The Economic Boom

This section explores the impact and reasons for the economic boom of the USA in the 1920’s. The 1920s saw an extraordinary period of economic growth and prosperity in the United States, often referred to as the "Roaring Twenties". This was a time when the economy expanded rapidly, and many businesses enjoyed large profits. Unemployment was low, wages were on the rise, and a new consumer culture took hold across the nation. This economic boom transformed the country, particularly in industries like manufacturing and consumer goods, setting the stage for modern American society.

Key Statistics of the Boom

• Radio production surged significantly during the 1920s, increasing from 100,000 radios produced in 1922 to 350,000 in 1929.
• Refrigerator production grew by 150% over the decade, as more households began to embrace new technologies.
• Car production reached impressive levels, with 4.7 million vehicles being produced annually by 1929, making cars more affordable and accessible to the average American.

Reasons for the Growth of the US Economy

The Impact of World War One

While World War One had devastated Europe, it provided a significant economic advantage for the United States. America, geographically distant from the battlegrounds, was not heavily affected by the war’s destruction. The country’s economy actually grew during the war years due to the increasing demand for American goods and services, particularly in the form of weapons, food, and materials supplied to European allies.

• American Manufacturers: With European industries destroyed by the war, American companies seized the opportunity to supply products to Europe. This expanded the US’s industrial capacity and opened up lucrative markets for American businesses.
• American Banks: Another key factor was the role of American banks, which loaned vast amounts of money to European nations, including Britain and France, enabling them to purchase goods from the US. These loans created a steady stream of profits for American businesses.

Republican Government Policies

The Republican administrations of the 1920s, particularly under President Calvin Coolidge, played a key role in fostering economic growth. Coolidge famously declared, "The chief business of the American people is business." This reflected the government's pro-business stance, which focused on reducing government interference in the economy and encouraging private enterprise.

• The Fordney-McCumber Tariff (1922): This was a protective tariff law that imposed high taxes on imported goods. The tariff made foreign products more expensive, encouraging American consumers to purchase domestically produced goods instead. This benefited American businesses, especially manufacturers, and provided the government with additional revenue.
• Laissez-faire Policies: The Republican approach was fundamentally laissez-faire, meaning they believed in minimal government intervention in business affairs. Taxes were kept low, which allowed businesses to reinvest their profits in expansion, research, and job creation. Additionally, low income taxes meant that individuals had more disposable income to spend, further stimulating the economy.

Technological Innovation

The 1920s was a period of rapid technological advancement, which played a major role in the economic boom.

• Electricity: By 1927, 63% of American homes had access to electricity, a major increase from earlier decades. This allowed for the widespread use of electrical appliances, transforming daily life.
• Household Goods: The rise in electricity prompted an increase in the production and purchase of electrical goods, such as refrigerators, radios, and vacuum cleaners. This created new industries and jobs, while simultaneously improving living standards.

As more Americans gained access to modern appliances, the demand for these goods soared, creating a cycle of growth that benefited manufacturers and retailers alike.

The Rise of Consumerism

One of the most significant cultural shifts of the 1920s was the rise of consumerism. With rising wages and more disposable income, a growing number of Americans began to buy luxury items that were once considered out of reach for the average person. The rise of advertising and new forms of credit played a pivotal role in encouraging consumer spending.

• Advertising: Advertising in the 1920s exploded, reaching consumers through new media such as radio, billboards, and cinema. Famous personalities, including film stars and sports figures, were frequently used in advertisements to sell products, further driving the desire for luxury goods. This helped create a culture of consumption, where owning the latest products became a symbol of status and success.
• Consumer Credit: Another important factor in the spread of consumerism was the introduction of hire purchase schemes, which allowed people to buy goods on credit. This "buy now, pay later" system meant that even those without the immediate funds could afford to purchase expensive items like cars and household appliances. This made goods more accessible and helped boost demand across a range of sectors.
• Increased Disposable Income: With wages on the rise, many Americans had more money to spend on leisure activities and luxury goods. This was particularly noticeable in the growing popularity of products like automobiles, radios, and cinema tickets, which contributed to a booming entertainment industry.

The 1920s were a transformative decade for the United States, marked by rapid economic expansion and widespread cultural change. The combination of favourable government policies, technological advancements, and a new consumer-driven culture set the stage for an era of unprecedented prosperity. However, while many Americans thrived during this time, it’s also important to note that not all groups benefited equally, with issues such as racial inequality and poverty continuing to affect significant portions of the population. Nonetheless, the 1920s are remembered as a time of economic dynamism, innovation, and societal change.