Economic boom

Reasons for the Economic Boom

  • The USA experienced an incredible economic boom in the 1920s, sometimes referred to as the ‘Roaring Twenties’.
  • Several factors contributed to this, including the end of World War I, which left the USA as one of the world’s leading industrial powers.
  • The USA had lent vast sums of money to Europe during and after the war, which boosted its own economy.
  • The Republican government’s policies of laissez-faire (non-interference in business), low taxation and high import tariffs all stimulated business growth.

Key Industries and Innovations

  • New industries, particularly automobiles and consumer goods, were at the heart of the economic boom.
  • The production of cars, led by Henry Ford and the Ford Motor Company, revolutionised the American economy. The use of production line techniques resulted in mass production, which made cars affordable for the middle classes.
  • The consumer goods industry grew rapidly. Electrical goods such as toasters, vacuum cleaners and radios were now being mass-produced and advertised widely.
  • Radio and cinema offered new forms of entertainment, and their popularity led to a huge growth in these industries.
  • Innovations in the financial sector, such as hire purchase agreements, made goods affordable to many more people.

Social Impacts of the Economic Boom

  • One of the key social impacts of the economic boom was the rise of the consumer society. With more money to spend, and goods more widely available, people bought more than ever before.
  • The booming economy allowed many Americans to enjoy a higher standard of living and unprecedented economic prosperity.
  • The prosperity was, however, uneven. While some became very wealthy, many, particularly in rural areas and among some ethnic groups, were left behind and did not benefit from the boom.

The End of the Boom

  • The boom ended with the Wall Street Crash in October 1929, when share prices on the New York Stock Exchange collapsed. This marked the start of a severe worldwide economic depression.
  • The over-reliance on certain industries and a lack of government regulation led to a fragile economy. When consumer confidence dropped, the bubble burst.