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THE POLITICS OF BOOM AND BUST
Chapter 32
CHAPTER THEMES
Theme: The Republican administrations of the prosperous 1920s pursued conservative, pro-business policies at home and economic unilateralism abroad.
Theme: The great crash of 1929 led to a severe, prolonged depression that devastated the American economy and spirit, and resisted Hoover’s limited efforts to correct it.
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”
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
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.
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.
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.
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?
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?
LIMITS IMPOSED BY WASHINGTON CONFERENCE, 1921–1922
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.
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.
THE STENCH OF SCANDAL
Harding Administration was beset with scandals.
Charles Forbes, Attorney General
Daugherty Teapot Dome
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.
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?
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.
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.
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.
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.
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.
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.
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.
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.
PRESIDENTIAL ELECTION OF 1928
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. layed into the hands
of rising Nazism in Germany.
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.
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?
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
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.
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?
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.
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.
STUDENTS ON THEIR OWN
JAPANESE MILITARISTS ATTACK CHINA HOOVER PIONEERS THE GOOD
NEIGHBOR POLICY