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The Brief American PageantSeventh Edition Chapter 32 The Politics of Boom and Bust 1920-1932
The Republican “Old Guard” Returns • Warren G. Harding was a popular choice as president, however he exterior hid the many shortcomings within. • Harding had a difficult time detecting moral defects in people. Often unable to say no, especially to his friends, Harding was soon surrounded by corruption. • He brought on several impressive characters in his Cabinet, but also hired on some outright crooks such as Secretary of the Interior Albert Fall and Attorney General Harry Daugherty. • Harding’s policy was simple: a pro-business approach to laissez-faire economics. • In order to uphold his policies, Harding had the good fortune of appointing four Supreme Court justices. He stacked the court with conservatives who attacked progressive reforms such as child labor laws, labor union rights, and upheld laws restricting the government’s ability to intervene in the economy.
The Aftermath of War • The war had provided a reason for greater government regulation, however the end of the conflict and the election of Republicans brought Progressive hopes of more government intervention to an end. • Organized labor, which had enjoyed a friendly relationship with government during the war, found themselves subject to wage cuts and a resurgence of injunctions to break strikes. • Those who returned from war enjoyed some gains however, as Congress created the Veterans Bureau to operate hospitals and provide vocational assistance. • A watchdog group, the American Legion, lobbied for veteran’s rights and benefits following the war. One of the greatest victories of the Legion was passage of the Adjusted Compensation Act which provided veterans payments for income lost while away at war.
American Seeks Benefits Without Burden • Despite the isolationist foreign policy, the Harding administration did involve itself in one world issue: disarmament. • The US, along with Japan and Britain entered into a 10 year “holiday” that called for restrictions on naval production and eased tensions in the Pacific. • Later in the decade during Calvin Coolidge’s presidency, the Kellogg-Briand Pact was signed by 62 nations who promised to avoid war as a means to settle conflict.
Hiking the Tariff Higher • Big business sought an increase in the tariff in order to horde domestic profits for themselves. • These individuals got their wish in 1922 when rates were increased from 27% to 38.5%. • A ripple effect was felt world wide as European nations struggled in the post war era. The high tariffs made trade with the US extremely difficult. The tariff was also counterproductive to the US as many of the European nations owed a great deal of money to America, however they were prevented from selling to their number one customer: the US.
The Stench of Scandal • The climate of greed in the 1920s led to several example of corruption: • Veterans Bureau- Colonel Charles Forbes and others were caught stealing $200 million from the government through fraudulent practice related to the construction of veteran’s hospitals. (convicted and served 2 years) • Teapot Dome Scandal- Secretary of the Interior Albert Fall convinced Secretary of the Navy to transfer valuable oil reserves in Wyoming and California to the Department of the Interior. President Harding secretly signed the deal and then the lands were leased to oilmen who had paid $400,000 in bribes to Fall. • Attorney General Daugherty- investigated by the Senate for the illegal sale of pardons and liquor permits. (resigned, placed on trial, hung jury)
“Silent Cal” Coolidge • All of the scandal perhaps played a role in the demise of President Harding as he died in office in late summer of 1923. • Vice President Calvin Coolidge was sworn in as president. The new president was the polar opposite of Harding as he exhibited the New England Puritan values of honesty, morality, hard work, and frugality. • Nevertheless, Coolidge embraced the pro-business status quo.
Frustrated Farmers • Farmers experienced a bust following WWI as crop prices dropped and large scale foreign purchases ceased. • Innovation changed the landscape of agriculture as the gasoline powered tractor made cultivation and sowing easier. • While the work was easier, it led to price dropping surpluses as farmers produced more than they could sell. • The government provided little assistance as legislation to require the government to buy up surpluses and resale it on the global market were vetoed by Coolidge. • As prices remained low, the farmers once again sought to align politically to have their grievances heard.
A Three-Way Race for the White House in 1924 • Coolidge did well enough finishing the dead Harding’s term that he received the Republican nomination in 1924. • The Democrats were in disarray as a struggle emerged between “wets” and “drys,” urban citizens and farmers, Fundamentalists and Modernists, north and south, immigrants and native born. • In the end the Democrats settled on John Davis as their candidate. • Another Progressive party offering emerged in the form of Senator Robert La Follette (Wisconsin). The distressed farming class rallied being the Progressive candidate.
