reasons for the boom

natural resources

  • Coal fields in West Virginia and Kentucky

  • Oil reserves in Texas, Oklahoma and California

  • US could use resources to power industry, meaning less money was spent on importing

  • Natural resources were plentiful so relatively inexpensive for companies and widely available.

transport

  • 662,000 miles of road by 1929

  • 254,251 miles of railway in 1916

  • Materials and goods were easier to transport across the country

  • There was also job creation in transport sector (e.g railway drivers, mechanics) and people could work jobs further from their homes

high population

  • 106 mil in 1920

  • Immigrants coming to the country provided cheap labour

  • More people created more demand and a wider market to sell to

spirit of enterprise

  • Rugged individualism and American dream pedalled by self made millionaires like Carnegie

  • People has high hopes and worked hard with the goal of making lots of money

  • People wanted to spend on things to improve their lives, demand increased, as well as investing into the stock market

hire purchase

  • 1920s creation of buy now pay later schemes, with instalments that made purchases easier to handle

  • 75% of cars bought using hire purchase

  • Wages for 13% between 1923-29, meaning people had more disposable income to buy goods

cars and electrification

Mass production:

  • Ford’s production line reduced the cost of car from $850 to $290 by 1925

  • Improved speed of production and lowered costs because employees didn’t need to be skilled or highly trained

  • Large industrial corporations were able to buy up production of resources to control the whole process (e.g Insull controlled 111 separate companies by 1929)

Cars:

  • Registrations increased from 8 mil to 28 mil between 1920-29

  • 7% of manufacturing workforce hired by car industry

  • Leisure industry developed, places like Atlantic city and New Jersey to travel to

Electrification:

  • 1 mil fridges and 10 mil radios by 1929

  • High demand for electric goods made electricity more available

  • 75% had of homes had electricity, but places in rural areas still didn’t

Leisure and marketing industries:

  • 1st major commercial radio station KDKA in Pittsburgh 1920

  • 619 radio stations, sponsored by corporations

  • Cinemas showing Hollywood films

  • Billboard advertising

laissez faire

‘Leave things alone’ — policy of minimum government involvement in economy through low taxes or regulation

Tariffs on foreign goods:

  • Fordney-Mccumber act 1922 added charges to cheap foreign goods to make them equal to American goods

  • Easier for people to buy domestic goods since foreign goods costed the same anyway

Tax reductions:

  • Mellon cut federal taxes on corporations by $3.5 bil

  • Cuts to government spending reduced national debt

  • Higher rate tax cut 50%-20%

De-funding the federal trade commission:

  • FTC was less able to investigate business behaviour and launch prosecutions

  • Price fixing, child labour and long work hours were not stopped

  • Exploitation allowed businesses to maximise production and minimise costs

  • Textile mills in the south: 56 hour week for 18 cent/hour, mostly employed children

  • Price fixing affected small businesses

    • ¾ businesses set up in 1920s was bankrupt by the end of the decade

No foreign entanglement:

  • US refused to join alliances, used diplomacy in disputes

  • No involvement in conflict meant less money on war and defence spending

  • Countries like Germany, USSR and Japan were more friendly, providing trade opportunities

  • 85% of USSR tractors were Ford-made by 1927

  • Main investors in South Manchurian railroad were American

By 1929, largest 200 corporations owned 20% of USA’s entire wealth.