THE POLITICS OF BOOM AND BUST

Chapter 32

1920s Politics: Prosperity 1920s Politics: Prosperity and Depressionand Depression

Theme 1Theme 1

TThe Republican he Republican administrations of the administrations of the prosperous 1920s pursued prosperous 1920s pursued conservative, pro-business conservative, pro-business policies at home and economic policies at home and economic unilateralism abroad.unilateralism abroad.

MEMORY DEVICE FOR MEMORY DEVICE FOR 1920s 1920s CONSERVATISMCONSERVATISM

HALT:HALT:

HHigher tariffsigher tariffs

AAnti-Unionnti-Union

LLaissez faireaissez faire

TTrickle Down theoryrickle Down theory

Political IdeologyPolitical IdeologyLiberalism/ProgressivismLiberalism/ProgressivismGov’t regulation of business

Federal gov’t as an agency of human welfare

Graduated income tax/lower tariff

ConservatismConservatismLaissez Faire (“Rugged

Individualism”)

States’ Rights

Lower taxes/higher tariffs

Progressive-Republicans and Wilson Democrats:1900-20

Democrats: 1932-present

“Old Guard” Republicans: Gilded Age and 1920s

Republicans: 20th century

Southern Democrats: 1877-1994

LibertyLibertyEqualityEquality

CYCLES IN AMERICAN HISTORYCYCLES IN AMERICAN HISTORYLiberalism/ProgressivismLiberalism/ProgressivismGov’t regulation of business

Gov’t Programs to Help People

Higher taxes

Civil Rights

ConservatismConservatism“Rugged Individualism”

States’ Rights

Lower taxes

Moral reform

1. Progressive Era: 1900-1920

3. Democrats: 1932-1952

5. Democrats: 1960-1968

8. Democrats: 1992-2000

10. Democrats: 2008-?

2. Republicans: 1920-1932

4. Republicans: 1952-1960

6-7.Republicans:1968-76;1980-92

9. Republicans: 2000-2008

LibertyLibertyEqualityEquality

1 23 45 6 78 9

WHO WERE THEY BETWEEN 1900-WHO WERE THEY BETWEEN 1900-1932?1932?

DemocratsDemocrats RepublicansRepublicans

Working class

Irish/“New Immigrants”

Catholics

Populists (western farmers)

Southern Whites

Middle Class/Upper Class

White Protestants

African Americans

WHO ARE THEY NOW?WHO ARE THEY NOW?DemocratsDemocrats RepublicansRepublicans

Working class

African Americans

Latinos

Women

Intellectuals

Gays/Lesbians

Middle Class/Upper Class

White males

Evangelical Christians

White Southerners

I.I. Election of 1920: Election of 1920: A. Republicans nominated A. Republicans nominated Senator Senator Warren G. Harding Warren G. Harding of of Ohio (and Ohio (and Calvin Coolidge as Calvin Coolidge as vice presidential vice presidential running mate)running mate)

1. Party platform was 1. Party platform was ambiguous regarding the ambiguous regarding the League of Nations League of Nations2. Harding spoke of returning 2. Harding spoke of returning America to America to “Normalcy”“Normalcy”

3. Conservative 3. Conservative “Old Guard” “Old Guard” wing of the party now wing of the party now dominateddominated

-- Progressive Republicans -- Progressive Republicans lost much of their lost much of their

influence influence  

Republican “Old Guard” Returns

Warren Harding was one of the best-liked men of his generation.

But, weak, inept and only a mediocre mind.

The country wasn’t looking for more. Why?.

Harding surrounded by scoundrels. “Ohio Gang”

GOP Reaction At The Throttle

Harding = Laissez Faire Progressivism was dead. Goal was Laissez-faire plus; help guide

business toward profits. Put many like-minded people into

administration and the courts. In Harding’s three years as President, he

appoints four S. Ct. judges. Taft as Chief Justice

Rolling Back Progressivism In 1920s the Supreme Court supported

business. (Taft is Chief Justice) minimum wage law. federal Child Labor law, Adkins v. Children’s Hospital overturned a

law that gave women special protections in the work place.

Progressive legislation regulating business was ignored and unenforced.

trade associations.

The Aftermath Of War

After war, Government got out of the governmental control of business

Merchant Marine Act of 1920 Labor saw major setbacks.

A violent steel strike crushed in 1919 Membership in unions declined by

nearly 30 percent between 1920 and 1930.

Strikes were ruthlessly crushed. RR strike injunction.

Veterans Veterans were one of the few

groups to achieve lasting gains through the war.

1921 Veterans Bureau American Legion.. Adjusted Compensation Act

Bonus bill in 1922. Harding vetoes.

