The Politics of Boom and Bust

The Down Side of the Roaring Twenties

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The Republican Old Guard Returns in 1920

• Newly elected President Warren G. Harding was popular, but he had a mediocre mind and did not like to hurt people’s feelings

• He promised a “Return to normalcy”• He did have some good cabinet officials• Charles Evans Hughes (State)• Herbert Hoover (Commerce)• Andrew W. Mellon (Treasury)

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Cabinet Corruption• However, people like Senator

Albert Fall, a scheming anti-conservationist, became Secretary of the Interior

• Harry Daughtery became Attorney General

• These two became the worst of the scandalous cabinet members

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• A good man, but a weak one, President Harding was the perfect front for old fashioned politicians to set up a McKinley style old order of laissez faire politics

• Harding appointed 9 Supreme Court Justices (including former President Taft)

• Corporations could expand again, and anti-trust laws were not enforced or were ignored

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One Step Forward, Two Steps Back for Labor

• Men sympathetic to the railroads headed the Interstate Commerce Commission

• In the early 20’s, the Supreme Court stopped a federal child-labor law

• The case, Adkins v. Children’s Hospital reversed the earlier labor victory gained by the Muller v. Oregon—the Adkins case invalidated a minimum wage law for women

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The Aftermath of the War

• The War Industries Board was dismantled which removed government control over industries

• The Merchant Marine Act of 1920 authorized the reduction of the US navy

• Labor union membership shrank by 30% between the years 1920-1930

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Helping the Veterans

• In 1921, the Veterans’ Bureau was created to operate hospitals and provide vocational rehabilitation for the disabled.

• Many veterans wanted the monetary compensation promised to them for their service in war

• The Adjusted Compensation Act gave every former soldier a paid insurance policy due in 20 years

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America Wants Benefits and Not Burdens

• July 1921, the USA signed a joint resolution with Germany, ending the war (remember the USA did not ratify the Treaty of Versailles nor join the League of Nations)

• Eventually the USA became an “unofficial observer” at League of Nations conferences

• Secretary of State Hughes paved the way for the USA to exploit oil resources in the Middle East

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Keeping an Eye out For Japan and Britain

• Washington Conference 1921-1922 • Plan to reduce navies• A 5:5:3 ratio of ships that could be held by the

U.S., Britain, and Japan (in that order) was proposed by Hughes

• The Soviet Union, which was not recognized by the U.S.—why???, was not invited and did not attend.

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The Four Power Treaty

• Bound Britain, Japan, France, and the U.S. to preserve the status quo in the Pacific, replaced the 20-year-old Anglo-Japanese Alliance.

• There were no limits placed on small ships• Congress only approved the Four-Power

Treaty on the condition that the U.S. was not bound, thus effectively rendering that treaty useless.

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Kellogg-Briand Pact (Pact of Paris)

• The agreement said that all nations that signed would no longer use war as offensive means.

• It was ratified by 62 nations• It essentially outlawed war…• Frank B. Kellogg, Secretary of State, won the

Nobel Peace Prize for his efforts

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Hiking the Tariff Higher• Businessmen did not want Europe flooding American

markets with cheap European goods after the war• The Fordney-McCumber Tariff Law, raised the tariff

from 27% to 35%.• Presidents Harding and Coolidge were much more

prone to increasing tariffs.• BUT…Europe needed to sell goods to the U.S. in order

to get the money to pay back its debts, and when it could not sell, it could not repay.

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The Stench of Scandal

• Charles R. Forbes was caught with his hand in the till and resigned as the head of the Veterans’ Bureau (over $200 million).• There were reports as to the underhanded

doings of Attorney General Daugherty, in which he was accused of the illegal sale of pardons and liquor permits.

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Teapot Dome Scandal

• Sec of Interior, Albert B. Fall leased land in Teapot Dome, Wyoming, and Elk Hills, California, to oilmen Harry F. Sinclair and Edward L. Doheny, • Fall had received a “loan” (actually a bribe) of

$100,000 form Doheny and about three times that amount from Sinclair.

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• “I have no trouble with my enemies, I can take care of my enemies in a fight. But my friends, my goddamned friends, they’re the ones who keep me walking the floor at nights.

---Quote from Harding on his cabinet of friends and the corruption that plagued it

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• President Harding, however, died in San Francisco on August 2, 1923, of pneumonia and thrombosis, and he didn’t have to live through much of the uproar of the scandal.

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Calvin Coolidge: A Yankee in the White House

• New president Calvin Coolidge was serious and never spoke more than he needed to.• A very morally clean person,

he was not touched by the Harding scandals, and he proved to be a bright figure in the Republican Party.

