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Chapter 32: The Politics of Boom and Bust
(1920-1932)
Essential Questions
How did the United States’ lack of participation in the League of Nations determine the group’s effectiveness?
In what ways did the introduction of new technologies result in the Great Depression?
How did the United States and other European nations deal with the enormous financial crisis created by WW1?
VocabularyWarren G. Harding
Calvin Coolidge
Herbert Hoover
Merchant Marine Act
Adjusted Compensation Act
Disarmament Conference
League of Nations
Teapot Dome Scandal
Fordney McCumber Tariff
Agricultural Marketing Act
Hawley-Smoot Tariff
“Black Tuesday”
Bonus Expeditionary Force (BEF)
Stimson Doctrine
Reconstruction Finance Corporation (RFC)
Overview (1920-1932)Only Republican Presidents during this time
Warren G. Harding
Calvin Coolidge
Herbert Hoover
Presidents allow retreat from Progressive Reform
serve public good less by direct govt. intervention, more through cooperation with big business
corrupt officials exploit public resources for profit
Return to isolationism and military unpreparedness
The Republican “Old Guard” Returns
President Warren G. Harding (inaugurated 1921)
Looked Presidential physically - tall, handsome
one of the best-liked men of his generation
like Grant, unable to detect moral corruption among associates
sought to collect the “best minds” for his administration
Charles Evans Hughes (Sec. of State) - very proactive in his role
Andrew Mellon (Sec. of Treasury) - managed budget extremely well
Herbert Hoover ( Sec. of Commerce) - demonstrated food-saving successes in WW1
The Republican “Old Guard” Returns (continued)
Still, some corrupt officials made their way into Harding’s administration (“worst minds”)
Albert B. Fall (Sec. of the Interior) - his role was to manage natural resources, but he was an avid anti-conservationist
Harry M. Daugherty (Attorney General) - small-town lawyer and participant in the “Ohio Gang”
GOP Reaction at the Throttle
Harding = well-intentioned, but weak-willed
McKinley-style Old Guard is therefore able to return
Goal is to improve on the old business doctrine of laissez-faire
Early 1920s
Supreme Court axes Progressive legislation
killed federal child-labor law
stripped away labor movement’s gains
restricted govt. intervention in economy
GOP Reaction at the Throttle (continued)
Adkins v. Children’s Hospital
Court reversed Muller v. Oregon reasoning, which had declared women deserving of special protection in the workplace
invalidated minimum wage law for women
erased idea of women’s protection at work
Anti-trust laws which had been applied during the Progressive years were set aside
Businesses in the Harding-era realized that expansion would be possible because of a lack of govt. interference
Example: The I.C.C. - The Interstate Commerce Commission, set up to regulate railroads, it was made up of men sympathetic to the railroad managers
The Aftermath of the War
With war’s end, the govt. stepped away from business intervention
War Industries Board was dismantled
Esch-Cummings Transportation Act - control of railroads went back to private enterprise
Merchant Marine Act (1920)
federal govt. reduced its involvement in shipping
authorized the Shipping Board to sell some 1,500 WW1-era ships to private shippers
Resulted in a smaller navy and less hassles
The Aftermath of the War (continued)
Because of laissez-faire and pro-business policies, the labor movement struggled
Bloody strike in the steel industry was broken in 1919 - crippled labor movement badly
1922, the Railway Labor Board cut wages by 12%
started a two-month strike
Attorney General Daugherty laid down a stinging injunction, crushing the strike
Afterward, enrollment in labor unions dropped by 30%
Veterans began organizing to fight for their rights
Teddy Roosevelt, Jr. started the American Legion in Paris in 1919
Distinguished for its militant patriotism, conservatism, and antiradicalism
Vets sought wages lost while away and/or veterans benefits
Congress agreed, passing the Adjusted Compensation Act, which gave every former soldier a paid-up insurance policy due in twenty years
America Seeks Benefits Without Burdens
Senate had not approved of the Treaty of Versailles, so America was technically at war with Germany, Austria, and Hungary three years after fighting ceased
Congress passed joint resolution in July 1921, officially ending war
U.S. did not officially participate in League of Nations
did send “unofficial observers” to meetings to keep an eye on their proceedings
lack of participation from U.S. kept the League from ever being truly successful
Harding recognized need for oil in the Middle East
Both Britain and the U.S. secured rights for drilling there
America Seeks Benefits Without Burdens (continued)
Disarmament was the trend of the time
cautious eye kept on Britain and Japan, who were starting a ship-building race
Disarmament Conference held 1921-1922
all major powers invited, including U.S., Britain, Japan, France, and Italy
Several treaties were made
Five-Power Treaty: set up a 5:5:3 ratio (U.S. to Britain to Japan) to limit ship-building among world’s largest naval powers
Four-Power Treaty: required Britain, Japan, France, and the U.S. to “keep the status quo in the Pacific”
Nine-Power Treaty: kept the open-door policy with China (free trade for all)
International trend to end warfare as a means of solving disputes
1928 Kellogg-Briand Pact: outlawed war
62 nations signed the treaty - a beautiful idea, but incredibly naive
Hiking the Tariff Higher
In the pro-business mood of the time period, businesses sought to increase the tariff to protect their markets from those of cheaper European goods
Fordney-McCumber Tariff: increased tariff rates from 27 to 38.5%
Presidents Harding and Coolidge were given authority to fluctuate tariff all the way to 50%
Pro-business men at heart, they leaned toward higher tariffs
Snag in the high-tariff system
Europe owed money to the U.S. for WW1. In order to pay it back, they needed to export goods. But because of the high tariff, Americans refused to buy from foreign markets. Therefore, European nations could not pay off their debt, and the U.S. was not getting paid back for its financial aid during the war.
