How Important Was Government Policy in Creating the Prosperity of the 1920s in the USA?

The prosperity of the 1920s in the USA, often referred to as the "Roaring Twenties," was a period of significant economic growth and social change. While government policy played a role, its importance in creating this prosperity is debatable. This essay will argue that while government policies contributed to the economic boom, other factors were equally, if not more, significant.

Arguments for the Importance of Government Policy

Proponents of the view that government policy was crucial point to the "laissez-faire" approach adopted by Republican Presidents Harding, Coolidge, and Hoover. This hands-off approach, championed by Treasury Secretary Andrew Mellon, emphasized low taxes, minimal government intervention in business, and protective tariffs.

Tax cuts between 1921 and 1925, coupled with tariffs like the Fordney-McCumber Tariff of 1922, aimed to stimulate investment and protect American industries from foreign competition. Furthermore, government spending on infrastructure, particularly the Federal Aid Highway Act of 1921, boosted the automobile industry and created construction jobs. These policies, alongside low unemployment rates, contributed to increased consumer spending and economic growth.

Arguments Against the Importance of Government Policy

However, critics argue that the Republican policies, while beneficial to some, exacerbated existing problems and failed to address underlying issues. Tariffs, while protecting industries, hurt farmers by reducing agricultural exports and lowering crop prices. This neglect of the agricultural sector contributed to its prolonged struggles throughout the 1920s and into the following decade.

Furthermore, the "laissez-faire" approach did little to address the growing wage gap between prosperous industries and older sectors like coal and textiles. Critics contend that the economic boom was driven more by factors external to government policy.

Other Factors Contributing to Prosperity

Technological innovations played a crucial role in the economic boom. The rise of electricity, new materials like Bakelite and rayon, and mass production techniques revolutionized manufacturing and consumer goods. The automobile industry, fueled by innovation and lower prices, experienced rapid growth, creating a ripple effect on related industries such as glass, rubber, and oil.

The USA's vast natural resources reduced its reliance on foreign imports, while its emergence as a global power after World War I further fueled economic growth. Wartime loans repaid with interest by European nations provided capital for investment, and increased speculation in the stock market, though risky, created wealth for some.

Conclusion

In conclusion, while government policies like tax cuts, tariffs, and infrastructure spending contributed to the prosperity of the 1920s, they were not the sole determining factor. Technological innovation, the nation's resource wealth, its strengthened global position post-World War I, and consumer confidence played equally significant roles. However, the government's failure to address the plight of farmers and the growing wage gap highlights the limitations of its policies. The prosperity of the Roaring Twenties was, therefore, a complex interplay of various factors, with government policy being just one piece of the puzzle.

<strong>Sources:</strong>

"THE UNITED STATES, 1919–41," History Essay