'More apparent than real.' How far do you agree with this description of the prosperity of the USA in the years to 1929?
In the 1920's America experienced a time of prosperity and went through economic and social change. Most see the 20's as a boom that was followed by a bust, The Wall Street Crash 1929, and then the depression. However there was much more going on in the 20's than a simple boom. Was the prosperity real or was it more of an illusion?
The prosperity was based on several factors, such as favorable government policies. During this period, the government adopted the policy of laissez faire; this meant that the government interfered as little as possible in the running of the economy. However, they believed in supporting big businesses. Andrew Mellon, the Treasury Secretary, believed that the wealth would filter down naturally. For example, The Fordney-McCumber Act was passed in 1922.
This raised tariffs to make foreign goods more expensive than goods produced goods in the USA. Domestic producers were given a guaranteed market. Federal taxes were also reduced. By 1928, the tax level was at 25%. There were also fewer regulations. This meant that businesses were left alone which was an important contributor to profit. There was also a more lenient approach to foreign policies. This meant more investment into other countries. For example, investors were more interested in investing in Japan over China due to profit. These policies stimulated the economy and helped big businesses make large amounts of profits, which benefited the society. It created employment, average unemployment never rose above 3.7%, which meant more disposable income, then increased demand for goods, and therefore increased employment and wages. It created a cycle.
However, the unemployment figure does not tell us if...