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History

The rise and fall of the American economy, 1910-29

What were the causes of the economic boom?

Why did a boom happen in America during the 1920s?

Why did a boom happen in America during the 1920s?

America's assets and development

The United States of America had an essential supply of natural resources such as timber, iron, coal, minerals, oil and land. This enabled America to become a huge economic power at the beginning of the twentieth century. These resources were an important foundation for the economy.

In order to help American people to purchase the new goods that were available, systems of hire-purchase and credit [Hire-purchase and credit : A way of borrowing money. The ability to get the goods and pay back over a period of time. ] were introduced. This meant that a person could buy something by paying for it on a monthly basis. As a result, the majority of Americans could afford expensive goods. In order to encourage Americans to take advantage of the scheme, advertisments [Adverts: Use of posters etc to inform people about the new goods. ] were placed on roadsides, on the radio, in newspapers and in cinemas.

During the same period, chain stores appeared for the first time, eg J P Penney. Catalogue shopping also became fashionable as it was a convenient way of buying goods.

Electricity developed slowly before the war but during the 1920s the electricity industry experienced a huge boom [Boom: A period of prosperity in the economy. The economy was doing well and many people benefited. ]. By 1929 the majority of houses in America had electricity and 70 per cent of them used it for lighting purposes. As a result of the development of factories to produce consumer goods for the American people, the demand for electricity doubled. Electrical power was introduced in factories to drive machinery, and thus it became possible to introduce mass-production [Mass-production: Method of producing goods on a large scale and quickly. ] to a number of factories, eg refrigerators, washing machines, vacuum cleaners and radio sets.

Henry Ford and his son

Henry Ford and his son posing in the model F Ford car in 1905

The car industry is the best example of mass-production during the period. Henry Ford was a pioneer with his idea of producing affordable cars for the people of America. He set about realising his dream by producing his early cars in small workshops. He had groups of men working for him and gradually the cars were built.

Henry Ford’s hard work bore fruit. As he produced more and more cars, he could reduce his prices. By 1925 the price of a car was around $290, which was much cheaper than the price of $850 in 1908. Henry Ford was of the opinion that it was better to sell more cars for a small profit, as that meant employing more workers.

By 1929 Americans owned 23 million cars. The workers earnt good wages ($5 per day), thousands of jobs were created, roads were built, petrol stations were built, as were hotels and restaurants. Therefore the entire economy was given a substantial boost due to the car industry.

Remember:

  • You should learn the terms that explain the boom.
  • Can you remember the eight things that caused to the boom? Give reasons why they contributed to the boom.

Back to The USA, A nation of contrasts, 1910-1929 index

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