Chapter 33 - The Politics of Boom and Bust 1920-1932
Major Themes
- The Republican administrations of the 1920s pursued conservative, pro-business policies at home and economic unilateralism abroad.
- The great crash of 1929 led to a severe prolonged depression that devastated the American economy and spirit and which resisted Hoover’s limited efforts to fix it.
Major Questions- I'll do 2, someone else do some also!!
- In what ways were the 1920s a reaction against the progressive era?
- Was American isolationism of the 1920s linked to the rise of movements like the Ku Klux Klan?
- To what extent did the policies of the 1920s contribute to the depression?
Because the '20's were the years of consumption in America, the Americans themselves didn't understand all of the consequences of their actions. By buying stock "on the margin," the people contributed to the collapse of the stock market. Using credit cards and other forms of credit led to businesses going bankrupt when people didn't pay their bills. Banks were failing all over the place, and so many people lost their life savings (this was before FDIC). The idea of "have now, pay later" was the major influential factor.
- How did the depression challenge the traditional belief of Hoover and other Americans in “rugged individualism?”
Many Americans were still under the impression that if a select few could do the "self-made man" thing, everyone should be able to. However, with the coming of the Depression, more and more laborers became unemployed. It became nearly impossible to find work, and there was no government welfare agency. Therefore, in order to survive in society, people needed help. The "rugged individualism" theory hurt the starving, destitute poor, who could no longer do it by themselves. Eventually, Hoover had to give out a "stimulus" type thing to the "top of the economic pyramid." He gave money to the RR's and other corporations, hoping that it would trickle to the lower classes. After this more or less failed, he gave money to the lower classes, and hoped it would trickle up.
Outline
The Republican "Old Guard" Returns
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Warren G. Harding looked presidential, but was often overwhelmed with his presidency
- He was unable to detect how bad his evil associates were
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Harding did promise to bring the "best minds" together
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Charles Evans Hughes- Secretary of State
- Masterful, imperious, incisive, and brilliant
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Andrew Mellon- Secretary of Treasury
- Multimillionare and a collector of art
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Herbert Hoover- Secretary of Commerce
- Brought his second rate cabinet post to a first rate importance
- Brought up foreign trade for the US manufacturers
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Charles Evans Hughes- Secretary of State
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These "best minds" were offset by two of the worst
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Senator Albert B. Fall- Secretary of Interior
- Scheming anticonsevrationist
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Harry M. Daugherty- Attorney General
- Was supposed to prosecute wrongdoers
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Senator Albert B. Fall- Secretary of Interior
GOP Reaction at the Throttle
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Harding was a perfect "front" for enterprising industrialists
- old order came back into being
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hoped to improve the business of laissez-faire
- gov't would help guide business to greater profits
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Made courts and administrative bereaus more friendly to their cause
- Harding lived less than three out of four years in office, but apointed four out of nine justices
- some of his choices ended up going against popular currents for the next two decades
- a fortunate choice was Taft who performed his duties and was more liberal about them than his associates
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Supreme Court killed some progressive laws in the early 1920's
- reverseed its own reasoning in cases like Adkins v. Children's Hospital and Muller v. Oregon (which stated that women were in need of protection in the workplace)
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invalidated a minimum wage law for women
- because women now had the vote, they were now equal to men and therefore could no longer be protected in special legislation
- caused controversy
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Corporations were better off under Harding
- anti-trust laws were often ignored, circumvented, or feebly enforced
- encouraged to regulate themselves rather than be regualted
The Aftermath of War
- Wartime government controls on the economy were swiftly dismantled.
- The War Industries Board dissappeared and with that progressive hopes for more government regulation of big business disappeared.
- Washington returned the railroads to private management in 1920.
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Congress passed the Esch-Cummins Transportation Act of 1920
- encouraged private consolidation of the railroads and pledged the Interstate Commerce Commision to guarantee their profitability.
- The Merchant Marine Act of 1920 authorized the Shipping Board, which controlled about fifteen hundred vessels, to dispose of much of the hastily built wartime fleet at bargain-basement prices.
- Under the La Follette Seaman's Act of 1915 American shipping could not thrive in competition with foreigners.
- Labor was suddenly deprived of its wartime crutch of friendly gov't support.
- A bloody strike in the steel industry was ruthlessly broken in 1919, partly by exploiting ethnic and racial divisions among the steelworkers and partly by branding the strikers as dangerous "reds"
- The Railway Labor Board ordered a wage cut of 12% in 1922 provoking a 2 month strike.
