The USA was rich in the supply of natural resources including coal and oil. Thus, America became a strong economic power in the 20th century. In the 1920s, the industrial growth experienced a boom.
How Prosperity Affects the American Society
The major increase was in the new industry of chemicals, cars, and electricity. The introduction of electricity in homes brought a huge expansion of the industries. Moreover, the car industry played a major role. It was the car that changed America leading to the construction of roads and new suburbs. The American people’s lifestyle changed to a great extent. There is also a series of factors that contributed to the rise of the American economy:
- First World War coming up with new technologies;
- Confidence as people decided to invest more money;
- Core Goods as goods were not imported from aboard because the country was rich in supplies;
- Credit Use because money was used for investment in stock market and buying more goods was done by money borrowed;
- New Technology as the major development was in the industry of electricity;
- Advertising new goods led to the industry of selling through catalogues.
The Fall and its Immediate Effects
There were financial experts who gave warnings that the American economy was on the verge of slowing in September 1929. Many investors sold shares in large amounts because they went into panic. A huge number of banks closed, the American people lost their savings, and they also lost hope for their future. People were no longer able to buy cars or clothes. People’s wages were also cut and unemployment reached high levels. This was the beginning of the Great Depression of the 1930s. More factors had been contributed to the fall of the US economy:
- Too much credit because the economy was dependent upon credit leading to too many loans for people;
- Loss of confidence in the stock market and the whole economy;
- Speculation as people borrowed money to buy shares which they sold in the end;
- Inequality because wealth was not distributed equally through the whole economy;
- Overproduction because industries were producing an increasingly large amount of goods;
- Less food was sold as the demand for goods from other countries fell because other countries had their own products on the market;
- Many small banks with the Wall Street Crash had to close and their customers were left without money.