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?