- Unions wilted in the hostile political environment and membership decreased by nearly 30% between 1920 and 1930
- In 1921 Congress generously created the Veterans Bureau, authorized to operate hospitals and provide vocational rehibilitation for the disabled.
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Veterans quickly organized into pressure groups.
- The American Legion had been founded in 1919. The legion soon became distinguished for its militant patriotism, conservatism and zealous antiradicalism.
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The legion also became notorious for its aggressive lobbying for veterans' benefits. The former servicemen demanded compensation to make up for the wages they had "lost" when they fought.
- In 1924 Congress passed the Adjusted Compensation Act which gave every former soldier a paid-up insurance policy due in twenty years- adding about $3.5 billion to the total cost of the war.
America Seeks Benefits without Burdens
- U.S. rejects Treaty of Versailles & therefore still at war w/ Germany, Austria, & Hungary almost 3 yrs after the armistice
- July 1921, Congress passes a joint resolution declaring the war officially over
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Harding
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Isolationism
- Harding administration continued to regard the League of Nations as unclean, refusing (@ 1st) to support the League's world health program
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As a rivalry between Britain & U.S. in the Middle East over oil-drilling concessions hightened, Harding couldn't keep his back turned to the rest of the world completely
- experts realized that oil would be as much needed for victory in battles of the future as it was during WWI
- Secretary Hughes secured the right to share in the exploitation of Middle East for U.S. oil companies
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Disarmament
- Harding was pushed by businesspeople that were unwilling to pay out of their pockets for $ to finance the naval building program started during the war
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Isolationism
Hiking the Tariff Higher
- A comparable lack of realism afflicted foreign economic policy in the 1920s.
- Businesspeople sought to keep the prosperous home market to themselves by putting up insurmountable tariff walls around the US
- They feared a flood of cheap goods from recovering Europe, esp. during the brief but sharp recession of 1920-1921
- Congress passed the Fordney-McCumber Tariff Law in 1922
- Schedules were boosted from the average of 27% under the Underwood Tariff of 1913 to an average of 38.5%
- Duties on farm produce were increased and the principle was proclaimed that the general rates were designed to equalize the cost of American and foreign production.
- The president was authorized with the advice of the factfinding Tariff Commission to reduce or increase duties by as much as 50%
- Presidents Harding and Coolidge were far more friendly to tariff increases than to reductions.
- In 6 years they authorized 32 upward changes.
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The high-tariff course set of a chain reaction.
- European producers felt the spueeze. An impoverished Europe need to sell its manufactured goods to the US if it hoped to achieve economic recovery and to pay its huge war debt.
- America needed to give foreign nations a chance to make a profit from it so that they could buy its manufactured goods and repay debts.
- The American example spurred European nations to pile up higher barriers themselves
The Stench of Scandal
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1923- Colonol Charles R. Forbes was head of the Veterans Bureau but had to resign when caught embezzling
- Had once deserted the army
- Appointed by Harding
- Took about 200 million, mostly from hospitals
- Got 2 yrs. in fed. penitentiary
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1921- Teapot Dome Scandal
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There were 2 naval oil reserves
- Teapot Dome, Wyoming
- Elk Hills, California
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Albert B. Fall was secretary of navy
- Got these reserves transferred to the Interior Department
- Leased the lands to oilmen (Harry F. Sinclair and Edward L. Doheny)
- First got about $400,000 of "loans" from the two men
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Details got out in 1923 and all three were taken to court in '24
- Decision dragged until '29
- Fall got 1 yr. in jail for taking a bribe
- Sinclair and Doheny got off scott-free
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Acquittal of Bribe-Givers killed the trust in the courts
- "Rich people don't go to prison"
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There were 2 naval oil reserves
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Att. General Daugherty was selling pardons and liquor permits
- He was tried in '27 but got away with it after 2 hung juries
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Harding didn't have to hear all about the scandals because he died
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Bonus Maybe???
- Went on a speech-making trip across the country
- On the way back, he died in San.Fran. (August 2, 1923)**
- Had pneumonia and thrombosis
- Harding just wasn't strong enough to be the president
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Bonus Maybe???
"Silent Cal" Coolidge
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Veep Calvin Coolidge was visiting family in Vermont
- "Justice of the Peace" Daddy swore his son in on the family Bible
- He didn't talk much, so was known as "Silent Cal"
- Believed strongly in the status quo
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Loved Big Business
- "The man who builds a factory builds a temple..."
