USA: credit and hire purchase

In the history's class, we had studied USA and we wrote an essay answering the question: How important were credit and hire purchase as a reason for economic growth during the 1920s?

Here is my essay:

In 1920s there was an economic boom in the USA that improved the USA as a country. There are many reasons why this happened and one could be the role that credits and hire purchase took.

On the one hand, credits and hire purchase allowed Americans to buy everything. Moreover, Americans started to use new methods. New techniques together with mass production meant that huge amounts of goods could be produced much more cheaply and more people could afford them. In this way, it was easy to buy in USA, because of ‘Buy now pay later’ so people can buy on credits and allowed families with low incomes to buy goods. Big industries such as the motor car industry used hire purchase schemes and 6 out 10 cars were bought on credit. This cause to people to had confidence, ordinary people had a house and a better quality of life as they paid on credits having confidence that they could paid their loan. Also business people get rich, as they started to invest in the stock market, they started to speculate, this meant that they borrow money from banks to bought shares on margin, then sold them again as soon as the prices has risen and then they paid off their loan and still had a quick profit. As confidence was high, banks started to lend money and many new millionaires appeared, so people invest money on companies.

cars bought on credits

On the other hand, the industries grew with the First World War as they sold arms, food and money to Europe. With this advantage, USA became the world leader in many sectors. The industry of oil was the best in the world and the chemical industries outstripped Germany. Electrification has a huge role too, since electricity was extended to new areas of the country and allowed for more productive factories. Besides, the Republicans policies helped too. There was tariff that protected the companies, there was laissez-faire that the government didn’t intervene in the people’s life and there was low taxation because in this way people had more money to spend, and this allowed profits to increase. Due to this, mass production became popular, after the Ford’s assembly line production invention in the motor industry that produced many consumer goods. Industries used other methods to attract people to buy. Big industries used sophisticated sales and marketing techniques to get people to buy their goods. There were advertising campaigns for buying new consumer goods. Poster and radio advertisements encouraged Americans to spend, like the idea of ‘Buy now, pay later’ was spread so more people started to buy goods because the ‘being careful with money and saving for a rainy day’ was replaced by a belief that spending money was a better quality of life.

campaign

Assembly line

To conclude, hire purchase and credit were important in the economic boom as they encourage people to buy. However, there weren’t the main factor for the economic growth. There are huge of reasons why there was an economic boom and hire purchase and credit was only a grain of sand.