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IMPACT OF FIRST WORLD WAR
By April 1917, USA had loaned Britain and France $2.3 billion in comparison with
only lending $27 million to Germany which suggested which `side' they would
take and also meant there was a huge investment to be protected.
The American economy was already in a strong state when the war had broke
out.
Until the outbreak of the war, the American government had not taken a direct
role in the economy. The War Industries Board Changed this, one of its roles
was to encourage companies who had previously been bitter rivals to work
together. E.g. a greater uniformity of bicycles saved 2,000 tons of steel.
Taxation raised about 1/3rd of the revenue needed to pay for war costs. Revenue
rose from $809 million in 1917 to $3.6 billion in 1918
There were revenue acts in 1916 and 1917 but the 1918 Revenue Act increased
the lowest rate of tax to 16% and the highest to 77%…read more

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The US economy was already developing rapidly but it came out of WW1
even stronger. Because of huge demands for war materials, imports from
Europe fell and exports from USA rose.
Industrial production increased by 39% between 1916 and 1918.
The number employed in the civilian workforce grew to 1.3 million and
unemployment which was relatively low at 5%, virtually disappeared.
The level of real wages increased by 20% from 1914 ­ 1918.
American farmers increased their exports of food to Europe by 300% and
also experienced a doubling of prices between 1913 ­ 1918.
After the war, there was a brief economic recession in 1920-21 and then the
US entered a phase of economic prosperity.
The war clearly strengthened the powers of federal government:
The Espionage Act of June 1917 make it illegal to obstruct military recruitment
The Sedation Act of May 1918 made it illegal to discourage people from buying war bonds or
verbally attacking the war effort.…read more

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CALVIN COOLIDGE
Calvin Coolidge presided over the longest boom period in US history.
Many Americans did not want their government to do much. They
believed that they had never been so well off and that the prosperity
they enjoyed was permanent.
Coolidge was a man whose views were outdated when he came to
office. Historians have generally criticised Coolidge for his low work
rate and reluctance to get involved in issues. He is seen as being one
of the weakest presidents.
Despite all this, `silent Cal' was a popular president and there is little
doubt that had he chosen to run for a second term in 1928, he would
have easily been re-elected.…read more

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REASONS FOR PROSPERITY -
GOVERNMENT
Harding and Coolidge both had similar fundamental views on key issues. Coolidge
said that `the chief business of the American people is business' and both he and
treasure secretary Andrew Mellon believed firmly in the free market and laissez-
faire.
High Tariffs:- Republican presidents worried that higher level of imports would
threaten economic prosperity. The Emergency Tariff Act of 1921 was initially
vetoed by Wilson but was reintroduced by Harding as a temporary measure until
the Fordney-McCumber Act 1922. This raised tariffs to cover the distance between
domestic and foreign production and in almost every case, it became cheaper to
buy goods within the USA. There was a tendency to exaggerate its impact but it
did lead to other countries introducing counter measures.
Tax Reductions:- The level of taxes had risen for the war but now peace had
returned Mellon believed taxes needed to be reduced in order to promote
economic growth. They were significantly reduced in 1924, 1926 and 1928. In
1920, tax levels were 65%, but 1928, they were 25%.…read more

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Fewer Regulations:- Paramount importance with the republican party
was business interests and a let alone approach was adopted.
Businesses were often left unhindered to carry on their affairs as they
saw fit and there was nothing to stop child labour or overworked and
underpaid employees.
Foreign Policies:- Calvin avoided intervention in foreign affairs
whenever possible. This lenient approach to foreign policy also meant
that investors often favoured profit over more ethical concerns because
there was no obligation to do such.
Trade Unionism:- Trade unions had grown in power during the war and
Wilson accepted much of this, however, since then much of what had
improved conditions was overturned due to a conservative majority in
the supreme court. Membership of trade unions fell in the 1920s ­ in
1920 in was 12% but by 1929, it was less than 8%…read more

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