Fall 2023 Final
What primary economic policy did the three presidents of the 1920s follow? Explain what is was and how it contributed to the economic dynamics of the era.
The primary economic policy followed by the three presidents of the 1920s was known as laissez-faire economics. Laissez-faire economics is an approach that advocates for minimal government intervention in economic affairs and emphasizes the importance of free markets and individualism.
During the Roaring Twenties, Presidents Warren G. Harding, Calvin Coolidge, and Herbert Hoover all embraced this philosophy to varying degrees, with Coolidge being the strongest proponent. Laissez-faire economics had a profound impact on the economic dynamics of the era.
One of the key features of this policy was the reduction of government regulations on businesses. The presidents believed that by eliminating barriers to economic growth and fostering a business-friendly environment, the economy would thrive. They aimed to create a hands-off approach, allowing businesses to operate with minimal interference.
To achieve this, they adopted a series of tax cuts and reduced government spending. Lower taxes incentivized businesses to invest and expand, while reduced government spending aimed to decrease the fiscal burden on the economy. This combination was thought to boost private sector activity and stimulate economic growth.
This approach contributed to the economic dynamics of the era in several ways. Firstly, it led to increased industrial production and economic output. Lower taxes and reduced regulations allowed businesses to thrive and invest in new technologies and production methods. As a result, the 1920s experienced rapid economic growth and technological advancements, particularly in industries such as automobiles, electronics, and consumer goods.
Secondly, laissez-faire economics played a role in the widening wealth gap during the decade. While the economy experienced growth, the benefits were not equally distributed. The policy favored the wealthy and big businesses, as their profits increased significantly. However, the working class and farmers faced challenges, as low wages and overproduction in agriculture led to economic hardships for these groups.
Additionally, laissez-faire economics set the stage for the speculative boom in the stock market, which eventually led to the Great Depression. Limited government regulations allowed for excessive speculation and risky investments, contributing to the unsustainable growth of the stock market. When the market crashed in 1929, it triggered a chain reaction that eventually led to the severe economic downturn.
In conclusion, the primary economic policy followed by the three presidents of the 1920s was laissez-faire economics. This policy of minimal government intervention in the economy aimed to foster free markets and individualism. While it contributed to rapid economic growth and technological advancements, it also widened income inequalities and played a role in the speculative excesses that led to the Great Depression.