How Did Laissez Faire Affect The Economy

The United States experienced a period of economic prosperity in the 1920s, commonly referred to as the Roaring Twenties. With the US entered World War I, a multitude of resources were needed, which were met by the growing power of industry. The war fueled the exponential growth of industry, providing jobs to millions of workers who in turn spent money on new consumer products. For the first time in American history, the economy came to rely on consumer spending. During the 1920s, three successive conservative Presidents ran the White House: Warren Harding, Calvin Coolidge, and Herbert Hoover. All of these successive presidents were opposed to the federal government intervening in the economy, to prevent it from becoming too powerful. While conceptually ideal, the federal government's lack of involvement in the US economy inevitably lead to the Great Depression of the 1930s. Up until the 1920s, the US government operated under Laissez-Faire economics. Laissez-Faire was a policy in which businesses and enterprises made transactions without government restrictions, tariffs, or subsidies. This type of economic policy was

The stock market rapidly grew in size and magnitude during this time. People would quickly buy and sell stocks to make money, which promoted an increase in stock value. Without federal regulations, banks could use their clients’ savings to invest in the stock market. In October of 1929, confidence in the stability of the stock market dropped, prompting investors to sell their stocks. This crippled the stock market and induced panic, causing bank runs as citizens withdrew their money from banks before its value diminished. If the federal government had more regulations established for the maintenance of the stock market, the crash that occurred on October 29, 1929 could have been