The Stench of Scandal
Harding was an honest man, but many in his administration were not
Col. Charles R. Forbes skimmed money as chief of the Veterans Bureau. He and his crowd pilfered $200 million while building veterans hospitals, and he only spent two years in jail.
Worst scandal was the Teapot Dome Scandal, which involved oil
Sec. of the Interior Albert B. Fall managed natural resources
When oil was discovered near the “Teapot Dome” in Wyoming, Fall had the land placed under his power
He then accepted bribes for oil drilling rights from Edward Doheny and Harry Sinclair for about $100,000 and $300,000
the scandal was uncovered in 1923
Fall served only one year in prison, while Doheny and Sinclair were let off the hook
The Stench of Scandal (continued)
These high-priced scandals and skimpy sentences jolted people’s trust in the court system
More scandals involved Attorney General Harry Daugherty
often suspected of selling pardons and liquor permits (during the Prohibition)
President Harding died August 2, 1923 of pneumonia and thrombosis: the stress of all these scandals, and his feeling betrayed by his fellow administrators may have added to his illness
he had proven too weak for the Presidency
“Silent Cal” Coolidge
With Harding’s death, V.P. Calvin Coolidge became President
was serious, calm, shy, somewhat boring (especially in his speech-making), but a very moral man
was even more pro-business than Harding had been
Once said, “The man who builds a factory builds a temple,” and “The man who works there, worships there.”
Frustrated FarmersDuring WW1, farmers had enjoyed a boom.
After war, new technologies like the tractor made farm work easier and increased production
but the unnecessary increase in supply decreased crop prices
farmers fell into tough times during the 1920s
Farmers turned to Congress
Capper-Volstead Act: exempted farmer cooperatives from antitrust laws
McNary-Haugen Bill: kept price of agricultural goods high by allowing the government to buy excess surpluses and selling them to other nations
A Three-Way race for the White House in 1924
1924 Presidential election
Coolidge reelected as a conservative Republican
John W. Davis nominated by the Democrats after much debate
In the changing times, Democrats had difficulty defining themselves and their positions (they remained split and unorganized)
Senator Robert La Follette nominated by the Progressives
he was endorsed by the American Federation of Labor (AF of L) and the Socialists
would receive a sizable 5 million votes
Still, Coolidge easily reelected
Foreign-Policy Flounderings
Isolationism continued during the Coolidge era: America still refused to participate in the League of Nations
In an exception to the U.S.’s isolationism was its armed interventionism in the Caribbean and Central America
Had troops in the Dominican Republic, Haiti and Nicaragua at various times
settled a situation with Mexico over disputed oil rights in 1926
many Latin Americans resented American intervention
The most pressing issue was still international debts
The U.S. wanted payment from the European Allies
The Europeans maintained that they repayment was unnecessary and unfair
Unraveling the Debt Knot
America demanded that Britain and France pay off their war debts
But they were unable to pay, so Britain and France demanded that Germany pay more reparations payments, totaling some $32 billion, as compensation for war-inflicted damages. Britain and France would use this money to pay off their debts to the U.S.
Germany certainly could not pay
it was in the midst of financial crisis and societal anarchy
many Europeans urged that war debts be scaled down or erased completely
Coolidge, both conservative and thrifty, refused to erase the debt
Finally, Charles Dawes introduced the Dawes Plan: stated that America would loan money to Germany, Germany would make payments to Britain and France, and Britain and France would repay the U.S.