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Frustrated Farmers

•World War I had given the farmers much prosperity, as they had produced much food for the soldiers.• New technology in farming, such as the

gasoline-engine tractor, had increased farm production dramatically.• However, after the war, these products

weren’t needed, and the farmers fell into poverty.

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Farmers looked for relief

• Capper-Volstead Act, which exempted farmers’ marketing cooperatives from anti-trust prosecution

• McNary-Haugen Bill, which proposed to keep agricultural prices high by authorizing the government to buy up surpluses and sell them abroad, helped a little.

• However, Coolidge vetoed the second bill…twice

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A Three-Way Race for the White House in 1924

• Coolidge was chosen by the Republicans again, • Democrats nominated John W. Davis• Senator Robert La Follette led Progressive

Party as the third party candidate.• He gained the endorsement of the American

Federation of Labor and the shrinking Socialist Party, and actually received 5 million votes.

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Foreign-Policy Issues

• Isolationism continued to reign in the Coolidge era• The Senate did not

allow America to adhere to the World Court, the judicial part of the League of Nations.

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• In the Caribbean and Latin America, U.S. troops were withdrawn from the Dominican Republic in 1924 but remained in Haiti from 1914 to 1934.

• Coolidge took out troops from Nicaragua in 1925, and then sent them back the next year,

• In 1926, he defused a situation with Mexico where the Mexicans were claiming sovereignty over oil resources.

• Latin Americans began to resent the American dominance of them.

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Unraveling the Debt Knot

• America demanded that Britain and France pay back their debts and so those nations demanded huge war reparation payments from Germany

• In order to pay Britain and France, Germany printed lots of paper money, causing inflation to soar

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The Dawes Plan 1924 (Not the Indian Plan)

• Rescheduled German reparations payments and gave the way for further American private loans to Germany.

• Essentially, the payments were a huge circle, with American never really gaining any money or repaid in genuine.

• Also, the U.S. gained bitter enemies in France and Britain who were angry over America’s apparent greed and careless nature for others.

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Indications of Economic Troubles

• Many important industries were declining– Railroads, coal, steel, textiles, mining, lumber,

energy• Most significant indicator of economic

decline was the reduction in the number of new homes being built • Industries related to homes started to

decline as well

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The Triumph of Herbert Hoover

• In 1928, Republicans nominated Herbert Hoover.• Democrats nominated New York governor Alfred

E. Smith, a man who was blanketed by scandal (he drank during a Prohibitionist era and was a Roman Catholic).• Radio turned out to be an important factor in

the campaign, and Hoover’s personality sparkled on this new medium (compared to Smith, who sounded stupid and boyish).

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• Hoover had never been elected to public office before, but he had made his way up from poverty to prosperity, and believed that other people could do so as well.

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Helping the Farmer

• Agricultural Marketing Act (June 1929), was designed to help the farmers help themselves, and it set up a Federal Farm Board to help the farmers.• In 1930, the Farm Board created the Grain

Stabilization Corporation and the Cotton Stabilization Corporation to bolster sagging prices by buying surpluses.

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Tariff Troubles…Again

• The Hawley-Smoot Tariff of 1930 raised the tariff to an unbelievable 60%!!!• Foreigners hated this tariff that reversed a

promising worldwide trend toward reasonable tariffs and widened the trade gap.

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Mellon Economics• Sec. of Treasury, Andrew Mellon enacted a series of tax

reforms which reduced the amount of taxes the wealthy had to pay

• He argued that lower taxes would enable more investment in industry and would produce more jobs

• In hindsight, critics argued that instead of investing in factories, the rich invested in the stock market

• Much of the tax burden shifted to the middle class

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Playing the Market

• The Stock market had become the symbol of American prosperity

• Americans quickly took advantage of the “bull market” a period of rising stock prices by investing heavily in stocks and bonds

• The average American hoped to strike it rich in the stock market

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Gambling on the Market• Most Americans did not have the money to

buy investments, so they “borrowed” to play the market

• Speculation—buying “risky” stocks on the chance of making a quick profit

• Buying on the margin—putting a small portion of the stock’s price as a down payment and borrowing the rest of the money to buy the share of stock

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Highs and lows

• September 1929—stock prices peaked and then dropped

• Some investors quickly sold their stocks before the prices dropped further

• October 24, 1929---the stock market dropped again, and even more investors dumped their shares

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Black Tuesday

• October 29, 1929• The stock market crashed• 16.4 million shares of stock were dumped • Million more stock owners could not find

buyers for their shares• People who had bought on the margin could

not pay back their loans• Others who had invested their savings lost

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Banks Fail

• After the stock market crashed, people started withdrawing their money from banks

