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The Roaring 20s: A Micro-Macro Perspective

The Roaring 20s were a timespan of rapid changes in America within the realms of society, economics, and the intersection of the two. New developments following victory in World War I led to the birth of the automobile and airline industries. Mass production also boomed, spurring new non-discretionary goods to be brought to households across the country. Today, we are going to explore how this time in American history can be embodied by a few key economic developments and federal decisions.

During the decade, US GDP grew by 42%, as a result of the societal developments mentioned below, but also because of the vicious effects of war on the world economy. The unemployment rate was said to have never risen above the natural rate (4%), which is a key sign for economic health. Although the economy was booming, not every American was becoming wealthier. The top 1% of the population by the end of the decade accounted for nearly 15% of all income, a 2% increase from 1920.

A perfect storm of America emerging victorious and wealthy from the Great War led to rapid industrial innovation in the communication and entertainment sectors. Consumer goods that we would normally have in our households, such as washing machines, vacuums, and refrigerators, suddenly became everyday items in the lives of Americans, spurring investments and economic activity. The invention of the radio also allowed for an interconnected domain for people to access a variety of informational outlets. By 1934, 60% of households owned radios. The automobile industry also boomed during this time period: by the end of the decade, about 25 million cars were registered to be driven on the roads. Henry Ford's industrial expertise allowed for his expansionary economics of scale, leaving Model Ts to only cost $300.

Mass entertainment also allowed for economic expansion. New appliances such as the radio and its accompanying stations were filled with newscasts, comedies, and shows. Movie attendance in theatres also soared, nearly doubling from 50 to 90 million weekly watchers by the end of the decade. According to research estimates, nearly 3/4 of the population went to a movie theatre each week.

Macroeconomic decision-making also played a part in starting the "roar" of the decade. Following the election of Warren Harding as president, recessionary signs in the market during 1920 wore off due to a variety of macroeconomic policy decisions from the executive branch and federal government. Harding lowered the top income tax rate from 73% to 58%. This move, alongside further tax rate cuts by Coolidge, set the stage for a 6-year bull run beginning in 1923.

The Roaring 20s were a unique moment in American history for a variety of reasons: post-world spirits, booming cultures, and rapid technology. The lasting impact above all, however, was the role the time period played in industrial innovation coupled with historical blueprints to be used for future macroeconomic decision-making.


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