This chapter explains how new industries, new technologies, and government support of big business led to economic prosperity in the United States during the 1920s.
Section 1 discusses the presidencies of Warren G. Harding and Calvin Coolidge. With a pledge to return the nation to normalcy, Harding won the presidential election of 1920. However, the Harding years proved to be far from normal. Scandals rocked the administration as some of the members of Harding's Ohio Gang accepted bribes, pocketed taxpayers' money, and sold government jobs and pardons. When Harding died suddenly, Vice President Calvin Coolidge took the presidential oath. Reserved and frugal, Coolidge aligned himself with business and prosperity, and he calmly worked to restore the integrity of the presidency. In the 1924 presidential election, he easily defeated the Democratic and Progressive challengers.
Section 2 describes the economic prosperity of the 1920s. During the 1920s, Americans enjoyed higher wages and more leisure time than ever before. New technologies, such as automobiles, airplanes, and radios, led to new industries, while new production methods increased output and lowered the prices of consumer goods. The economy was rolling, and Americans fueled the manufacturing boom by purchasing a flood of new goods. While advertising introduced new products, easily available credit encouraged consumer spending. The middle class rapidly grew as industries hired professional managers, and welfare capitalism helped industrial workers prosper. While the prosperity of the 1920s brought a better standard of living to many Americans, farmers struggled with debt and surplus crops.
Section 3 details the economic policies that encouraged the prosperity of the 1920s. During the 1920s, the United States government sought to promote economic growth and ensure prosperity. To this end, Secretary of the Treasury Andrew W. Mellon, the chief architect of economic policy between 1921 and 1929, decided to cut government spending, refinance the national debt, and persuade the federal government to lower its interest rate. He employed supply-side economics and urged Congress to dramatically cut taxes. Secretary of Commerce Herbert Hoover created government boards that supported business development and promoted economic efficiency. After World War I, the United States became the dominant economic power in the world with industries closely tied to other countries. Since the United States could not afford to withdraw from international affairs, American leaders of the 1920s worked to promote peace through agreements.