Causes of the Boom


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  • Created on: 15-06-10 09:19
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USA: The Promised Land?
In just ten years there was a huge increase in production. It was called the `Second Industrial
Goods Figures of Sales in Figures of Sales in 1929 Increase in Sales
Cars 9 million 26 million 289%
Telephone 10 million 20 million 100%
Radios 60 000 10 million 1667%
Factors of the economic boom:
First World War
The USA had only entered the war in 1917 and had no damages to repair.
The USA had made a lot of money by selling armaments to the European Allies.
The USA took over many of Europe's colonial markets.
The USA's chemical industry replaced the German industry as world leader producing
explosives, fertilisers, dyes and plastics.
During the war, America had become the banker to the rest of the world. According to the
First World War Foreign Debts Commission, Britain, France and Italy owed the USA $22
billion plus interest.
USA's wealth
The USA was rich in raw materials and had much fertile land
It was the world's leading industrial nation
It's population was hard working and ambitious
In the early 1900s it has seen the movement from agricultural to industrial
New Industries
The production of American industry increased by 50%
The Motor industry grew dramatically which boosted the oil, plastic and steel industry.
Rising Wages and Stable Prices
People could afford to buy the consumer goods because incomes rose around 25% whilst
prices remained the same or fell
Prices fell because of the Assembly Line techniques pioneered by Henry Ford. Mass
production enabled manufacturers to increase production and make goods more cheaply.
Government policies
The economy was controlled by Andrew Mellon who believed that the government should
play as little part in economic life as possible. This is known as Laissez Faire.
Businessmen believed that if taxes were low people and companies would have more
money to invest so Mellon decreased taxes however this would lead to problems in the
future as no social security could be provided.
The government also introduced tariffs, which promoted American goods.

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Hire purchase
The consumer boom was encouraged by the easy availability of credit.
There was a feeling of confidence among people the good times would last and they would
be able to pay off debts eventually
Pioneered by the car companies, Hire Purchase enabled consumers to buy the goods they
wanted with a small deposit and then pay the rest off in instalments. 6 out of 10 cars were
bought this way
Another marketing tool was the mail order catalogue e.g.…read more


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