America in the 1920s

1. America in the 1920s

2. End of the Great War • President Wilson had tremendous clout at the Paris Peace Conference. • While he won more points than he lost in negotiations, his experience left him a jaded and dispirited man • He refused to accept the reservations of the majority of Republican Senators, led by Henry Cabot Lodge. • Wilson collapsed after a long speaking tour of the West. • No compromise was possible and ratification of the treaty was blocked.

3. 1920 Presidential Election • Wilson’s ill health made it impossible to contest the 1920 election. • Democratic candidate James M. Cox was soundly thrashed by Warren G. Harding and the isolationist Republicans. • Most Americans preferred to turn inward rather than focus on world affairs. • Europeans and other foreigners were left to sort out their own affairs.

4. Domestic Trouble • At home there was enough to deal with. • Government control of telephone, telegraph, cable lines and railways ended. • America wanted to get government out of the business world. • Labor peace – the legacy of Sam Gompers and the American Federation of Labor’s effort to strengthen the war effort – ended. • Soldiers returned to an America torn by labor unrest.

5. Warren G. Harding • Harding’s solution was to do little. • In May, 1920, he said “America’s present need is not heroics but healing, not nostrums but normalcy; not revolution but restoration...not surgery but serenity.” • Harding cut government spending to deal with the post-war recession.

6. Warren G. Harding • Harding presented himself as a congenial president. He even freed imprisoned socialist leader Eugene Debs from prison, saying “I want him to eat his Christmas dinner with his wife.” • At the same time, Harding allowed business to operate without much regulation. • Once the vicious recession ended, business rebounded strongly – partly on the back of depressed wages.

7. Immigration • In 1921 the government responded to pressure from labor and businesses to decrease immigration. • Labor feared low wage competition for jobs. • Business worried that Bolshevik radicals lurked among newcomers. • Legislation drastically reduced immigration in a manner that was clearly racist. • Racial quotas were set. Congressmen made it clear that their intent was to bar the entry of “inferior stock.”

8. Immigration • Mainstream America was deeply racist. • F. Scott Fitzgerald wrote the following to Edmund Wilson in 1921: “Raise the bar of immigration and permit only Scandinavians, Teutons, Anglo-Saxons and Celts to enter.”

9. Racism • Popular support for the Ku-Klux Klan was undeniable. • It counted 4 million members in the East and Midwest. • Will Hayes, Harding’s campaign manager, was careful to stress that his candidate’s lineage was “the finest pioneer blood, Anglo-Saxon, German, Scotch-Irish and Dutch.”

10. Conformity • Clearly, Americans preferred conformity to diversity. • British writer H.G. Wells lamented in his The Future in America that American politics lacked variety: “All Americans are, from the English point of view, Liberals of one sort of another.” (Liberal here meant favoring free trade and small government.)

11. The Roaring 20s • Despite the dark side of the era there were positives too. • After the post-war depression, there was a period of unprecedented growth. • Calvin Coolidge said “the chief business of the American people is business.”

12. The Roaring 20s • “Silent Cal” was convinced that government intervention produced undesirable results, so he was committed to leaving business alone. • He appointed commissioners and regulators who would not interfere. • He refused to tighten credit or make stock speculation more difficult.

13. The Roaring 20s • He was willing to increase tariffs on imported goods, however. • This hampered foreign efforts to pay debts to America and hampered American exports. • His policies appear dangerous in light of what followed, but they seemed eminently sensible at the time. • Economic growth was spectacular.

14. The Roaring 20s • Per capita income rose by 1/3 in eight years. • A building boom provided 11 million new homes by 1924. • The automobile ceased to be a luxury item as car production rose from 569,054 in 1914 to 5,621,715 in 1929. Henry Ford revolutionized industry with new production techniques and standardization. • US car production was 5/6 of total world production – 1 car for every 5 people in America. • The radio became a domestic staple, creating mass culture along with another new necessity – movie going.

15. The Roaring 20s • All this buying was fueled by the new advertising industry, with products like cigarettes touted as “progressive, liberating and healthy.”

16. The Roaring 20s • America was booming. • Americans were better off than ever before – and better educated. • Literacy was increasing and the Book of the Month Club and Literary Guild put literature into the hands of the masses. • Jazz clubs proliferated, but so too did orchestras.

17. Politics • In a booming America, few were concerned about political change. • Both political parties favored business and most Americans were happy with their prosperity. The rest were largely ignored. • Radicalism was relegated to the political fringes. Only the most marginalized favored radical parties. • As a union organizer said in 1929: “the Ford car has done an awful lot of harm to unions here and everywhere else. As long as men have enough money to buy a 2nd hand Ford and tires and gasoline, they’ll be out on the road and paying no attention to union meetings.”

18. Politics • Calvin Coolidge decided not to run in the 1928 election, preferring retirement despite massive public support. • In his final speech, he said: “The great wealth created by our enterprise and industry and saved by our economy, has had the widest distribution among our people, and has gone out in a steady stream to serve the charity and business of the world. The requirements of existence have passed beyond the standard of necessity into the region of luxury. Enlarging production is consumed by an increasing demand at home and an expanding commerce abroad. The country can regard the present with satisfaction and anticipate the future with optimism.”

19. Politics • Coolidge was wise to quit while he was ahead. • His successor, Herbert Hoover, would have to meet the next economic down-turn head on.

20. Warning Signs • Structural weaknesses were present in the economy well before the crash. • The agricultural sector was weak throughout the 20s. Southern sharecroppers lived in poverty. • The USA was a high tariff country throughout the decade – limiting international trade opportunities. • The result was high prices – with government deliberately inflating the money supply to keep the public buying.

21. Warning Signs • Buying on credit became a way of life in the 1920s with present lifestyles bought with borrowed money. • Banking was propped up by foreign loan repayment. American prosperity relied on foreign stability. • So long as consumption and business confidence were high, the system worked – but it could not do so for ever.

22. Warning Signs • For consumption to remain high at the end of the decade, credit had to be extended. • The bankers’ solution was terribly flawed: available funds went largely into speculation as investors, rich and poor, bought stocks at grossly inflated prices. • Stock market investment was a national mania.

23. Warning Signs • Investing in the stock market was once the realm of the wealthy. • Now even secretaries and teachers invested – firm in the belief that the stock market always went up on balance. • To make matters worse, stocks could be bought on margin, with only a 10% down-payment required. The rest would be redeemed through paper profits on expected earnings. • Speculation bid up stock values, while easy credit pumped speculation. • Even drops in consumption in 1928 did not dampen investment • The result was an economic time bomb.

24. Warning Signs • Credit inflation eased at the end of 1928, but the economy declined six months later. • What followed would be either a short, sharp recession and financial correction, or a full blown depression. • The stage was set for the economic crisis of 1929.

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