- Because of his Laissez-faire policies, people like Cal
- He was "thrify" so agreed to lowering taxes and debts
- Got rid of scandalous admin's from Harding's time
- People got over the scandals because of the "good times" going on in the economy department
Frustrated Farmers
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Farmers in a boom-or-bust cycle in the 1920's
- end of war brought an end to gov't assured high prices and an end to mass purchases by other nations
- tracters was increasing the amount of their crops making them less profitable
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Many schemes to help the farmers
- Capper-Volstead Act which exempted farmers from antitrust prosecution
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McNary-Haugen Bill
- sought to keep agricultural prices high by authorizing gov't to buy up surpluses and sell them abroad
- losses were to be made up by a special tax on farmers
- bill was passed and vetoed twice
- Farm prices stayed down
A Three-way Race for the White House in 1924
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Republicans:
- "Keep Cool and Keep Coolidge"
- "Silent Cal" gets a repeat nomination
- Got 15,718,211 popular, 382 electoral
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Democrats:
- Had a more difficult time deciding
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Had many tensions:
- "Wet" vs. "Dry"
- Urbanites vs. Farmers
- Fundamentalists vs. Modernists
- Liberals vs. "Stand-Patters"
- Immigrants vs. Old-Stock Americans
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Finally picked John W. Davis
- Not much different the Coolidge
- Got 8,385,283 popular, 136 electoral
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Non-Party:
- Bob La Follette (Senator) decided to run for Presidents
- He got the support of the AF of L, the Socialst Party, and the "New" Progressive party (not to mention Farmers)
- Had only a presidential ticket
- Wanted Gov't ownership of RR's, relief for farmers, no monopolies, wanted to limit Judicial Review for laws
- Got 5 million popular, 13 electoral
Foreign Policy Flounderings
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isolationism remained the main forgien policy throughout the time period
- congress still would not allow US involvement in League of Nations
- the exception to this was the armed intervention in the Carribean
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overshadowing all foriegn policy issues was the problem of international debts
- European nations ovwed US $16 billion
- they couldn't pay this sum
- argued that it should be conunted as war expenses
- said that their war fueled american economy
- also claimed high us tariffs prevented trade necessary to get the $
Unravleing the Debt Knot
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America wanted its money back from its war allies
- Allies pressured Germany to pay $32 billiion in war reparations
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Germany allowed rampant speculation
- 480 million marks for a loaf of bread or about $120 million preinflation
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Sensible statesmen called for reduction or even cancellation of war debts, many others against
- Coolidge asked, " They hired the money, didn't they?"
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Reality came in the form of the Dawes Plan created by Charles Dawes, Coolidge's running mate
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it rescheduled German reparation payments and allowed America to lend money to Germany
- America lends to Germany who pays Britain and France who pays back America
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idea caused by credit which died in 1929
- Hoover called for suspension of debts for one year in 1931
- all countries in debt soon stopped paying all together except "honest little Finland" which payewd off its debt in 1976
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it rescheduled German reparation payments and allowed America to lend money to Germany
- US never got its money and Europeans disliked America
Predient Hoover's First Moves
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prosperity was predominant in the late 1920s
- but unorganized wage earners & esp. disorganized farmers weren't getting their share of the wealth
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Agricultural Marketing Act helped wounded farmers
- designed to "help farmers help themselves" mainly thru producer's cooperatives
- set up Federal Farm Board w. $ 1/2 million at their disposal for buying/selling/storing
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Federal Farm Board creat the Grain Stabilization Corporation AND the Cotton Stabilization Corporation
- goal: bolster decreasing prices by buying up surpluses
- prices soon fell tho, suffocating the two agencies
- farmers hoped the tariff would save them
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Hoover had promised to call Congress into special session to consider agricultural relief & to bring about "limited" changes in the tariff
- these hope-giving promises had def helped him win votes in the mid-west
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Hawley-Smoot Tariff of 1930
- started in the House as a pretty reasonable protective measure to assist the farmers
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whin it came out of the lobbyist Senate it had about 1000 amendments, turning it into the hightest protective tariff in the nation's peacetime history
- 38.5% to nearly 60% (est. by Fordney-McCumber Act of 1922)
- foreigners felt it was a "blow below the trade belt"
