The USA: Credit and Hire purchase

In History Skills, we are studying the USA. Therefore, we had to write an essay answering the following question: How important were credit and hire purchase as a reason for economic growth during the 1920s?. Here it´s my work:

In the 1920s, the USA went through a series of changes, from the economic aspect. Each of them affected the country in different ways, some for good and others for worse. During this period, USA's economy boosted, it led most of the world’s industries, the economic growth was huge.

Referring to this last concept, we have to mention the “Buy now, pay later” hire purchase schemes. With the development of new industries, huge corporations, new selling methods, appeared as well. People were encouraged to buy the new stuff that was coming out, it didn't matter if you lacked money. Banks offered many ways for people to lend them money. Therefore, they would buy what they needed or wanted using a loan, and later on paying the bank. Banks lended money to speculators as well. They were investors who borrowed money to buy shares and when the price of them raised, they would sell them again. Then, they would pay de loan and have a profit left. What's more, they didn't have to pay the full value of the shares. They could buy “on margin” which meant they had to pay 10% cash and could borrow the rest.

Mass marketing and advertising played an important role when persuading people to do so. Many advertisers had learned their skills in wartime propaganda and now were setting up agencies to sell cars, clothing, etc. They encouraged Americans to spend. With all this new idea, a cultural change can be observed, people´s mind changed. Before, they would save up every penny and use it for necessary things. Now, they would spend money and not save up, since this was seen as what an American should do.

But, did this change actually benefited the economy growth? At the moment it may look like it did, industries, shops, were producing at a mass scale due to Fordism, which was the first moving production line in the world that made produce more in less time, making products cheaper so more people could buy them. People were able to acquire what they needed and even more, for example, owning a car was not just a rich person’s privilege. However, this fast economic growth would end up failing, leading the country into a great depression, where people couldn't pay the debts that were created previously, and, as a result, since they didn't have money, businesses wouldn't have anyone to buy their goods.