Causes of the Economic Boom

The Multiplier Effect
1. Technological Advances
  1. New forms of media helped to stimulate demand
    1. Cinema and radio
  2. Allowed huge increases in both the quantity and variety of products on sale
    1. Automobile industry
      1. Henry Ford revolutionised the motor vechile industry with new methods of mass production
      2. The growth of this sector had a knock on effect, that saw the growth of new services
        Garages
        Motels
        Petrol Stations
        Used Car Sales
      3. Improved transportation also afforded new opportunities for insutry
        Goods could be much more easily be moved from factories to their markets
    2. Electrical Consumer Goods
      1. Facilitated the development of labour saving devices
Easy Credit
1. By 1929 almost $7 billion worth of goods were Sold on credit; this included 75% of cars and 50% of major household products
2. Credit facilities enabled consumers to buy goods they otherwise could not afford
3. This consumer boom was greatly aided by the availability of hire purchase - the ability to buy goods on credit. Because times were good, people were not worried about having to keep up payments.
Inheritance from the past
1. Isolationism + Racism
  1. The Red Scare
  2. Racism
  3. Immigration Policy
2. Strong, educated worforce
  1. Entreprenurial Flair
3. Prior to 1920's - 1st industrial revolution
4. WW1
  1. Stimulated Growth in agriculture and "staple" industries
  2. Political
5. Society’s beliefs
  1. Laissez Faire
  2. Rugged Individualism
Role of the Federal Government
1. Republican Presidents followed a policy of laissez faire, meaning that the government interfered as little as possible in the running of the economy.
  1. However, due to advances in technology the Government passed The Federal Highway Act of 1921 that gave responsiblility for road building to the central government rather than individual states
2. believed that business should get on with the process of creating wealth.
  1. "The chief business of the American people is business” Calvin Coolidge
    1. Andrew Mellon, Treasury Secretary in Coolidge’s administration believe in a free market
      1. Mellon proposed that wealth filtered down naturally to all classes in society; so the best way to increase living standards for all was to do everything possible to enable the rich to continue to make money and invest in industrial development
3. Fewer Regulations
  1. The Federal Trade Commission was increasingly unable to and unwilling to operate effectively
  2. Economies in Government meant fewer regulations and fewer personnel to enforce them
4. Tax Reductions
  1. The government helped in this by keeping taxes as low as possible. This had the dual purpose of allowing businesses to invest more money to expand their operations and giving consumers more money in their pockets to keep spending.
    1. Taxes were reduced significantly throughout the 1920’s usually to the benefit of the wealthy and the expense of the poor
5. High Tariffs
  1. High tariffs were introduced through the Fordney-McCumber Act 1922

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Causes of the Economic Boom

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	Created by eichanghai about 11 years ago