American Economy in the 1920s

Warren G. Harding succeeded President Woodrow Wilson in 1921, inheriting a nation left poor and overworked from World War I. Harding quickly assumed pro-business measures. A month after taking office, he presented his program for economic recovery. “A Return to Normalcy” included:
1) A call for a national budget program (which was vetoed by his predecessor).
2) National debt reduction
3) Tax reduction
4) An emergency tariff to protect American industry and farm commodities.
5) Farm relief legislation
6) Immigration restrictions to protect American jobs.

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These conservative fiscal policies built the foundation for economic upturn that took place after Harding’s death.
Harding’s vice president, Calvin Coolidge, continued his predecessor’s program. Coolidge followed Harding’s lead, which cut t h e federal spending from Wilson’s high of $23 billion in 1919 to $10.5 billion two years later, and kept the spending level below $12 billion for the rest of the decade. The tax cuts during their two presidencies increased revenue to help reduce of Wilson ’s de bt by a third. Unemployment and inflation decreased immensely during these times, and combined with the tax cuts, most o f the middle and lower class Americans were finally able to afford items that were considered luxuries before. The age of inventions boomed as Americans caught on to the wave of increased recreational time. More on 1920s social life

external image cooledge.jpg President Harding
However, tax cuts also aided the rich, who were left with more money to speculate. With Coolidge’s blocks for government intervention in private business with his vetoes, a speculative bubble grew into the 1930s that led to the stock market crash and Great Depression. Coolidge’s successor, Hoover, also followed relatively laissez-faire approach, only urging businesses to cooperate and regulate them instead of act ively enforcing laws to oversee them. Even with the stock market crash in 1929, Hoover, under his top economic advisor, Andrew Mellon, left the businesses to “fix” themselves. He believed that not selfish, but communal, creating a mutualistic society that made growth of government power unnecessary. Unfortunately, this approach failed, and the economy dipped into depression. More on Hoover's politics

President Coolidge

Still, Coolidge and Hoover are not entirely to blame. The Federal Reserve had eased credit and increased the money supply in the early 1920s, which gave much incentive for speculation. In 1929, it had decided that this policy wasn’t sustainable, and cut back on credit immensely by raising interest rates. Since a majority of Americans had become accustomed to living on easy credit, the cut made a drastic impact.

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The stock market crash left the economy helpless

Another important aspect of the three pro-business Republican administrations is the Secretary of Treasury for all three of tho​se terms – Andrew Mellon. His strong stance on tax cuts and returning money back to the people backfired. When too much were in the citizen’s hands, they became too prosperous, overspeculated too much and lost it all. There has been much government involvement in the economy since the Great Depression.

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Andrew Mellon

One of the biggest advancements America made in business and production was in the 1920’s and it is credited to Henry ford. He developed and popularized the idea of mass production and the assembly line, distinctly with the Ford Model T. Mass production is affective and helped bring the United States out of its brief depression because it allowed for high rates of production and low priced products.

Henry Ford and the Ford Model T

Industries and businesses were booming in the 1920’s as mass production took effect and new methods of advertisement, such as mass marketing, appeared. Mass marketing is important because it targets a large quantity of customers unlike previous methods of marketing which were directed to a single person or group of people. An example of a mass marketed product of the time would be something as simple as toothpaste.toothpaste1.jpg

Many inventions we produced during this time that we take for granted today. The radio was a major development that changed the lives of Americans. Before the 1920’s, news and important information would take an excessive amount of time to be passed along, but because of the radio, almost all Americans had instantaneous information. The radio also aided the method of mass marketing because advertisers would pay money to have their product publicized over the air, a technique that benefitted both the advertiser and the radio station. Telephones were also being connected across the entire continent, another gigantic technological and economic improvement made by the US.
1920's radio

The development of all the new technology led to the need for improved infrastructure, which fell in the hands of the government, who began building many roads, highways, and expressways.
1920's highway
Americans also started using electricity instead of coal, which lead to the development of vast amounts of power plants.Other inventions that seem basic to us today were extremely profitable in the time period.
Inventions such as;
  • Indoor plumbing and modern sewer systems
    1920's traffic light
    A Victorian Bathroom
  • Television
  • Penicillin
  • Liquid-Fueled Rocket
  • Traffic Lights


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