How successful were Republican policies in helping the US economy in the years 1920 to 1932?

Published: March 21, 2017

The economic policies of Republican government in 1920s contributed to the boom which lasted for short period of time. The Laissez-faire approach adopted by the government and took two significant steps:

  • The import duties were raised through the Fordney-McCumber Tariff in 1922. This made imports costly and led to the growth of the domestic industries as many people started buying American goods.
  • The income tax was lowered twice in 1926 and 1928 which left much cash left with the Americans to spend.

Then during the depression Hoover appealed to businesses not to reduce wages and lay off workers. The government lent money to banks, industrialists and farmers to save them from the impact of depression. Governors were asked to create more jobs by investing in public works schemes. These policies looked impressive initially but later on become ineffective because of the following reasons:

  • When the government bought surplus grains from farmers, the farmers were encouraged to grow more crops and the government was unable to buy more crops and the policy failed resulting in more surplus crops and falling prices.
  • The one year war debt instalment waiver so that the European nation could use that money to buy American goods but this failed because at the same time USA increased import tariffs and due to this European nations also increased import tariff on American goods and exports declined.
  • The Reconstruction Finance Cooperation which made banks to lend money for job creation. This was one step taken by the government which showed results in the late 1932 but it was quite late as elections were approaching and Republican lost it.

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