There were many factors that caused the economic boom to happen. However the main reasons were the first world war,republican polices ,industrial strength,state of mind and industrial methods. The first world war greatly impacted the American economy. Great Britain,France and Germany were all fighting each other so there was no competition. America stepped in to take over their export markets (which were world wide). They supplied Great Britain and France with munitions and loaned them money, which they paid back with interest.
America was very fortunate in all their natural resources it had, this gave it industrial strength. They had oil, coal, and iron ore. These were were valuable and worth a lot of money because you need iron ore to produce steel, oil for any form of transport and coal for fires. This made America very rich. They also had lots of arable land, and skilled workers and farmers produced more than they could sell. It was a lot more efficient and productive. The motor industry was extremely important.
It employed hundreds and thousands in the production of cars and a similar number in the supply industry’s e. . glass production, sheet metal, rubber and leather. Service stations supplying petrol appeared all over the country, and engineers were needed to service car engines. Thanks to The 1916 Federal Road Act new roads were being built all over America,which employed thousands in their construction and supply industry’s e. g. concrete, metal bridges and road signs. The most popular of Fords cars was the Model T-more than 15 million were produced by 1925, selling at the rate of one every ten seconds. The prices went up fast, as people got richer.
America had a large growing population which was good, because they had more people to work and generate more money. Even women started working and there was a lot of immigration. A lot of new industry’s were set up, such as a new truck industry and passenger aircraft in 1927-which by 1930 companies were flying over 162,000 people per year. Rayon was also invented which sold 300 million to a female population of 100 million. They began a great age of popular entertainment, starting theatres and radio stations.
The most popular was the cinema which sold 100 million tickets a week by the end of the twenties. This gave people more jobs and meant more people had more money to spend. Electricity was taken to most American cities. This had a positive effect on the boom because lots of people were willing to pay for it and more and more people wanted it. By 1929 almost all urban homes had it. Some new methods helped America become rich, the most important was the moving production line (otherwise know as the assembly line).
This was where the workers remained in the same position all day, adding one or two components to the products as they rolled past them on the conveyor belt, instead of one person making the whole thing. It really sped up production. The introduction of mass production revolutionised the American economy, because prices fell and more people could afford things-so the demand increased. Advertising was another method that was good for the economy, because it persuaded people to buy more things. However propaganda campaigns were redirected towards selling consumer goods.
This started a consumer boom based on telephones, radios, vacuum cleaners and washing machines. Hoover and Kodak became household names. People made use of posters, radio advertisements and adverts at the cinema and would tour the country demonstrating products. The American government was republican in the 1920’s. They believed in laissez faire, which meant they didn’t get involved in the working of the economy. This policy helped the economy because they weren’t hampering productivity or creativity through a range of regulations, but let the economy grow.
Another policy the government had was protectionism. This meant they put high import taxes on foreign goods e. g. In 1922 Harding introduced the Fordney-McCumber tariff which made it expensive to import food in the USA. This isolationism helped the economy because it protected American businesses against foreign competition, and allowed American companies to grow rapidly. The republican government passed anti-union laws. This helped business because there were no workers campaigning for higher pay. So it made businesses richer and more successful.
A very popular policy was low domestic taxes. This helped the economy because if people kept their own money they would spend it on American goods, and wealthy people would reinvest their money in industries. Another policy the government had was trusts. This meant they allowed huge super-corporations to dominate industry. Woodrow Wilson and the democrats fought against this policy because they believed it was unhealthy for one person to have complete control over a vital (very important and needed) sector of industry e. g. Carnegie (steel) and Rockefeller (oil).
This helped the economy because the “captains of industry” knew what was best for the economy more than politicians would, and they helped the USA become more prosperous by making their own companies successful. One of the main reasons for the boom was the way people felt. They thought they would always have a job and were confident business would keep booming. President Hoover said one day there would be “a chicken in every pot and two cars in every garage” and claimed that America was “Nearer to the final triumph over poverty then ever before in the history of any land”.
This led to people taking out loans if an item was too expensive. Many people used hire purchase to buy things. This is when someone takes possession of goods after paying the rest of the price in regular instalments over a certain period of time. It was good for the economy because people ended up paying more for their goods then they would if they had bought it. It helped the businesses get richer, and didn’t hugely effect the people using hire purchase as they were wealthy and could afford to.
A lot of people bought on margin, which means they took out loans to purchase shares in the stock market. Loans were good for the economy, because it kept the banks prosperous and most people who took out loans made good use of them. This helped them boom as the stock market was going up, because so many people had shares lots of people made profit and reinvested it in other businesses. There is no definitive cause that was the start of all five of these reasons, but they are all linked and some have been caused by others.
The first world war caused peoples state of mind to change as they became more confident when they saw the amount of money the war was helping them gain. Industrial strength and new industrial methods also caused people to grow in confidence, and industrial strength caused new industrial methods and ideas to speed up the production process. Republican policies hugely impacted the growth of industrial strength, as they helped industry’s grow, protected them from foreign competition, and helped them to keep their workers down.
State of mind also caused industry’s to grow, as people were a lot more eager to purchase shares in the stock market and reinvest their money in businesses because of their confidence in the economy and the stock market. I think the most important cause of the boom was the first world war. This is because America made lots of money supplying Great Britain and France with munitions and other goods as well as lending them money. They took over world wide export markets and made a huge amount of profit, which then caused peoples to become more confident, and that contributed to many more things.