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Boom and bust: the USA, 1919-1941

In the 1920s many Americans got richer than any people in history. By 1933 about a quarter of workers had no job. This guide explains how both happened.

It covers the first part of AQA's America, 1920-1973: Opportunity and inequality, and it's useful context for any question on the Depression.

Key dates

Why did the economy boom in the 1920s?

• The First World War. The USA joined late, in 1917, lost far fewer people than Europe, and made money selling and lending to the Allies.
• Natural resources. Plenty of coal, oil, iron and timber.
• Mass production. Henry Ford's moving assembly line cut the price of the Model T until ordinary families could afford a car. The car industry boosted steel, rubber, glass, oil and road building.
• New products. As homes got electricity, people bought radios, fridges, vacuum cleaners and washing machines.
• Credit and advertising. Hire purchase let people "buy now, pay later", and advertising made them want to.
• Republican policies. Presidents Harding and Coolidge believed in laissez-faire (leaving business alone), low taxes and high tariffs, like the Fordney-McCumber Tariff of 1922, to protect American industry.
• Confidence. Rising share prices made people feel rich, so they spent and invested more.

Who missed out?

• Farmers produced too much food after the war, prices fell, and many lost their farms.
• Workers in old industries like coal and cotton faced competition from oil, electricity and new fabrics.
• Black Americans faced segregation under "Jim Crow" laws in the South. Many moved north for jobs, but met discrimination there too.
• Native Americans were among the poorest people in the country.
• Immigrants, especially from southern and eastern Europe, faced suspicion, and new quotas cut the numbers allowed in.

A divided society

The "Roaring Twenties" brought jazz, cinema and the "flappers", young women who wore shorter skirts, smoked and went out without chaperones. But many Americans, especially in small towns, feared these changes.

• Prohibition (1920-1933) banned making and selling alcohol. Illegal bars ("speakeasies") and bootlegging made gangsters like Al Capone rich, and corruption spread. It was ended by the 21st Amendment in 1933.
• The Red Scare. Fear of communism led to the Palmer Raids of 1919-20 and the trial of Sacco and Vanzetti, two Italian anarchists executed in 1927 on weak evidence.
• The Ku Klux Klan grew to millions of members in the mid-1920s, attacking Black Americans, Catholics, Jews and immigrants, before scandal made it shrink.
• The Monkey Trial (1925): a Tennessee teacher, John Scopes, was prosecuted for teaching evolution.

The Wall Street Crash, October 1929

Share prices had risen far above the real value of companies. Many people bought shares "on the margin", borrowing most of the money and expecting to pay it back from rising prices. When confidence cracked in October 1929, everyone tried to sell at once. Prices collapsed on "Black Thursday" (24 October) and "Black Tuesday" (29 October).

The Crash was a trigger, not the only cause of the Depression. Underneath it were overproduction, wealth held by too few people to keep buying, weak and unregulated banks, and tariffs that made it hard for other countries to buy American goods.

The Great Depression

Banks failed and took people's savings with them. Factories closed, and unemployment rose to about a quarter of all workers by 1933. Homeless families built shanty towns nicknamed "Hoovervilles". In 1932, thousands of First World War veterans, the "Bonus Army", camped in Washington to demand early payment of a promised bonus, and were driven out by troops.

President Herbert Hoover believed in "rugged individualism" and that government shouldn't give direct help to people. He did more than his reputation suggests, for example lending to banks and businesses through the Reconstruction Finance Corporation, but it wasn't enough, and he lost the 1932 election heavily. For a first-hand feel of these years, see our guide to the song 'Brother, Can You Spare a Dime?'.

Roosevelt and the New Deal

Franklin D. Roosevelt took office in March 1933, saying "the only thing we have to fear is fear itself". In his first "Hundred Days" he closed the banks to stop panic and reopened the sound ones, and Congress created the "alphabet agencies":

• CCC (Civilian Conservation Corps): outdoor work for young men.
• AAA (Agricultural Adjustment Act): paid farmers to produce less, to push prices up.
• TVA (Tennessee Valley Authority): dams and electricity for one of the poorest regions.
• NRA (National Recovery Administration): codes for fair wages, hours and prices.

The Second New Deal of 1935 added the Works Progress Administration (WPA), which employed millions, and the Social Security Act, which brought in pensions and unemployment insurance.

Did the New Deal work?

Yes: it restored confidence in the banks, gave millions of people work and dignity, built lasting infrastructure, and created a safety net that still exists. No: unemployment stayed high through the 1930s, there was a new recession in 1937-38, the Supreme Court struck down parts of it, and many Black Americans and women got less help. It was the huge spending of the Second World War that finally ended the Depression.

Updated 18 October 2026