealth, demand and output production all helped America’s prosperity. Banks were eager to lend money to businesses and individuals. With this easy money and the introduction of hire-purchase schemes, the demand for products increased. Consumer spending was incredibly high, which is reflected in the statistic that in 1920 there were 312 department stores, and by 1929 there were 1395. There was a consumer boom. Business profits rose by 80% during this period, which in turn raised share dividends by 65%. Also, some women had continued working as they had done through the war. Both of these elements contributed to giving people again, more money to spend.

However, the availability of money was not the only reason for increased consumer spending. New inventions such as vacuum cleaners, refrigerators and washing machines became available, and advertising over the popular radio encouraged consumers to spend more on everyday products. Henry Ford had founded the Ford Motor Company in 1903, and a few years later he introduced Assembly-Line Production. This was a breakthrough in cheaper mass production. In addition to this, the discovery of electricity quickened the rate of manufacturing in factories, which increased output.

The result of this new production method and introduction of electricity was the Model Tin Ford or ‘Tin Lizzie’. This new production method had cheapened the cost of cars, which coinciding with this easy money explains why in 1920, there were 8 million cars on the road, and by 1930 there were 23 million. All these new cars led to increased road construction, more petrol garages, and more restaurants and hotels’, as America suddenly became much smaller.

With the discovery of electricity, came a boom in related industry, which consequently helped lower unemployment. The electricity discovery directly increased factory production of wires, light bulbs, and general electrical fittings. Workers in all industries were making a steady income. Their real wages were going up slightly because they were taxed less and the cost of living stayed steady. This meant the lower classes had a little more disposable income.

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The American public did not only buy goods and products. With their credit, hire purchase, dividends, and wages they also invested on the Wall Street Stock market and spent on more entertainment. The stock market boomed as many Americans bought shares on credit, ‘hoping to make a quick buck’. As more shares were bought, the businesses expanded, and output production increased more. More spending in entertainment developed the film industry. First, there were silent movies, and then after 1927 there were ‘talking pictures’.

Skyscrapers, jazz music, cinema, radio, the ‘flapper’s’ and a higher level of economic independence for women were all positive elements of life in the 1920s. Generally a less relevant point, but one that I feel is worth mentioning is that after a small level of economic prosperity, confidence in the government, economy and in low unemployment grew. This caused people to be more generous and to expect more. With all the new inventions, less emphasis was based on practicality and need, and more on want and preference, consequently general consumer spending for those whom easy money was available, rose.

There is no doubt that hire purchase; credit, increased demand and consumer spending on various things and new ease of manufacturing had a direct effect on the general prosperity of America.

The Republican governor also played an important role in making economic prosperity in America. They believed in not imposing unnecessary rules and regulations on businesses, which personally benefited each business because they could cut corners to make more profit. In addition to this, in 1922, the government introduced the Fordney-McCumber tariff, which raised import duties on foreign goods, which encouraged people to buy home-produced goods instead which added to the increased demand.

Economic prosperity in America during the 1920s was due to several contributing factors. The confidence that America had due to its isolationism, successful high levels of production and large numbers of profitable businesses after World War 1 lead to increased confidence. This confidence meant that people would spend their disposable income on newly invented products and the stock market, which increased businesses and seemed to secure their jobs more, which again, led to more confidence and the cycle repeated again.

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Without the kick-start that World War 1 gave America, I do not believe it would’ve had such a consumer boom. I think there would have been a continued level of confidence and economic success after World War 1, as some countries continued to import from America and the banks received their money with interest. But, I do not think without the increase of manufacturing and the invention of Assembly Line production that there would have been such a boom. On balance without all the factors I have previously discussed combining, I do not believe there would not have been such a feeling of economic prosperity.

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Economic Prosperity in the 1920s. (2021, Feb 10). Retrieved December 6, 2022, from