• The Problem…banks had invested the money in the stock market

• By 1933, 11, 000 of the nation’s 25,000 banks closed their doors

• People’s deposits were not insured by the government, so people lost everything

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Snowball Affect

• National production of goods and services dropped by half

• 90,000 businesses went bankrupt causing 13 million employees to be left without jobs

• 1 out of every 4 Americans lost their jobs• Those that were able to keep their jobs faced

pay cuts and fewer hours

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Impact on the Family Unit

• Some families were forced to separate • 300,000 hoboes traveled across the nation

looking for work• Women struggled to stretch food supplies and

manage budgets• Those women that did work were resented for

having a job when so many men didn’t• Children suffered from malnutrition and

schools shut down

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Psychological Effects

• Suicide rate rose more than 30%• People were forced to make sacrifices that

would affect the rest of the lives (dentist, college, marriage, families)

• Achieving financial security became the focus for the rest of their lives

• Generosity of the human spirit was revealed• People learned to save money and be thrifty

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Causes of the Depression1. Tariffs and debts from the

war cut down on the foreign market for American goods

2. Farming crisis3. Credit was easily available4. Unequal distribution of

wealth

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Hooked on the Horn of Plenty

• The Great Depression might have been caused by an overabundance of farm products and factory products; the nation’s capacity to produce goods had clearly outrun its capacity to consume or pay for them.

• Also, an over-expansion of credit created unsound faith in money, and many bought too much to pay.

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Horrible Hoover?

• Hoover unfairly received the brunt of the blame for the Great Depression, but he did pass measures that made the depression less severe than it could have been.• Critics noted that he could feed millions in

Belgium (after World War I) but not millions at home in America.

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What was the Government doing?

• Herbert Hoover took a mostly laissez-faire approach to the stock market crash

• He believed that this was a normal part of the business cycle and that Americans should go about their business as usual

• He believed the government should play a limited role in helping to solve the national economic problems

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Hoover’s Philosophy

• The government should promote cooperation between competing groups and the needs of society

• Hoover called together leaders in business, banking and labor to find solutions to the economic problems

• He offered some relief to certain businesses, believing that this would create a trickle-down effect which would eventually help the average American

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Hoover’s Reconstruction Finance Corporation

• This agency loaned money to railroads, banks and insurance companies to keep them in business.

• By doing this, Hoover hoped to keep workers on their jobs, but it was too little too late.

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• He also valued the American ideal of individualism—that most Americans would rather work the problem out themselves than have the government bail them out

• He opposed direct relief for the needy and said Americans would appreciate help from charities so that their “moral fiber” would not weaken.

• Hoover created special organizations to help charities

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Americans Turned Against their President

• Farmers burned crops and dumped milk• Famers blockaded roads• Some farmers used force to prevent

authorities from foreclosing on farms• “Hoovervilles” (shanty towns), Hoover

blankets, Hoover flags• Americans viewed Hoover as a cold and

heartless leader

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• Finally, Hoover voted to withdraw $2.25 billion to start projects to alleviate the suffering of the depression.

• The Hoover Dam (Boulder Dam) provided electricity, irrigation, and flood control from the Colorado River

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Norris-La Guardia Anti-Injection Act 1932

• Outlawed anti-union contracts and forbade the federal courts to issue injunctions to restrain strikes, boycotts, and peaceful picketing.

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The Bonus Army• A bill was being debated by Congress that would

have paid WWI veterans cash and a life insurance policy in 1945 ($500). Congressman Patman thought the men should be paid immediately

• Spring 1932, 10,000-20,000 veterans and their families marched on Washington DC to show support for the bill

• The “Bonus Expeditionary Force” erected unsanitary camps and shacks in vacant lots, creating health hazards and annoyance

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• Hoover respected their right to assemble but when the Patman Bill was voted down by the senate, he ordered the people to leave

• 2,000 members of the Bonus Army refused• Hoover was afraid that the mob may become

violent, so he called in the military • More than 1,000 people were gassed (baby

and a 8 year old, 2 others shot)• Hoover ‘s image was damaged, again

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Japanese Militarists Attack China• In September 1931, Japan, alleging provocation,

invaded Manchuria and shut the Open Door.• Peaceful peoples were stunned, as this was a

flagrant violation of the League of Nations covenant, and a meeting in Geneva, Switzerland, was arranged.• An American actually attended, but instead of

driving Japan out of China, the meeting drove Japan out of the League, thus weakening it further.

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Hoover Pioneers the Good Neighbor Policy

• Hoover was deeply interested in relations south of the border, and during his term, U.S. relations with Latin America and the Caribbean improved greatly.• Since the U.S. had less money to spend, it was

unable to dominate Latin America as much, and later, Franklin D. Roosevelt would build upon these policies.

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