1924, Congress repasses the bill.. Terms Cost 3.5 billion.

Coolidge vetoes, but Congress over-rides.

Benefits Without Burdens

Harding was intent on isolationism, but U.S. couldn’t be completely isolationist.

US still technically at war with Axis 1921 Congress passed a joint resolution that declared the war

officially ended. Republicans continued to despise the League of Nations

Eventually forced to send unofficial observers Mid-East: GB and America were competing for oil-drilling

rights of oil-rich Arab nations Business wants disarmament. Why? Hard to draw down the navy. Why?

Five-Power Naval Treaty

Washington “Disarmament” Conference in 1921-22. Two main issues: Naval disarmament and the situation

in the Far East. What does the US propose?. Becomes the Five-Power naval Treaty of 1922:

US England and Japan agree to ratio of 5:5:3 Brits and Americans agreed not to fortify their Far East

possessions, including the Philippines. Japan has no such restrictions.

Anglo-Japanese alliance replaced by the Four-Power Treaty. Brit, Japan, France and US agree to preserve the status quo in Pacific.

China boosted by Nine-Power Treaty of 1922 which guarantees a full open-door policy in China.

What is the flaw in the treaty?

Limits Imposed by Washington Conference, 1921–1922

Kellogg-Briand Pact (1928)

Idealistic Americans urged nations to foreswear war as an instrument of national policy.

US Sec. of State Kellogg reluctantly supports after nearly 2 Million US signatures

Signed by 62 nations pledging not to use war as an instrument of national policy.

Americans believed that this would prevent war.

Huge loop-hole.

“It Works Both Ways,” c. 1922

Hiking The Tariff Higher Isolationism reflected in economic policy. Business wanted to keep American markets for

American business. Fordney-McCumber Tariff Law. 1922 Hiked

tariff from 27 percent to 35%. President given the power to raise or lower

tariffs by 50%. Mostly used to adjust rates higher. (32 up, 5 down)

Tariffs hurt European countries trying to recover from the war and pay war debts.

Leads to international tariff war and to feeling of economic oppression in countries such as Germany.

A 1924 political cartoon shows fallout from the Teapot Dome Scandal

The Stench Of Scandal

Harding Administration was beset with scandals.

Charles Forbes, Attorney General

Daugherty Teapot Dome

II. Harding’s administrationII. Harding’s administrationA. ScandalA. Scandal1. “Ohio Gang” or “Poker Cabinet”1. “Ohio Gang” or “Poker Cabinet” -- Harding used his connections -- Harding used his connections with friends in his cabinet with friends in his cabinet to to make money in some make money in some instancesinstances2. Veterans Bureau chief stole 2. Veterans Bureau chief stole about $200 million from funds about $200 million from funds to build veterans’ hospitalsto build veterans’ hospitals

3. 3. Teapot Dome ScandalTeapot Dome Scandal, 1923: , 1923: one of the biggest presidential one of the biggest presidential scandals of the century scandals of the century a. 1921, Sec. of Interior Alberta. 1921, Sec. of Interior Albert Fall transferred naval oil Fall transferred naval oil

reserves to the Interior Dept. reserves to the Interior Dept. b. Harding signed the orderb. Harding signed the order c. Fall took a $400,000 bribe to c. Fall took a $400,000 bribe to lease the land to oilmen lease the land to oilmen d. Scandal became public after d. Scandal became public after Harding’s death in 1923 Harding’s death in 1923

-- Oilmen were acquitted-- Oilmen were acquitted-- The case undermined -- The case undermined

Americans’ faith in the Americans’ faith in the courts and public officials courts and public officials

4. Attorney General Harry 4. Attorney General Harry Daugherty forced to resign for Daugherty forced to resign for illegal illegal sale of pardons and sale of pardons and liquor liquor permitspermits

a. He was acquitted in two a. He was acquitted in two trials trials

b. One of his advisors b. One of his advisors committed suicide committed suicideB. Harding died in 1923 while on a B. Harding died in 1923 while on a speech tourspeech tour

1. The scandals had not yet 1. The scandals had not yet reached the public reached the public

2. Stress from the scandals may 2. Stress from the scandals may have contributed to his death have contributed to his death

3. V.P. Coolidge became president3. V.P. Coolidge became president

Calvin Coolidge, Andrew Mellon and Herbert Hoover

D. Conservative economic agenda of D. Conservative economic agenda of the 1920s (initiated by Harding; the 1920s (initiated by Harding;

advanced by Coolidge & Hoover)advanced by Coolidge & Hoover)1. Role of gov’t is to make 1. Role of gov’t is to make

business more profitable business more profitable a. a. “Trickle down” theory: “Trickle down” theory: tax cuts for corporations and tax cuts for corporations and the wealthy the wealthy

Put forth by Andrew MellonPut forth by Andrew Mellon Tax cuts would result in more Tax cuts would result in more

business investment thus creating business investment thus creating more jobsmore jobs

Tax burden shifted to the middle Tax burden shifted to the middle classclass

Harding Dies

Harding dies in August, 1923, before the full scope of these scandals has come to light.

