THE POLITICS OF BOOM AND BUST

1. THE POLITICS OF BOOM AND BUST Chapter 32

2. 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”

3. 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

4. Rolling Back Progressivism • In 1920s the Supreme Court supported business. • 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.

5. 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.

6. 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.

7. 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?

8. 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?

9. Limits Imposed by Washington Conference, 1921–1922

10. 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.

11. 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.

12. The Stench Of Scandal • Harding Administration was beset with scandals. • Charles Forbes, • Attorney General Daugherty • Teapot Dome

13. 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.

14. 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?

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

22. 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.

23. 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.

24. 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.

25. Presidential Election of 1928

26. 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. played into the hands of rising Nazism in Germany.

27. 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.

28. 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?

29. 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

30. 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.

31. 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?

32. 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.

33. 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.

34. Students on Their Own • JAPANESE MILITARISTS ATTACK CHINA • HOOVER PIONEERS THE GOOD NEIGHBOR POLICY