The economic boom and bust of the 1920s would have occurred without the Republican economics policies that were introduced. The Republicans felt that it was necessary to allow the economy to ‘grow’ without state intervention unless it was urged upon by the industry. Such freedom did in fact allow for the likes of Henry Ford to innovate and take advantage of the beneficial circumstances brought about by the First World War. The significant increase in trade wasn’t sustainable and for the reason that it wasn’t stabilised the economic collapse took place in the absence of Republican policies to regulate growth.
The Republicans built on the conditions that were provided by the First World War. After the War, Europe was dependant upon American industry to be provided by American products ensuring trade for America. However, credit can be given to the Republican government for the introduction of the Fordney-McCumber tariff. This raised import duties on farm products, chemicals, textiles, chinaware, cutlery, guns and other industrial goods.
This move towards Protectionism ensure that there wasn’t a two-way trade between America and Europe, allowing for a domestic market to grow whilst the Europe dependant on the US economy. This policy in Harding’s government can be seen as the basis of US economic prosperity and indicates the importance of the policies made by the Republicans. Although policies were infrequent they encouraged widespread production, which could be considered as a major contribution to the economic boom and the subsequent economic collapse.
The policy for small taxes was a strong belief of the Republican Party and achieved the rise in industry.
Otherwise an increase in taxes would have reduced the disposable income that was vital for the growth in companies that sold domestic appliances. It could be said that these Republican policies did not just contribute towards the boom but actually were responsible for the initiation of the boom by providing the perfect conditions for a quick boom.
The lack of regulations ensured that prosperity wasn’t hindered and businesses weren’t deterred from expanding. This started the possibilities of the get rich-quick schemes that flooded America causing a nation to make money without having to consider the long term consequences. Republicanism contributed to this short-sightedness within American society that instigated the economic collapse. Encouraged by Republican policies this quick-fix attitude was enlarged by the start of credit that was highly dependant on both consumer demand and confidence.
Consumer products were bought on a massive scale on the basis that the customers were certain that they could make the repayments in order to keep such domestic appliances. This new grown confidence of prosperity and belief in economic growth shared by many families brought about the demand for these new products. Confidence was so high in the economy that ordinary people began ‘buying on the margin’, the purchase of shares on the credit that the shares were definitely going to increase in value, enough to pay off the credit and to leave people with profit.
This heightened the reliance on the growth of the economy and instigated further confidence, causing the economy to be uncontrolled by anyone, meaning that a small stumble would bring about total. The delicate nature that the economy wasn’t completely due to the Republican policies, however, the Republicans didn’t feel that there wasn’t any need for state intervention since it wasn’t seen to be a national issue.
Therefore the lack of policy in regulation in the banking system that created an increase in ‘buying on the margin’ caused the fragile economy that collapsed precisely due to the lack of intervention. Although the Republicans were responsible the confidence and the increase in credit was due to the fact that it was probably the first time that the public had more money than required to survive and felt that it was to continue and didn’t know what to do and thus brought about the lack of savings. The boom wasn’t a long term growth that raised society than what could have been achieved by regulation.
Using the word ‘boom’ it refers to the significant rise in a short space of time and therefore as a consequence means that it would have to fall suddenly unless the economy could be underpinned by a stronger infrastructure. Long term would have ensured that 33%of the total national income in 1929 wasn’t held by just 5% of the population. Such a figure can question whether it was in fact a national boom at all, since it failed to permeate to lower sects of society, however caused for those lower sects to be confident that they would find prosperity and go onto purchase products on credit.
The fact that prosperity didn’t reach the whole of society meant that the marker became saturate with the sale of the same domestic products without the people to purchase them because either they already had them or had too many loans. The Republican Government with the introduction of taxation would have brought greater support in need, who could fuel the economy further since groups like blacks, rural workers and urban poor would be able to purchase the appliances and increase share purchase.
However, the lack of taxation mean that growth took place exponentially and during the period of growth there would be no slow down. On the other hand, collapse was made certain by the lack of support given towards the economy and bringing about the end of such growth. It must be remembered that this was the first time that such mass growth took place in American history and meant that it wasn’t possible to create a model for the growth of the economy because noone really had an idea what this expansion would result in.
The flaws within the system, causing a brittle economy should be held more responsible because I don’t feel that there would have been a collapse, rather more of a slowdown throughout the nation. These flaws were triggered by the lack of regulation by the Republicans but the However, perhaps the most compelling argument in their defence is the lack of precedent. Never before had such growth been seen as even possible, nor the depression which was to follow. In such light, it is perhaps unfair to judge Republican policies too harshly for their inability to anticipate the hitherto unknown.
It is also clear that Republicanism was not responsible for initiating the ‘Roaring 20s’, but rather for adopting a policy of non-intervention which allowed the boom to proceed almost entirely unimpeded. As a result, Republican responsibility must be judged in terms not of what they did, but what they did not. In doing very little to regulate nor intervene in the boom from 1921-29, successive Republican administrations were, to the greatest extent, responsible for ensuring that what occurred was not a long-term trend of steady, social economic growth, but a short-lived boom.
Furthermore, rather than making efforts to convert this into growth which permeated throughout, bringing even longer-term benefits to American society as a whole, these policies were content to sit back and allow America to become a gambling den on a majestic scale, almost entirely dependent on the fickle nature of human confidence and reliant on an impossibly limitless demand for new products which soon reached saturation point.
As a result, Republican policies must be seen to a great extent responsible for shaping the nature of the economic boom, if not instigating it, and in doing do, directly responsible for the inevitable bust which followed.