A Three-Way Race for the White House in 1924 • Progressive platform in 1924: • Supported government ownership of railroads • Supported government aid for farmers • Opposed monopolies • Opposed anti-labor injunctions • Opposed judicial review
Foreign-Policy Flounderings • Isolationism remained the American foreign policy in the Coolidge administration. • However, the US did have a few flare ups in the 1920s in the volatile Latin American region. • American troops were withdrawn after eight years in the Dominican Republic and they remained in Haiti and Nicaragua throughout the decade. • Another international issue following WWI was the concern over German reparations and foreign loans. The US was due over $10 billion in loan payments from the Allies, who argued they should not have to repay. • In reality the Allies could never pay back their war debts due in large part to the incredibly high tariff on imports levied in the US.
Unraveling the Debt Knot • The US insistence on being repaid had a negative impact on Germany who owed $33 billion in reparations for its “responsibility” for the war. • In order to collect from a weakened Germany, the French marched troops into the resource rich Ruhr Valley in 1923. • Unable to combat the aggression militarily, the German government purposely wrecked its own economy causing runaway inflation.
Unraveling the Debt Knot • The world financial systems were on the brink of collapse when cooler economic minds prevailed with the Dawes Plan (1924). • The agreement changed the terms of German reparations payments, made American loans available to the Germans, and as a result a financial merry-go-round was created with American credit allowing the Germans to pay the Allies who in turn paid the US government.
The Triumph of Herbert Hoover in 1928 • Coolidge did not seek another term in 1928 leaving the door open for rising Republican star Herbert Hoover to earn the nomination. • The Democrats, still out of sorts, nominated Governor Alfred Smith (NY). Known as “Al(cohol) Smith,” his platform was in opposition to prohibition, pro-urbanization, and he was a Roman Catholic. • Many Democrats, who lived in rural areas, favored temperance, and that were Protestant abandoned their candidate on election day.
President Hoover’s First Moves • The late 1920s brought forth a bull market with incredible profits. • However, two groups within society were struggling as the decade came to a close: unorganized wage earners and unorganized farmers. • To assist farmers, the Agricultural Marketing Act (1929) was passed which granted low interest loans. • However, the government’s tariff policy was damaging to the farmers as the Hawley-Smoot Tariff (1930) raised the protective tariff from 38.5% to a record 60%. • The tariff legislation drove the US and world economy into further depths of the depression that was emerging. The US went further into isolation in an attempt to soak up domestic profits.
The Great Crash Ends the Golden Twenties • “Black Tuesday,”” October 29,1929 occurred amidst a 16 million share sell off. Investors sought to save themselves as stock prices plummeted, however by the end of the year $40 million had been lost. • The market crash had a domino effect on the American economy. By the end of 1930 over 4 million Americans were unemployed and by 1932 nearly 12 million were without work. Those that did have jobs saw their wages slashed as employers struggled to keep their doors open. • The banking industry collapsed as well with 5,000 bank failures by 1932. In the days before federal deposit insurance, the bank failures zapped the life savings of tens of thousands of Americans, which resulted in massive foreclosures on homes and farms. • The depression impacted the family unit as mental depression wreaked havoc on men who saw themselves as failures unable to provide for their families. Women birthed fewer children and the decade long depression resulted in a record reduction in birth rates.
The Horn of Plenty Runs Dry • A simplified explanation as to what caused the Great Depression can be summed up in one word: overproduction. • America’s ability to produce both in the field and the factory had outpaced its ability to consume and even pay. • A disproportionate amount of wealth was being controlled by a relatively small amount of people who invested in industry rather than wages which lessened the common man’s purchasing power. • Also, credit was made to readily available to those individuals who in reality were unlikely or unable to repay their debt. • The tariff issue also brought about damaging effects at home and aboard as international trade crawled at a snail’s pace.
The Horn of Plenty Runs Dry • Reality eventually forced Hoover’s hand to provide some assistance. He extended aid to railroads, banks, and rural credit providers. • Hoover believed in “trickle-down” economics, a belief that repairing the top sector of the economy would lead to growth further down. • In 1932, the Reconstruction Finance Corporation was created to provide loans to insurance companies, banks, agricultural organizations, railroads, and state governments.
Japanese Aggression • Japan used the worldwide economic downturn as an opportunity to go unnoticed into Chinese Manchuria, which it did in September 1931. • In the region held by the Japanese, they greatly restricted free trade . • Americans called for a blockade or boycott of Japan. However, the US took a soft stance issuing the Stimson Doctrine which stated America would not recognize any territorial acquisition taken by force. This action was about as much as the US could do considering the bleak economic conditions at home. • This act of aggression by the Japanese would only be a beginning however of what would become a decade of hunger for power and prestige.