Why was the USA prosperous in the 1920s?

Question 1

WW1

Answer 1

• Increased trading and investment abroad: by late 1916, Britain was spending $10mil a day purchasing American goods and by 1919 the USA had invested over $10bil abroad
• Increased demand for goods in the army: size of US army increased to 3 million men, these men needed weapons, supplies and clothing, which boosted all sectors of the economy.
• Between 1916-19, industrial production increased by 39% and agriculture exports by 300%

Question 2

Technical advances

Answer 2

• Motor vehicle industry: number of cars on the road rose from 8 million in 1919 to 23 million in 1930.
  By 1930, car industry was contributing to 13% of US manufacturing production and employed 40 million workers
• Electrical consumer goods: development of new technologies such as mass production led to large scale development of labour saving devices e.g. washing machine and the hoover.
  160 million electrical goods sold in 1929

Question 3

Republican Economic Policy (high tarrifs)

Answer 3

• Imported goods into America are tariffed (taxted). to cover the costs of the tariff, people exporting goods to America will have to increase the cost of their goods… meaning their goods will be more expensive than American goods, so people will buy American goods.
  1921 - Emergency tariff Act: placed high duties on wheat, corn, meat, wool and sugar for 6 months
  1922 - Fordney-McCumber Act: raised tariffs on all imports

Question 4

Republican Economic Policy (low taxes and fair businesses)

Answer 4

• Taxes were reduced in 1924, 1926 and 1928.
  These reductions benefited the wealthy; tax reductions of $3.5bn were given to large-scale industrialists and corporations.

1914 - Federal Trade Commission: established to ensure that businesses operated fairly, but it did little to regulate price fixing

Question 5

Easy credit (the most important factor)

Answer 5

• The ready availability of credit enabled consumers to buy goods they otherwise could not have afforded.
• By 1929, almost $7bn worth of goods were sold on credit; this included 75% of cars and 50% of major household appliances
• One study showed that men earning $35 a week were paying the same amount for the family car

Question 6

Influence in foreign economies (export capacity)

Answer 6

• The US exported vast amounts of manufactured products

- In all, private investment by the US in forgein countries rose from $700mil in 1919 to 17,200mil in 1930

Question 7

Influence in foreign economies (American interests abroad)

Answer 7

• The government encouraged businessmen to develop extensive interest abroad, especially in terms of raw materials that fueled technological advancements
• Business corporations bought oil concessions in many countries including Canada, Venezuela, Iraq and the Dutch East Indies
• The Firestone Corporation developed a rubber industry in Liberia