u ñThe 1920s was a boom time for America. The new automobile industry, easy credit, and a thriving stock market all contributed to growing prosperity.ñ
During the First World War, many American firms benefited directly from the huge military purchases made by France and Great Britain, and later by the United States government itself. Indirectly the whole economy profited, and strong economic growth followed. In 1920, however, exports to Europe slumped and the US economy underwent a brief period of crisis. To overcome this, most firms put new products on the market or offered existing products at reduced prices. They were able to do this because of the new mass-production manufacturing techniques. Previously, manufactured goods had been aimed mainly at the wealthy. But, in America around 1920, the enormous potential market and the use of production lines meant that goods could be produced cheaply enough for the mass of the population to afford. Many American families of the 1920s were able to buy cars or electric household appliances - goods that would not become commonplace in Europe until the 1950s. Sales of manufactured goods increased rapidly throughout the decade, as did the profits of the firms making these items.
The widespread use of cars in the United States - by 1929 there was around 1 car per 4.5 Americans - had considerable consequences. The automobile industry became a key sector of the economy. Not only was it important in itself, but it was connected to a whole variety of other industries including the manufacture of iron and steel, the petrochemical industry, and the banking sector. In a more visible manner, it brought about the growth of suburbs, which spread further and further from the centres of towns and cities. This caused a property boom in the 1920s - although it also in due course led to the problems associated with urban decay, as city centres were gradually abandoned by anyone who could afford to escape them.
~Financing the boom~
The strong economic growth of the 1920s in the US would not have been possible without the increasingly important role played by the banks. They financed the operations of property companies and offered easy credit to private individuals, allowing them to buy new homes, as well as the cars, furniture, and household appliances to go with them. By the late 1920s, the smooth operation of the banking system had become essential to continued economic growth. The stock exchange, meanwhile, came to occupy an increasingly important place in business finance. Quantities of stocks and shares were issued and tended to rise rapidly in value. Individual investors came to believe that putting money into shares was a certain route to wealth. They were even encouraged to borrow money with which to buy shares, believing that they could easily pay off any loan as their shareholdings rose in value. The scene was set for the Great Crash of 1929.ñ x 3