His administration is the most scandal-ridden since Grant.

Coolidge President.

Calvin Coolidge Coolidge embodies Yankee

Puritanism. Is not a dynamic leader. His policies compared to

Harding? His five years are relatively

uneventful and isn’t forced to grapple with any serious crisis.

Coolidge helps to save the Republican Party. How?

President Calvin CoolidgePresident Calvin Coolidge1923-19291923-1929RepublicanRepublican

Frustrated Farmers

Farmers hit hard after the war. Prices plummet. Why?

In 1920s one-in-four farms goes bankrupt. Great depression starts in farm economy

long before it hits the rest of the economy. Capper-Volstead Act. McNary-Haugen Bill. What would it do?

Coolidge twice vetoes this measure. Political ire of farmers stays high as a result.

2. A depression hit farmers in the 2. A depression hit farmers in the 1920s as 25% of farms were 1920s as 25% of farms were sold for sold for debt or back taxesdebt or back taxes 3. McNary-Haugen Bill3. McNary-Haugen Bill

a. Bipartisan “farm bloc” from a. Bipartisan “farm bloc” from agricultural states sought to agricultural states sought to aid aid farmersfarmers b. Planned to keep agricultural b. Planned to keep agricultural prices high by authorizing the prices high by authorizing the gov’t to gov’t to purchase surpluses purchase surpluses and sell them and sell them abroad abroad

c. Gov’t losses would be c. Gov’t losses would be regained by a tax on farmersregained by a tax on farmers

d. Coolidge vetoed the bill twice d. Coolidge vetoed the bill twice

Election of 1924 Rep. nominate Coolidge to be elected in

his own right, and he campaigns on the basis of the status quo.

Democrats are hopelessly divided Nominate John W. Davis, a wealthy

corporation lawyer who didn’t excite anyone. 102 ballots

La Follette runs as third-party Progressive candidate.

Coolidge wins nearly 2-1 over Davis.

IV. Election of 1928IV. Election of 1928A. NominationsA. Nominations

1. 1. Herbert Hoover Herbert Hoover was the was the Republican nomineeRepublican nominee

-- Platform of prosperity and -- Platform of prosperity and prohibitionprohibition

2. 2. Al Smith Al Smith nominated by nominated by DemocratsDemocrats

a. First Irish Catholic a. First Irish Catholic nominated by a nominated by a major party major party b. Rural America andb. Rural America and the South opposed the South opposed him him

B. CampaignB. Campaign1. Radio was used 1. Radio was used

significantly for significantly for the first time the first time2. Hoover warned of 2. Hoover warned of

“socialism” “socialism” and preached and preached “rugged “rugged individualism” individualism”

3. Religious bigotry surfaced 3. Religious bigotry surfaced regarding Smith’s regarding Smith’s

CatholicismCatholicism

2. Coolidge defeated Davis and 2. Coolidge defeated Davis and La Follette 382-136-13 La Follette 382-136-13

President Herbert HooverPresident Herbert Hoover1929-19331929-1933RepublicanRepublican

The Debt Problem Biggest foreign policy issue in second Coolidge

term was foreign debt owed US. America had gone from a debtor nation before

the war to a creditor nation after the war. The dollar was beginning to supplant the Pound

Sterling. America had loaned 10 Bill. to Allies during and

after the War, and American investors had loaned an equal amount to Europe in the 1920s.

US wants this money back, but Allies are having a hard time repaying.

Europe asks for a Break

Allies argue that US should write off as war expense.

What is their argument? Allies had sacrificed millions of lives while sat

on the sidelines. Allies can’t get repaid for lost lives and manpower.

US tariffs making it very hard to earn the money necessary to repay the debt.

Money Allies had borrowed had been spent in US, helping to refuel the US economy.

Unraveling The Debt Knot

American government intransigent on debt. Allies response? Effect on Germany. German reaction? Many urged that debts and reparations be

drastically scaled down or canceled. Coolidge response Contribution to isolationism. 1924. Dawes plan.

Why is it fatally flawed.

