Economic Boom 1920s

 

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Definition and Summary of the Economic Boom in the 1920s
Summary and Definition: The Economic boom in the 1920's was a period in American History often referred to as the Roaring Twenties. This period of economic boom was marked by rapid industrial growth and advances in technology. The Economic Boom in the 1920's saw increases in productivity, sales and wages accompanied by a rising demand for consumer products leading to massive profits for businesses and corporations.

Economic Boom of the 1920s:
This article provides reasons for the Economic Boom and the causes of the Economic bust - the 1920's example of the Boom and Bust Cycle.

Economic Boom 1920s
The economic policy of the United States was highly influenced by the policies of the Mellon Plan when the Secretary of the Treasury, Andrew Mellon, introduced policies which reduced taxes on the wealthy and the businesses in America that encouraged growth and led to the economic boom and the rise in stock market investments.

Economic Boom 1920s Facts for kids: Fast Fact Sheet
Fast, fun facts and Frequently Asked Questions (FAQ's) about the Economic Boom in America during the 1920s.
 

What is a Boom? A boom is a time of financial prosperity, stock growth and rapid progress. A Boom is often followed by a Bust indicated by a fall in production and an increase in unemployment.

 

What caused the Economic Boom of the 1920s?
The causes of the Economic Boom of the 1920s were the Republican governmentís policies of Isolationism and Protectionism, the Mellon Plan, the Assembly line and the mass production of consumer goods such as the Ford Model T Automobile and luxury labor saving devices and access to easy credit on installment plans.

Economic Boom in the 1920s - Consumerism

Economic Boom in the 1920s - Ford Model T Automobiles

American Economic Boom 1920s Facts for kids
The following fact sheet contains interesting facts and information on the American Economic Boom in the 1920s for kids.

Facts about the Economic Boom 1920s for kids

 
Economic Boom 1920s Fact 1:What is a Boom? Definition: A boom is a time of financial prosperity, stock growth and rapid progress. A Boom is often followed by a Bust indicated by a fall in production and an increase in unemployment.
  
Economic Boom 1920s Fact 2:Following WW1, America experienced a massive economic boom bringing an increased demand for American goods (Consumerism) and rapid industrial growth. Before World War One, America was in debt to Europe. After WW1 the situation was reversed and the former Allies owed America more than $10 billion for the cost of armaments and food supplies.
  
Economic Boom 1920s Fact 3:After an initial recession in 1919, middle class Americans moved to a period of  prosperity. Between 1921 - 1924 the nationís gross national product (GNP) jumped 40% from $69 billion to $93 billion and wages rose by an average of 22% per person.
  
Economic Boom 1920s Fact 4:During World War One (1914 - 1918) manufacturing techniques, efficiency and production increased through necessity in order to meet the urgent demands of the war effort.
  
Economic Boom 1920s Fact 5:The new advances in manufacturing techniques and technology were transferred from focusing of the needs of the military to the production of consumer goods.
  
Economic Boom 1920s Fact 6:The advances in technology led to the age of steel and electricity. Industries switched from coal to electricity and many homes, especially in the industrialized cities, were powered by electricity.
  
Economic Boom 1920s Fact 7:Access to electricity provided Americans with the power required to run new labor-saving luxury, devices such as radios, phonographs, electric razors and irons, refrigerators, washing machines and vacuum cleaners. Refer to Inventions in the 1920's and Industrial Revolution Inventions
  
Economic Boom 1920s Fact 8:The factory system and the efficiencies of the Assembly Line were introduced by entrepreneurs and industrialists such as Henry Ford.
  
Economic Boom 1920s Fact 9:Mass Production techniques, such as the introduction of the Assembly Line, enabled massive quantities of products to be produced quickly, cheaply and efficiently by automated, mechanical processes and reduced consumer costs.
  
Economic Boom 1920s Fact 10:The Ford Model T automobiles, mass-produced on moving assembly lines, increased production and reduced costs and by 1924 a new Ford Model T could be purchased for just $260.
  
