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THE NEW ERA: 1921-1933. CHAPTER 25 (668-689). HARDING AND “NORMALCY”. Warren G. Harding was a compromise candidate: the Republican party could not decide between General Leonard Wood, a Roosevelt progressive and Frank Lowden, Governor of Illinois

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The new era 1921 1933

THE NEW ERA: 1921-1933

CHAPTER 25 (668-689)

Harding and normalcy

Warren G. Harding was a compromise candidate: the Republican party could not decide between General Leonard Wood, a Roosevelt progressive and Frank Lowden, Governor of Illinois

He was a newspaperman and had been in the Ohio legislature and its Lt. Governor

Harding and normalcy1

Indecisive and unwilling to offend, he allowed his department heads to make policy

He also gave some of his cronies jobs – men who were not necessarily of good character

Harding was miserable as the president finding no relief from the pressure – he likened it to a prison

The business of the unites states is business

Andrew Mellon, Secretary of the Treasury was determined to reduce the national debt, reduce taxes on the rich, raise tariffs, and return to the laissez-faire policies of McKinley

Most of Mellon’s proposals were cut back by southern Democrats and mid-western Republicans – however he was able to balance the budget and reduce the deficit by an average of $500 million per year

Harding and Coolidge used their appointing powers to turn the ICC and the Federal Reserve into pro-business entities, reversing many of the Progressive Era reforms

The harding scandals

Harding appointed several corrupt officials

Harry M. Daugherty – Attorney General – accused of the fraudulent return of German assets

Charles R. Forbes – head of the Veterans Bureau – siphoned millions of dollars out of hospital funds

Albert B. Fall – Secretary of the Interior – leased oil reserve lands to private oil companies

Harding allowed bootleg whiskey to be given to guests after dinner parties at the White House

Harding died of heart failure in San Francisco during a trip to Alaska (He was the first President to visit) – his personal physician and friend was incompetent and diagnosed him with ptomaine poisoning – he actually died of a heart attack – rumors swirled that he killed himself or that his wife poisoned him

Coolidge prosperity

Vice President Calvin Coolidge took office after Harding died

Coolidge was a conservative and cleaned up Harding’s corrupt appointments

He was devoted to laissez-faire policies

Coolidge was easily re-elected in 1924 – complacency was the order of the day – “Mr. Coolidge’s genius for inactivity is developed to a very high point”

Peace without a sword

Both Harding and Coolidge handled foreign affairs as they did domestic ones: they relied heavily on their Secretary of State to make policy

After the war, many Americans wished to return to isolationism in order to prevent another war – but America had economic interests all over the world - it needed raw materials and markets

Peace without a sword1

The Open Door policy remained in effect

The State Department worked to open opportunities in underdeveloped countries

Meanwhile, Japan was growing in influence in China, threatening Open Door

Japan, Britain and the US were in the midst of a naval arms race

Peace without a sword2

Washington Conference – Nov 1921-Feb 1922

5 Power Treaty – US, GB, France, Italy, and Japan agree to limit their capital ships to a fixed ratio to produce a balance of power

4 Power Treaty – US, GB, France, Japan – agreed to respect each other’s interests in the Pacific Islands

9 Power Treaty – all parties would respect the independence of China and Open Door

These treaties were mostly toothless – the shipping ratio gave Japan the balance of power – Japan did not relinquish its Chinese territorial claims in China – The Japanese became more antagonistic towards the US, beginning to believe that war was inevitable

The peace movement

Americans wanted peace but would not build the defenses to ensure it

Peace societies flourished – Carnegie Endowment for International Peace – Woodrow Wilson Foundation

The US refused membership in the World Court

Kellogg-Briand Pact of 1928 – France wanted to collect allies against a resurgent Germany – they would agree never to go to war against each other – Kellogg had it broadened to all nations – in Paris 15 nations signed – it was a worthless gesture but many Americans felt good about it

The good neighbor policy

President Herbert Hoover reversed Wilson’s policy of trying to teach the Latin American nations how to operate

He removed intervention from the Roosevelt Corollary and abrogated the Platt Amendment to the Cuban constitution

Self-preservation would be the only reason for intervention n the future

Marines in Nicaragua, Haiti, and the Dominican Republic would all be withdrawn by 1934

The “Good” part of the Good Neighbor policy never really materialized, however – resentment against America was high

The totalitarian challenge

In 1931, Japan marched an army into Manchuria and made it a puppet state called Manchukuo

This violated both the Kellogg-Briand and Nine Power Treaty

Chiang Kai-shek appealed to both the League of Nations and the US – neither could help

In 1932 Japan attacked Shanghai, was condemned by the League of Nations and promptly withdrew from it and extended their control over China

The lesson was not lost on Adolf Hitler, now chancellor of Germany…

War debts and reparations

The great democracies were fighting over war debts – German debts to the Allies and Allied debts to the United States

The Allies owed the US $22 billion to be paid over 62 years but they could not afford it – much of the money had been spent on weapons rather than factories – so they pushed as much as possible into Germany - $33 billion – When Germany defaulted, so did the Allies

War debts and reparations1

All sides were at fault

Germany allowed runaway inflation that put the mark at 1 trillionth of its prewar value

The Americans refused to see the connection between high tariffs and the debt

The Allies made little effort to pay any of their obligations

The Dawes Plan (1924) The US loaned Germany $200 million to stabilize the economy – then Germany would play $250 million per year – in 1929 the payments were scaled down even further