Election of 1928

Coolidge decides not to run. Herbert Hoover. Hoover platform. Democrats, still quite

divided, nominate liberal New York Governor Al Smith. Seemingly and odd choice. Why?

Many dry, rural, fundamentalist democrats choked on his candidacy.

Hoover Hoover is American success

story. Against foreign entanglements.

Believed in isolationism. Had never run for or held office

before. He was used to the business model. Uncomfortable asking for votes.

Shy and standoffish personally. Integrity and personal honor;

great humanitarian administering US foreign aid.

Very efficient and very bright.President Herbert Hoover poses with his dog, King Tut.

Hoover Landslide Hoover runs as a business candidate. Did have some progressive instinct. Hoover and Smith try to keep the campaign

clean, but minions take it into the sewer. “Rum, Romanism and Ruin.” Hoover wins in a landslide, and Smith can’t even

hold all of the solid democratic South. Also a very solid Republican majority in

Congress.

Presidential Election of 1928

President Hoover’s First Moves Economy was roaring, but Farmers and non-union wage

earners were not getting their share of the prosperity:. Hoover did not believe in direct aid. Wanted private

sector response. Agricultural Marketing Act. Sets up Federal Farm

Board. What does it do? Why doesn’t it work? Farmers then turn to the tariff to cure their ills. Leads to the Hawley-Smoot Tariff of 1930. Probably one

of the worst pieces of legislation in US history. Why? Biggest tariff in US peacetime history. Raised tariff from 38.5 to nearly 60%. Foreign nations outraged. Seemed to be a declaration of economic warfare. Helped push the world toward depression. layed into the hands of

rising Nazism in Germany.

Theme #2Theme #2

TThe great crash of 1929 led he great crash of 1929 led to a severe, prolonged to a severe, prolonged depression that devastated depression that devastated the American economy and the American economy and spirit, and resisted Hoover’s spirit, and resisted Hoover’s limited efforts to correct it.limited efforts to correct it.

B. B. The Great Crash of 1929The Great Crash of 1929 1. 1. Bull market: Bull market: stock values stock values continued to rise during the ‘20s continued to rise during the ‘20s 2. 2. On marginOn margin buying of stocks buying of stocks allowed investors to purchase allowed investors to purchase stocks with little money down stocks with little money down 3. 3. Overspeculation: Overspeculation: investors investors gambled prices would continue gambled prices would continue to rise to rise -- Hoover tried unsuccessfully to -- Hoover tried unsuccessfully to curb speculation curb speculation

Stock Market Crash Economy was near the

bursting point. Prices on the stock market

were vastly over-valued. Many had bought on the

margin. Problem with this. Black Tuesday. October

29, 1929. Causes In two months, investors

lost 40 Bill, in paper value. More than total cost of WWI.

Great Depression Opening bell of the worst and

longest depression in US and World history.

By the end of 1930, more than 4 Million unemployed. By 1932, 12 Mill.

Wages and hours slashed. People weren’t buying, so factories weren’t producing, so there were no jobs.

Many lost their life’s savings in the Market.

Was a huge hit to the America Psyche. Where was Manifest Destiny? Where was the American Dream?

Causes of the Great Depression Over-production of both farm and factory. Too little being paid in wages. Over-expansion of credit through installment buying

helped over-stimulate production and over-extend the buying power of consumers.

Technology pushed people out of jobs. Economic anemia overseas caused by the debt burden

(and Hawley-Smoot). Dried up purchasing from Europe. Terrible drought in the Mississippi Valley caused a

number of farm foreclosures, putting farmers out of business.

Antiquated economic theory Lack of deposit insurance

Panic hits Wall Street on Black Tuesday

Rugged Times For Rugged Individualists

Hoover trapped by traditional economic theory

Had great sympathy for those suffering.

Wedded to the idea of Laissez faire, saw governmental handout as sacrilege.

Why did he fear governmental handouts?

Hoover believed that recovery was just around the corner.

Hoover Props Up Business

As the depression drags on private relief organizations run out of money.

Hoover agrees to provide aid to RR, banks and credit corps.

What is the intent. What do critics claim? Why doesn’t it work?

Herbert Hoover: Pioneer Of The New Deal

Hoover eventually recommends that Congress vote 2.25 Bill. for useful public works.

1932—Reconstruction Finance Corporation (RFC).

Norris-La Guardia Anti-Injunction Act. Compared to his predecessors Hoover did a

great deal. Republican Congress was often very hostile to

Hoover’s plans.

The Bonus Army In Washington Vets of WWI were hard

hit. Bonus Expeditionary

Force. Congress, riots ensue and two are killed.

