In the 1920s, the USA was booming. Business grew, people became wealthy, new buildings were constructed and thousands of miles of roads were laid. Americans were able to buy a whole new range of new products like cars, radios and washing machines. Why did the US economy grow so fast at this time? Historians have suggested that a number of factors worked together to cause the boom. There is not a single most important factor to the great business boom of the 1920s.
There is a certain cycle which must be followed for an successful boom to take place; firstly there is demand, this means that companies need to produce more, therefore there needs to be more workers, this leads to more money for the workers to spend which then goes back to there being more demand. However, this cycle does just not happen, some things help each part of the cycle making each part stronger. But this cycle needs something to get it started. This is usually, confidence among the people who have a good self-belief about their future.
There is a chain of events which lead up to the boom (causes) and each have their own set of consequences, I believe that the way which the USA came out of the war was the biggest factor for the start of the business boom in the 1920s. The First World War was probably one of the best things that happened to the USA economically (technically there are no winners in war, only losers). At that time there were few super powers in the world, the main 3 were Russia, Great Britain and the USA. France and Germany were very close thanks to their big trading market.
When the war started the USA decided to sit back and let their opponents rip themselves to pieces. All the countries closely involved with the war were all losing vast amounts of money. The USA therefore loaned some of their money and the borrowers paid them back after the war with interest on top (Great Britain only just finished paying off their debts a few years ago in 1999! ). Whilst the other super powers were fighting USA took complete control of the world trading market. During the war Britain and Germany’s boats couldn’t move anywhere because of the risks that they would be taking.
If they moved from their harbour then it is very likely that they would be very quickly sunk. But the USA was not involved and therefore could move around and trade as much as they wanted! This made it worse for the other big trading countries currently involved in the war because the USA took their trading places and would probably not get them back. After the war USA hit the ground running, the other countries were suffering after their heavy loses and would not recover for many years afterwards.
After war all countries hit a bad patch, USA did have a small depression but it was so brief this lead to a rise in everyone’s spirit, this is because that everything is back on track and they are back to improving themselves and their country. A rise in spirit leads to a rise in confidence! Earlier I mentioned the cycle that was essential for a big boom to be a success. Firstly there is demand, this means that companies need to produce more, therefore there needs to be more workers, this leads to more money for the workers to spend which then goes back to there being more demand.
There were some big changes in the 1920s that vastly improved all of the stages in the cycle. Just one big change would have affected each part in turn i. e. the domino effect, but in the 1920s there was a big change in pretty much all the stages, causes a big boom. Demand was pushed more because of the introduction of mass marketing. It was very important for people to know about the products being produced, if they do not then the business will go bust. Many companies set about paying huge amounts to have their products advertised.
This was the start of advertising for the USA and was hugely successful. It was also an introduction to the mail order catalogue. Because the USA is so big many people cannot make it to the shops making mail order catalogues an ideal thing. Improvements in media and also a greater demand for media products also helped other goods. Radios and cinema was used for advertising and was a great achievement. However, the trailers before films were no way near as successful as the advertising of what was in the film itself.
Everyone wanted to become a film star or just look like one, leading to a huge increase in the sales of cosmetics. During this time films were full of people smoking and this lead to a big rise in the amount of cigarettes being sold. The second part of the cycle, the production of more, was immensely improved at that time by mass production. Henry Ford who mass-produced his cars started mass production by creating the assembly line. Before there was just a motor and the mechanics all worked around the motor, with the new production line this was changed.
The mechanics stayed in the same place and were passed the motor from a conveyor belt. They then performed their small task and moved the motor down the line to the next stop. The next motor would then shortly arrive and the person would repeat the same small task to the new motor. This meant that cars could be built quickly and cheaply, therefore, could be sold very cheaply and soon nearly everyone could afford a car. Mass production was helped by the fact that the USA had so many resources. If an economy is to be successful then it must have 3 important natural resources; coal, oil and iron.
These are the essential resources in order for any boom to work. Coal is used for fuel and used for creating electricity, with the introduction of the motorcar oil suddenly became a lot more important to society, it is also important because you use it to make plastics, iron is used for the production of most strong metals. However, the USA had a bigger supply of a more valuable resource, people, there were millions upon millions of people living in the USA at the time meaning there were few job vacancies and people would work for less.
This meant that there was even a greater demand for products. The next part of the sequence; the need for more workers, played a big role but was not individually helped by a certain thing i. e. an improvement in technology. Because of the increase in jobs there were more workers, this gave the workers a sense of security for themselves and their future, this lead to an increase in confidence. The last part was the fact that people were making more money; this to gave an increase in confidence.
People were now able to buy so much more with the amount of money that they were bringing in, even if they did not have the money then, the creation of the credit card meant they could buy what they wanted when they wanted and would pay it back later (with interest of course). At the time a democratic government ran the country. The beliefs of the democrats are to let everything run its course and only get in the way when needed. This did help the boom because sometimes the government can get in the way and prevent a boom being as successful as it could be. The government also added an increased amount to any foreign goods.
This means that out of the things being purchased at the time a bigger percentage of those goods came from the USA, improving the economic status of the country. The main reason for this essay is to show that an economic boom is not wholly reliant on one factor but on a number of factors which are all linked. However, an economic boom does not last forever, people will not always need new things and the boom could come to a halt through over production. An economic boom is a group of events all linked together, if one collapses then so will the whole system.
The way you know this is because if one thing goes wrong then the whole thing could go wrong. If there is over production then that means there would be less demand, meaning less things produced, meaning less workers, meaning less money, therefore leading to less demand. This means you would just head down on a downward spiral. The system could also go wrong because America was lending out so much money at the time, if they lost their records of the loans somehow it would cause major problems with thousands of banks going bankrupt.