Economic Boom 1920s Fact 11:Many ordinary Americans, who were once "prudent and thrifty",  were able to purchase cars and other luxury goods on easy consumer credit, paying some money down at first, followed by 1 -5 years of monthly payments. The new philosophy of the economic boom was "Live now, Pay later". Refer to Buying by Margin and The Long Bull Market
  
Economic Boom 1920s Fact 12:The rapid development of the automobile industry had a positive effect on other industries due to the need for more rubber to make tires, more glass for windscreens, more paints and an increased requirement for leather for car seats. The rise of the car industry revolutionized transportation in America and the construction industry also boomed to meet the requirement for new roads, petrol stations and motels.
  

Facts about the Economic Boom 1920s for kids

 

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Facts about the Economic Boom 1920s for kids
The following fact sheet continues with facts about Economic Boom 1920s for kids.

Facts about Economic Boom 1920s for kids

 
Economic Boom 1920s Fact 13:Advances in Technology led to a boom in the chemicals and movie industries. Refer to Hollywood in the 1920s
  
Economic Boom 1920s Fact 14:In the movie industry the studios made epic films such as Ben-Hur (1925) which alone grossed $5,500,000. By 1929 over 25,000 cinemas had opened and an average of 100 million Americans went to the movies on a weekly basis. Audiences of this vast size ignited the imagination of manufacturers and merchants with products to sell. The movies became one of the most important advertising mediums of the 1920's.
  
Economic Boom 1920s Fact 15:The movie stars contributed to the economic boom in other ways. The Movie stars were idolized and their fans were eager to follow the new fashions that were advertised via newspapers and magazines.  The 1920's saw the emergence of the youth culture and the age of the Flappers. Young women were influenced, and wanted to imitate, the glamorous clothes, fashion and styles of movie stars. Refer to 1920's Fashion for Women
  
Economic Boom 1920s Fact 16:The movie industry led to a massive boom in clothing and other items such as cosmetics, hair dye, mouthwash, deodorants and perfumes. All of these  added to the ever-growing list of new consumer products manufactured in America.
  
Economic Boom 1920s Fact 17:Mass advertising: Mass advertising promoted a massive range of new products in the consumer society of America and led to the general acceptance of buying by on credit as a way to finance consumption. 70% of radios sold in the 1920's were purchased through credit plans.
  
Economic Boom 1920s Fact 18:The Radio Industry: Annual sales of radio equipment sky-rocketed from $12.2 million in 1921 to $842.5 million in 1929. The latest Jazz music and other types of popular music of the Jazz Age was played on the radio, leading to the booming sales of gramophones and records. By the end of the 1920s there were over 100 million radios in use in America - all selling advertising time.
  
Economic Boom 1920s Fact 19:The Radio Industry made a massive contribution to the rise in Advertising, which became big business in the late 1920's and fueled Consumerism in America. In the 1928 election campaign radio networks sold more than $1 million in advertising time to the Democratic and Republican Parties.
  
Economic Boom 1920s Fact 20:The development of new products and new industries resulted in more jobs. The profits made by the businesses also resulted in higher wages. For example, between 1922 and 1928, the average income on tax returns of those earning more than $100,000 increased by 15%, and the number of taxpayers in that group almost quadrupled. During the same period, the number of taxpayers earning between $10,000 - $100,000 increased 84%, whilst the number reporting income of less than $10,000 fell.
  
Economic Boom 1920s Fact 21:The economic boom in the United States was enhanced by the abundant supply of core goods such as coal and oil.
  