Hoover orders the army to force the marchers to leave.

Gen. Douglas MacArthur. Battle of Anacostia Flats.

Brings down more abuse on Hoover.

Unemployment: 1928-Unemployment: 1928-19421942

The U.S. Business Cycle: The U.S. Business Cycle: 1890-19401890-1940

Dorothea LangeDorothea Lange

Government-sponsored

photographers like Dorothea

Lange documented the

suffering that occurred during

the Great Depression.

VIII.VIII. Hoover’s response to the Hoover’s response to the Great Great Depression Depression A. Hoover did not respond A. Hoover did not respond quickly quickly enough enough

1. Believed the biggest 1. Believed the biggest cause of cause of the depression the depression was the weak was the weak international economyinternational economy

2. Domestic measures to 2. Domestic measures to curb the curb the depression depressionwere slow to were slow to appear appear

VIII.VIII. Hoover’s response to the Hoover’s response to the Great Great Depression Depression A. Hoover did not respond A. Hoover did not respond quickly quickly enough enough

1. Believed the biggest 1. Believed the biggest cause of cause of the depression the depression was the weak was the weak international economyinternational economy

2. Domestic measures to 2. Domestic measures to curb the curb the depression depressionwere slow to were slow to appear appear

B. FarmingB. Farming 1. Pre-crash: Agricultural 1. Pre-crash: Agricultural

Marketing Act (1929) Marketing Act (1929) a. Designed to help farmers a. Designed to help farmers

help help themselves themselves b. Indicated Hoover’s b. Indicated Hoover’s progressive tendencies progressive tendencies

-- Coolidge vetoed such -- Coolidge vetoed such measures measures2. 2. Federal Farm Board Federal Farm Board created created in 1930 with a revolving fund in 1930 with a revolving fund

of of $500 million $500 million a. Lent funds to buy, sell, and a. Lent funds to buy, sell, and store agricultural surpluses store agricultural surpluses b. Failed due to b. Failed due to

overproductionoverproduction

C. Attempts at economic recoveryC. Attempts at economic recovery 1. Volunteerism1. Volunteerism

a. Hoover believed in a. Hoover believed in voluntary voluntary cooperation cooperation

b. Urged businesses to avoidb. Urged businesses to avoid lay-offs and wage cuts lay-offs and wage cuts c.c. Secured no-strike pledges Secured no-strike pledges from labor leaders from labor leaders d. Urged citizens to d. Urged citizens to

contribute contribute to charities to charities -- In reality, private charity -- In reality, private charity not adequate to meet not adequate to meet

the the economic calamity economic calamity

3. Public works3. Public works a. 1930, Congress provided a. 1930, Congress provided

$750 million for $750 million for infrastructureinfrastructure

b. Hoover Dam b. Hoover Dam construction construction began in 1931 began in 1931 (completed in (completed in 1936) 1936)

c. Efforts did not yield c. Efforts did not yield significant results significant results

Hoover DamHoover DamPhoto by Ansel Adams, 1942Photo by Ansel Adams, 1942

D. D. Bonus ArmyBonus Army

1. 14,000 unemployed 1. 14,000 unemployed veterans veterans marched on marched on Washington in 1932 Washington in 1932 asking asking Congress for early Congress for early payment of WWI-era bonusespayment of WWI-era bonuses

2. The Senate refused (at 2. The Senate refused (at Hoover’s Hoover’s insistence) and half the insistence) and half the marchers marchers went back home went back home

E. Hoover EvaluatedE. Hoover Evaluated

1. Despite not doing enough, 1. Despite not doing enough, Hoover advocated more direct Hoover advocated more direct gov’t involvement than any gov’t involvement than any previous president in U.S. previous president in U.S. historyhistory

2. His focus on maintaining a 2. His focus on maintaining a balanced budget through balanced budget through increased taxes further increased taxes further decreased demanddecreased demand

3. By refusing to get off the gold 3. By refusing to get off the gold standard, the U.S. money standard, the U.S. money supply remained stagnant supply remained stagnant

4. Refusal of large-scale 4. Refusal of large-scale relief relief resulted in misery resulted in misery among the among the masses masses

3. 5,000 marchers remained 3. 5,000 marchers remained and and erected a Hooverville near erected a Hooverville near the the Capitol, demanding early Capitol, demanding early

payment of their payment of their bonusesbonuses

4. Hoover called in the U.S. Army 4. Hoover called in the U.S. Army to to remove the Bonus Army remove the Bonus Army

5. Hoover was seen by many as 5. Hoover was seen by many as heartless and suffered heartless and suffered

enormous enormous political damage political damage

Students on Their Own

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