U.S. never got repaid for all of its loans
European nations felt bullied by America, and therefore resented their wartime ally
The Triumph of Herbert Hoover, 1928
Sec. of Commerce Herbert Hoover became Republican candidate in 1928 election
he spoke of “Rugged Individualism”
stated that America was made great by strong, self-sufficient individuals
Democrats nominated NY Governor Alfred E. Smith
had the people’s touch, but was Catholic (which turned off many) and a drinker (during the days of Prohibition)
Radio was a factor in an election for the first time
Hoover made better use of the technology and it greatly improved his campaign
Campaign was full of mudslinging on both sides
Hoover triumphed in a landslide
President Hoover’s First Moves
At first, Hoover enjoyed the economic prosperity of the day
His philosophy of helping one’s self prompted him to pass the Agricultural Marketing Act
It set up a Federal Farm Board, which would lend money to farmers
The Board started the Grain Stabilization Corp. and the Cotton Stabilization Corp. in 1930
They were supposed to buy surpluses of their respective crops to keep prices high
Isolationism was carried into economics
Hawley-Smoot Tariff was hiked up to almost %60, which angered other nations and resulted in numerous negative effects
slowed trade and would thus deepen the depression
moved U.S. into full-fledged isolationism and allowed for Hitler’s rise to power
The Great Crash Ends the Golden Twenties
The beginning months of 1929 showed no sign of impending economic disaster (stock market prices continued to climb)
“Black Tuesday”, October 29, 1929
stock market crashed
the sell-off of shares began and prices plummeted
Stock-holders had lost $40 billion in value by the end of 1929
Results of the crash
Businesses went out of business
unemployment shot up
over 5,000 banks went bankrupt
soup kitchens and homeless shelters grew in number
Hooked on the Horn of Plenty
Stock market crash was the trigger of the Depression, but it was not the only cause
over-speculation (in stock) and over-production (in farms and factories) led to the depression
American production and consumerism had over-reached the consumers’ ability to buy
The Great Depression was international
Europe was already struggling with wartime debt and could not handle more economic burdens
Natural disasters added to the tough times
drought sizzled in Mississippi Valley in 1930 (ruined many farmers)
“Rugged Individualists” became “Ragged Individualists”
even they could not escape poverty (often lived in homemade slums named “Hoovervilles”)
Rugged Times for Rugged Individualists
Hoover received backlash of economic downturn
his “rugged individualist” nature made him slow to take any government action
but ultimately, his humanitarian side showed through
he would assist railroads, banks, and credit corporations, restoring the top of the economic pyramid
Hopefully, financial health would be restored, unemployment relieved, on a trickle-down basis
many criticized him for aiding the big corporations who had allegedly gotten the country into the depression in the first place
Hoover Battles the Great Depression
Hoover recommended that Congress dole out $2.25 billion for useful public works (government spending would jump start the economy)
Hoover Dam (begun 1930, completed 1936)
serves to generate electricity, help with irrigation, flood control, and recreation
created the Reconstruction Finance Corporation ( RFC)
would lend money to finance the massive government projects of FDR’s “New Deal”
Congress passed the Norris-La Guardia Anti-Injunction Act
outlawed antiunion contracts
said that federal courts could not hinder strikes, boycotts, or peaceful protesting by unions
Hoover did get the government to battle the Great Depression (it just happened later rather that sooner)
Routing the Bonus Army in Washington
Many WW1 veterans still clamored for “bonuses” during the Depression
Created the Bonus Expeditionary Force (BEF)
consisted of 20,000 veterans
They marched to Washington and set up camp, waiting for the government to grant them their bonuses
riots emerged in the unsanitary encampment
Hoover ordered the BEF to be evicted from the premises
Eviction carried out by General Douglas MacArthur
used bayonets and tear gas to force the BEF out - resulted in the “Battle of Anacostia Flats”
The entire affair further damaged Hoover’s image
Japanese Militarists Attack China
1931, Japan invaded Manchuria (Northern China)
This action violated the League of Nations covenant, as well as various other international agreements signed by the Japanese government
some suggested that the League of Nations should use boycotts and blockades to put the economic stranglehold on Japan
League wary of taking such action without the assistance of the U.S. (not an official member)
America formulated its own response
Stimson Doctrine: stated that the U.S. would not recognize any territories acquired by force
Japan reacted to Stimson Doctrine by bombing Shanghai in 1932
Japan’s aggressive actions marked the first step towards WW11
Hoover Pioneers the Good Neighbor Policy
U.S. relations with Latin America had been hurting since around 1900
Hoover went on a good-will tour of Latin America in an attempt to extend the hand of friendship
During Depression
Americans had less money to engage in Taft-like “dollar diplomacy” (“economic imperialism”) with Latin America
new policies allowed American troops to be pulled out of Haiti and Nicaragua
These policies laid the groundwork for FDR’s “Good Neighbor” policy
Review: Short Answer Questions
How did new legislation after WW1 demonstrate the United States’ growing isolationist attitude? Use examples.
What were some of the main reasons that Labor Unions struggled after the war?
What did the Disarmament Conference seek to accomplish?
How did President Hoover attempt to aid struggling farmers?
What were some causes and effects of the Great Depression?