What caused the economic boom of the Roaring 20's to happen?

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brettd eNotes educator| Certified Educator

I'd also have to add the overwhelming infusion of cash into the America economy from the arms industries and the production of war material for World War I.  $17 billion worth of arms sales to European empires took place at that time, and this created not only massive wealth in the hands of a few industrialists, (which they were able to invest later in new economic ventures) but drove up wages, caused increased consumer spending, and increased stock prices.  The economy expanded greatly as a result, as did its industrial base.

Republican laissez-faire administrations over the course of that decade that kept taxes and regulations low sure didn't hurt, but I believe they merely accelerated an economic trend already brought about by the vast fortunes of war, and a new American middle class who wanted to share somewhat in the luxury of the new economy.

From the first link below:

Annual incomes rose steadily, from $580 in 1914 to more than $1,300 by the end of the decade. Thus, World War I dramatically changed the domestic and international economy and set the stage for the prosperity of the 1920s.

pohnpei397 eNotes educator| Certified Educator

I would say that the Roaring '20s were caused largely by technolgical changes and by the policies of the Republican administrations of that decade.

Technologically speaking, this was a time when things like assembly lines had just recently come to be used.  This allowed things like the Model T to be produced in huge numbers and for relatively low prices.  As this happened, people were able to buy more things.  This led to something of a spiral where people bought more, companies made more, people bought more, etc.

At the same time, the government was pretty much letting companies do what they wanted.  It was not imposing restrictions on them (like restrictions on working conditions, etc) and so businesses could prosper quite easily.  This helped bring down the price of goods and contributed to the cycle I mentioned above.