Economic Boom 1920s Fact 22:The Republican backed Mellon Plan resulted in the Revenue Act of 1924 that cut federal tax rates. In 1920 the majority of tax payers paid 4% federal income tax and wealthy Americans paid 73% income tax. By 1928 the majority of tax payers were paying Ĺ% income tax and rich Americans had their income tax reduced to 73%
  
Economic Boom 1920s Fact 23:The Mellon Plan also cut government spending and significantly reduced the WW1 government debt. Between 1921 and 1929 the Republican Mellon Plan reduced the nation's debt by $7 billion. Andrew Mellon was called "the greatest Secretary of the Treasury since Alexander Hamilton."
  
Economic Boom 1920s Fact 24:Isolationism: The Republican governments of the 1920's also adopted the policy of Isolationism which avoided foreign entanglements and limited foreign competition by imposing high import tariffs (taxes).
  
Economic Boom 1920s Fact 25:The 1922 Fordney-McCumber Act saw the introduction of the highest tariffs in American history, this policy was called Protectionism
  
Economic Boom 1920s Fact 26:The Republican Presidents adopted a 'laissez-faire' (free market) policy which allowed big businesses to expand without being held back by the government.
  
Economic Boom 1920s Fact 27:The Easy credit of the 1920's saw a massive increase in consumer indebtedness, together with an equally dramatic decline in savings. 75% of the  population spent most of their yearly income to purchase goods including food, clothes, radios, and automobiles. Consumer Credit outstanding in 1929 totaled over $3 Billion. And ordinary Americans had started to gamble on the Stock Market, believing it was a 'safe bet'.
  
Economic Boom 1920s Fact 28:The excess of the 1920's and the confidence inspired by the Economic Boom ended abruptly with the 1929 Wall Street Crash. Share prices began to fall and $30 billion was lost in just 2 days.
  
Economic Boom 1920s Fact 29:The Total Consumer Goods purchased on Credit in 1929 was $7 Billion.
  
Economic Boom 1920s Fact 30:The Stock Market crash led to the ruin of many Americans and was followed by the Great Depression. The Great Depression witnessed the end of the Economic Boom in the 1920's and the 'Bust' of the 1930's
  

Facts about Economic Boom 1920s for kids

Facts about Economic Boom in the 1920s for kids: The Negatives of the Economic Boom
Not everyone in America prospered during the Economic Boom and 60% of Americans were under the poverty line.

 

The Negatives of the Economic Boom

Black AmericansAfrican Americans suffered from racism and were unable to obtain high paying jobs
ImmigrantsImmigrants suffered due to Nativism (prejudice against immigrants)
FarmersAmerican farmers suffered due to over-production that resulted in low prices

Facts about Economic Boom in the 1920s: Reasons for the Economic Bust - The Boom and Bust Cycle
An economic Boom is often followed by an Economic Bust indicated by a fall in production and an increase in unemployment, called a Boom and Bust Cycle. A boom and bust cycle is an economy characterized by a period of economic growth with an increase in its production and GDP followed by a period of economic contraction with a fall in production and an increase in unemployment. The reasons for the Economic Bust are detailed as follows:

 

Reasons for the Economic Bust

1929 Stock Market CrashA sudden fall in prices and a loss of confidence led to the 1929 Stock Market Crash. People had over-speculated and many had borrowed money to buy shares. Refer to The Long Bull Market
Over-production in industryOverproduction in industry resulted in supply exceeding demand with a vast amount of unsold goods.
Over-production in farmingMechanization in agriculture led to abundance of crops and falling prices, made worse by the falling demand from Europe
Trade  and CommerceEuropean countries had imposed a tax on American goods making them too expensive to buy in Europe
Property pricesMany houses were worth less money than what had been paid for them.
Consumer CreditThe "Live now, Pay later" led to massive financial difficulties as people were unable to pay their debts.
Bank ClosuresThe Small banks in America did not have the financial resources to meet the rush for money when the Wall Street Crash happened. This led to bank closures leaving thousands of American without money.

Reasons for the Economic Bust for kids

Facts about Economic Boom in the 1920s for kids
For visitors interested in the history of the 1920's Economic Boom refer to the following articles:

Economic Boom 1920s
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