There were many factors that were important and helped to cause the boom in America in the 1920s. These were factors like the car industry, availability of credit, policies of republican presidents and advances in technology. The boom started after the brief depression of 1919-1920 where unemployment and strikes were common. This started to change when America started getting repaid by the European countries and they started to get a lot more trade because a lot of Europe’s crops had been destroyed. During the boom unemployment was low, supply and demand were high so the economy was very healthy. One of the main factors of the boom was the availability of credit to almost everyone. People found it so easy to get credit for almost any purchase like mortgages and loans for houses and holidays.
This meant that people were always able to buy things which meant that companies would have more customers and in affect make more money. Also if companies make more money, then they will pay more money in tax which the government can use to improve society and improve people’s standard of living. Furthermore, if more people are buying goods and services then more people will need to provide the goods and services which will provide more jobs and decrease the level of unemployment. Companies also made it possible for individuals to borrow money that they would like to spend on the stock market but they would only be able to pay the money back if the share price went up. However, as this borrowed money adds up the economy is put under more and more pressure as only so much money can be borrowed before money has to start being paid back.
Another big factor of the boom was the expansion and innovation of the car industry which Henry Ford monopolised during the 1920s. The number of cars sold in the U.S more than tripled over 9 years which also helped the expansion of other industries. Other industries which benefited were the rubber industry because of all the tyres that were needed, the steel industry as that’s what most cars are made of, the oil industry as that’s is what’s used for petrol and the glass industry as that is needed for windows. This helps the boom as when the industries expand they need more employees to meet the needs of the consumers, and then when they are paid they will spend the money which will go back into the economy. Ford also introduced new techniques like mass production, this was a new innovation and helped the industry grow as more could be created quicker, for example by 1928 a car was being produced every 10 seconds in Ford’s factories across the U.S.
Prices start at $12
Prices start at $11
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Prices start at $12
A further factor was the policies of the Republican presidents as they didn’t stand in the way of the growth of the economy. They had a policy of laissez-faire which meant that they wouldn’t interfere where business was involved. This meant that it was easier for companies to make profits using capitalists. The presidents also reduced taxes on businesses and individuals which helped businesses make more money and enabled individuals to spend more money on goods and services. As the businesses made more money they could use that capital to invest in the company and help them to expand. In addition, the government put a tariff on foreign imports which encouraged people to buy American goods which in turn encouraged people to invest in American companies. However, this did also have a negative effect as other countries followed suit and put tariffs on American exports which discouraged people from buying American goods.
The First World War also had an impact on the boom as it meant that other countries would have to buy from America as all of the produce in their countries had been destroyed and they didn’t have enough money to build it back up. This meant that a lot of the American industries grew and were producing a lot more to capacitate the extra demand. Also, the fact that Europe was paying America money that they borrowed helped as it meant the government could spend the money on things that would benefit society and the economy. There were also other factors like new technologies and advancing marketing techniques. The new technologies meant that processes became more efficient and quicker which meant that the consumers would have more confidence in buying the products and more could be supplied so more could be bought.
However, some groups didn’t benefit from the boom like farmers, blacks, new immigrants and old industry workers. The farmers were overproducing and the price of grain collapsed because so much was being produced. Blacks didn’t benefit as some places would only hire white people and they were discriminated against. New immigrants faced exploitation and had their jobs taken by machines and old industry workers suffered because their jobs were also taken by machines and several mines were closed down due to the substitution of coal. Altogether the boom was created through many different factors, but credit was probably the most important as it allowed industries to expand so much and created so many more jobs. The other factors were also very important and without them, the boom may not have happened. But a lot of these factors also contributed to the Wall Street crash of October 1929 and the depression of the 1930s as they didn’t think about the consequences of their actions and although not everyone in America benefited from the boom it still helped America become an economic world power.