Why was there an economic boom in the 1920's?

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First World War

  • America's neutrality extended to a policy of fairness - American bankers could lend money to both sides in the war
  • sold arms, munitions and food to Britain and France
  • this one way trade gave the American industry a boost
  • Americans were able to take over Europe's trade around the world
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  • the USA became the world's most successful chemical industries
  • explosives manufacture during the war also stimulated a range of by-products which became new American industries in their own right eg plastic
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Short conflict

  • USA was not part of the war long enough to drain American resources
  • war inustries readjusted to peacetime temporarily
  • by the 1920's the American economy was growing once again
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Natural resources

  • they had a plentiful supply of raw materials such as coal, oil, wood and iron
  • these resources had provided the foundation for US economic growth in the years before WW1
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Cheap labour force

  • continuous immigration from Europe
  • this provided plentiful cheap labour from Germany, Scandinavia, Italy, Poland, Russia, Ireland, China and Japan
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Technological change

  • development of electricity waas fundamental to developments in technology
  • electricity was a cheaper and more reliable form of power for factories and industries
  • production of electrical goods, fridges, radio and vacuum cleaners
  • conveyer belt and mass productionadopted the car industry
  • new plastics used in household
  • these innovations sped up industrial production and lead to greater profits
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  • 1923-1929 the average wage rose by 8%
  • this was enough for some workers to afford luxuries
  • these goods are often bought on credit under a sceme known as hire
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  • many americans had confidence in their country's economy and were prepared to buy American goods
  • most Americans believed prosperity was a right and not a priviledge
  • people were encouraged to spend, not be thrifty
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