To what extent did the U.S. experience an economic boom during the 1920s? is a curiously worded question for a curious time in American history. The twenties were one heck of an oxymoron. Not only was it directly after World War I, it was the time that preceded the Great Depression, and, for such grim surroundings, still managed to have an especially stunning reputation. The twenties were seemingly the peak of human accomplishment in the U.S., the arts and technology working together to create talking movies, jazz, Fitzgerald, Einstein, surrealism, Hemingway, baseball, Lindbergh, and on and on and on. It was seen as a time of prosperity in the U.S., where per capita income increased by 33 percent and consumerism and the auto industry boomed. But at the same time, these seemingly great economic feats, like so many other things, are much more complicated than they seem. Here’s where the wording of the question comes in. It would seem like the twenties saw an undisputable economic boom. And if you thought that, then you would be, technically, right. But when held up to scrutiny, the apparent economic growth in the U.S. was in reality a façade for some deeper, more serious economic problems that were growing in America and the international community.
A bit of background and oversight on international economics at the time in a simple statement: Europe was devastated. Germany, being on the losing side of WWI, had a massive amount of debt to pay off. The Allies, having borrowed so much money from the U.S., had more to pay back than Germany did. To help matters, the entirety of Europe, including its workforce and its industry, was completely in tatters from the terrors of war, and France, having refused to raise taxes on its people, was completely broke. Needless to say, this was not the start of a promising economic future. What happened that allowed the U.S. to remain unaffected, and even “prosper”? Well, there was a two-part plan, so to speak: debt and tariffs. The U.S. didn’t really play that big of a part in the war physically, so all of its land and factories and agriculture were completely fine, and they had $2.6 billion in war debts waiting to be collected from the Allies who were owed $2.0 billion by Germany. Sadly, Germany didn’t have any money, so to keep this cycle of money from Germany to the Allies to the U.S. going, the U.S. started the Dawes Plan, where they loaned $2.5 billion to Germany so they could pay off their debt to the Allies (who again, in turn, had $2.6 billion in debt to the U.S. See where this is going?). The debt situation severely weakened and subdued the European economy, but what struck the final blow was the tariffs. At around the same time as the Dawes Plan, the Fordney-McCumber Tariff was enacted, creating tariffs of 60 percent, the highest in American history. As a result, the American people tended to buy American-made products instead of generating much-needed revenue for Europe. This short-lived and crushing plan swiftly put the U.S. into control of western economics, and at the same time, debilitating the European economy, and setting up a teetering global market, just waiting for a gust of wind to blow it over the edge.
Now, back to domestic affairs. One would think that all of these tariffs and the fact that per-capita income increased by 33 percent or exports increased by 60 percent would be indicators of a healthy, sustainable economy. Sadly, in this case, one would be mistaken. Although these statistics and facts are true, the economy, as can be seen just a few years later, was far from sustainable. The economic growth seen by the U.S. was facilitated by a short term strategy and a series of ineffective plans, including the implementation of trickle-down economics and (again) tariffs. Trickle-down economics (implemented later by Reagan) was a policy where governments would give big businesses and other wealthy entities big tax breaks and other benefits with the idea that they would invest in other ventures and stimulate the economy as a whole. Sadly, when implemented, it was found that the rich would rather save money than frivolously spend and invest it and the “trickle-down” benefits to the poor were never really seen. Tariffs and trickle-down economic policies ended up benefiting the rich and hurting the poor, creating a concentration of wealth, increasing the class divide, and artificially inflating the market. As you can see, those statistics only tell part of the story; when you omit the fact that over half the people in the same decade were living below the poverty line and two-thirds of Americans were living at “minimum comfort level”, the twenties did indeed seem like a prosperous time. As a side note sub-factor, consumerism was also booming--the auto industry employed 6 million people by the end of the decade. But, not only were people starting to buy things that they couldn’t afford on credit, the ultimate consequence of the mass production consumerism of the twenties was the oversaturation of the market. Companies quickly found that households often didn’t need more than one toaster or one car, and as a result, companies that stuck with one model rather than operating on an constantly updating system (buy the new iPhone! with even more gizmos!) were quickly weeded out. By the end of the decade, the U.S. had a whole lot of metal, but not a lot of cash.
Ultimately, when discussing the extent of the economic boom of the twenties, we must also look at what came after: the Great Depression. Look, you can’t have one day with economic prosperity and suddenly the next with poverty; history just doesn’t work like that. The nature of history is that one event fluidly transitions into the other--every single thing that happens in one decade becomes a factor in the next, and the twenties were no exception. The Great Depression was a result of poor and unsustainable economic strategies implemented in the 1920s. All of the faulty tariffs, debts, taxes, and policies eventually started to add up. They temporarily boosted the market, inflating our economy for a short amount of time and for a small amount of people before it became completely unsustainable due to a lack of proper infrastructure and crashed. So, while it would be technically true to say that the U.S. experienced an economic boom during the twenties, calling it “effective” or “sustainable” would be equivalent to calling alcoholism a sound solution to life’s troubles; it might have worked well enough for a few hours, but shortly afterwards, you’re left with no money, a pounding headache, and a whole pile of problems.
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