- reversed a promising worldwide tredt toward reasonable tariffs
- plunged America & other nations deeper into the Depression
- increase internation financial chaos
- force US further inot economic isolationism
The Great Crash Ends the Golden Twenties
- On March 4th 1929 everything looked peachy for Herbert Hoover- no one saw the coming crisis
- The Crash came in October 1929 when foreign investors and domestic speculators started to sell
- After they sold everyone else started to sell and 16,410,030 stocks were sold
- loses were some 40 billion for stockholders by the end of 1929
- America was hit the hardest of all the countries by this depression
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by the end of 1930 more than 4 million were out of a job
- 2 years later that number tripled
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over 5 thousand banks collapsed in the first three years
- Thousands lost there savings because of this
- Families felt alot of stress blame was sometimes placed on the father
Hooked on the Horn of Plenty
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There were several cause for the great depression
- The nations overproduction of goods
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Too much money going to to few people
- not enough money going into salaries and wages
- The debt and installment system was also at fault
- The economic weakness of Europe and other areas was felt in the US
- There was also a drought in the Mississippi valley
- Farm tenancy was also spreading in the south
- Many of the citizens who were not at fault at all were out of a job
Rugged Times for Rugged Individualists
- The Great Depression basically made Hoover look really bad
- He was not able to engineer a way to fight the great depression
- He did not believe in government handouts-weakens the national fiber
- As America sunk deeper into depression Hoover decided to give money to the Railroads bank and rural credit corporations. Hopeing that wealth would trickle down to the lower classes
- critics sneered at his attempts-they wanted money now for the poor
- Honestly Hoovers policys did help prevent a further sinking into depression
Herbert Hoover: Pioneer for the New Deal
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recommended Congress vote lots of $ for useful public works
- he secured from Congress $2.25 billion for such projects
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Hoover Dam on the Colorado River
- started plans during Coolidge, beginning in 1930 under Hoover, completed in 1936 under FDR
- used for irrigation, flood control, & electric power
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Reconstruction Finance Corporation (RFC)
- became a gov't leding bank w/ it's initial working capital of $1/2 million
- designed to provide indirect relief by assisting insurance companies, banks, agricultural organizations, RRs, & even hard-pressing state & local gov'ts
- no loans were given to individuals
- was v. veneficial but came a little too late for max. usage
- giant corporations benefitted form this
- acutally had a stroy New Dealish aire
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Norris - La Guardia Anti-Injunction Act in 1932
- benefited labor
- outlawed antiunion contracts
- forbade federal courts from issuing injuctions to restrain strikes, boycotts, & peaceful picketting
- tho he started out w/ a 19th century bias, by the end of his term he had started puching toward gov't assistance for needy citizens
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Hoover suffered from a critical Congress
- 1st 2 yrs, Repub majority was v. uncooperative
- 2nd 2 yrs, Dems almost controlled both houses
- Repubs and Dems tag-teamed to harass Hoover
Routing the Bonus Army in Washington
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veterans were hard-hit victims of the depression
- wanted their payment for their service early eve tho it had been deferred by COngress in 1924 to be paid in 1945
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The "Bonus Expeditionary Force" (BEF)
- had about 20,000 members
- went to Washington in 1932
- set up a giant unsanitary Hooverville, disturbing the public health
- the bonus bill failed in Congress by a little, so Hoover paid off 6000 vets to leave while others stayed, defying Hoover's orders
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Riots followed so Hoover called in the army to evacute the vets
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Gen. George Douglas MacArthur came in w/ bayonets and tear gas
- harsher than Hoover wanted
- "Battle of Anacosita Flats"
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Gen. George Douglas MacArthur came in w/ bayonets and tear gas
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Hoover's popularity dropped a lot
- he "ditched, drained, & damned the country"
- helped Dems (FDR) win support in upcoming election
Hoover Pioneers the Good Neighbor Policy
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The arrival in the White House was good for the United States's southern neighbors
- Most Americans had less money to invest and pulled out of Latin America after the stock market crashed
- Hoover was a major advocate of good will
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Hoover wanted to abandon the Roosevelt Corrilary
- Negociated a new treaty with Haiti that provided the complete withdrawl of US platoons by 1934
- Early in 1933 the last group of Marines left Nicaragua (Had been stationed there for last 20 years)
- Hoover returned America to the "Good Neighbor" policy
- Returned to this policy after attempting to repair the damage that was caused by those before him