Soon the US stopped loaning money, the Great Depression struck (in large part due to the war debts) and Germany defaulted on its payments, the Allies stopped even attempting to pay anything

After 1933, the only thing left was mistrust and hostility

The election of 1928

Coolidge decided not to run again and Herbert Hoover received the nomination

Hoover had never been in elective office before

He was a modernist – businesses should cooperate with each other and labor

He opposed union busting and trust busting

He supported prohibition

Hoover easily won 444-87

However, a political change was sweeping the nation – many working class voters in the cities became Democrats

Economic problems

Not every industry was sharing in the prosperity

Coal was down – competing with petroleum

Textiles were down – competing with new synthetics

Industries resumed a trend toward consolidation

by 1929 200 companies owned half the nation’s corporate assets

GM, Ford and Chrysler made 90% of American cars and trucks

4 tobacco companies produces 90% of cigarettes

Economic problems1

The weakest part of the economy was agriculture

Prices slumped and costs increased

Farmers faced high tariffs and quotas

Harding opposed direct aid to agriculture

The prosperity of America rested on unstable foundations

The stock market crash of 1929

In late 1928, prices on the New York Stock Exchange were at an all time high and continued to rise

In early 1929, they continued and many people entered the market as speculators

In September, the market began to fall,

On Oct 24, major sell off began

On Oct 29, the bottom dropped out and prices plummeted

Hoover and the depression

Stocks rallied later that year but in the spring of 1930, they fell even more sharply

Several key issues:

The default of WWI war debts by Germany and the Allies

Poor distribution of wealth – too much money in too few hands – people could not afford to buy the goods being produced

Too easy credit policies of the Federal Reserve

Mellon’s tax structure which favored the rich

Hoover and the depression1

Unable to sell products, manufacturers closed plants and laid off workers – making the problem worse – demand fell even further

5000 banks closed between 1930 and 1933

Millions of depositors lost what little they had

Unemployment rose to 13 million from 1 million


The national income fell from $80 billion to $50 billion

Hoover and the depression2

Secretary of the Treasury Mellon advised Hoover to allow the crash to run its course – “people will work harder, live a m ore moral life. Values will be adjusted and enterprising people will pick up the wrecks from less competent people.” – Hoover disagreed

Hoover’s plans required a great deal of cooperation between businesses and citizens and relied on their good will and ability to help – without legal compulsion

Hoover and the depression3

Hoover refused to allow crop or acreage controls

He refused to shift responsibility from states to federal agencies

He refused – on Constitutional grounds – to allow federal funds to be used for individual relief – state, city, and private groups must take care of the needy

As the depression worsened, breadlines lengthened, and millions continued to be out of work, the public grew increasingly resentful

Hoover and the depression4

Almost everyone at the time believed that a balanced budget was essential to recovery:

Economists, business leaders, labor leaders, even socialists – this only took more money out of the economy

Hoover signed the Hawley-Smoot Tariff Act in 1930, raising duties on manufactured goods to very high levels, which affected Europe tremendously – they could not earn the money they needed to pay their war debts and went onto their own depression

Hoover was ultimately unable to be flexible and change when desired results were not obtained – something the next president had no problem with doing

The economy hits bottom

In the spring of 1932 thousands faced starvation

About ¼ of the unemployed were getting any public aid

Many people were evicted from their homes and gathered in shanty towns fondly called “Hoovervilles”

Tramps and Hobos roamed the countryside looking for food and work

Nebraska farmers organized a “farm holiday” – basically a boycott where they refused to ship their crops to market

The economy hits bottom1

Immigration agents began rounding up Mexican-Americans and deporting them – many were legal

Summer 1932 20,000 WWI vets marched on Washington (the Bonus Army) demanding payment of their compensation – when they were rejected, 2000 refused to leave and were chased away by tanks and tear gas

Changes needed to be made, just few knew what to do

The depression and its victims

Depression described the economic situation and soon described the psychological situation as well

Many simply gave up trying to work, many became ashamed of themselves, and were driven to drink

Food consumption went down and people became listless due to lack of vitamins and proteins

Birthrates dropped

Children suffered – lack of attention, lack of food, lack of clothing

The election of 1932

The Depression, coming after 12 years of Republican rule, ensured that a Democrat would be elected – Hoover’s attitude didn’t do him any favors either

Democrats chose New York governor Franklin D. Roosevelt – a distant relative of TR

New York led the nation in providing relief for the needy, enacted a program of old-age pensions, unemployment insurance, conservation and public power projects – exactly what many wanted on a national scale

The election of 19321

Roosevelt was crippled by Polio in 1921 – he could only walk a few steps with the help of braces and 2 canes

He was a liberal Democrat, known for his hard work and geniality

Despite his handicap, Roosevelt was an energetic campaigner, traveling across the country radiating confidence and good humor

Roosevelt believed that there must be a “re-appraisal of values” a “New Deal” and he was willing to try anything to make it happen – the government should do whatever was necessary to protect the unfortunate and advance the public good

The election of 19322

Roosevelt’s approach was very different than Hoover’s – Hoover refused to change, sticking to what he thought was right even when it wasn’t working – and Roosevelt easily won the White House 472-59

During the interval between the election and taking office, the Depression continued but neither Congress, Hoover or Roosevelt could do anything – the nation drifted aimlessly