1920S DAY 2

• We have a quiz on Day 1.

• Study your notes from day one and be sure to consider:• What social changes were occurring in 1920s society?

• What were some examples of the transition from traditionalism to modernism?

OBJECTIVES

• Cite and explain evidence that led to the transition of the U.S. economy from laissez-faire capitalism to an increasingly regulated economy.

• Analyze and evaluate historical arguments regarding monetary policy.

• Critique the government‘s use of tariffs and trade agreements.

Harding to Coolidge

POLITICS OF THE 1920S

WARREN HARDING

• Born in Ohio in 1865

• Elected to one term in the U.S. Senate

• Runs in 1920 under the campaign slogan of “Return to Normalcy”

• Chose CALVIN COOLIDGE as his running mate for VP.

WARREN G. (HARDING)

WARREN G’S HOMIES: THE OHIO GANG

• Harding made some good appointments to his cabinet:• Herbert Hoover – Secretary of Commerce• Andrew Mellon – Secretary of the Treasury

• However, some were not so good…• The “Ohio Gang” – Many cabinet posts were

given to his buddies from home. These guys sold government jobs, pardons, etc.

• Harding often didn’t have any clue what they were doing.

• Charles R. Forbes, who ran the Veterans Bureau sold medical supplies and kept the money for himself – costing the U.S. over $200 million.

TEAPOT DOME SCANDAL

• Harding’s Sec. of the Interior ALBERT FALL leases land with U.S. oil reserves to private interests in TEAPOT DOME, WY and ELK HILLS, CA.

• Fall gets $300,000 in bribes for doing this.

• Fall becomes the first cabinet officer to go to prison.

“SILENT CAL” COOLIDGE

• On a trip out west in 1923, Harding has a heart attack and dies. This happens just before the news about the scandals breaks.

• Calvin Coolidge – from Vermont – takes over.

• He quickly got rid of many of Harding’s corrupt friends, but kept Mellon and Hoover on staff.

CAL COOLIDGE

COOLIDGE IN OFFICE

• Coolidge was PRO-BUSINESS. He thought that the gov’t should stay out of business’s business as much as possible.

• He wanted a SMALL GOV’T with little bureaucracy.

“The chief business of the American people is business. The man who builds a

factory builds a temple. The man who works there worships there.”

~Calvin Coolidge, 1925

ELECTION OF 1924

• Coolidge wins in 1924 easily over John W. Davis (Democrat) and Robert M. La Follette (new Progressive Party).

• La Follette was a Senator from Wisconsin, but got only 17% of the popular vote.

• Coolidge serves for 4 more years and give the U.S. the “normalcy” that Harding promised.

Boom to Crash

ECONOMICS OF THE 1920S

• Many black citizens in the South were tied to the land through a system of “sharecropping.”

• Sharecroppers paid rent to land owners by giving them a large percentage of their crop.

• Economics and Racism gave many Southern blacks a strong incentive to try and escape this life.

ECONOMICS FOR SOUTHERN BLACKS

• After World War I, Northern cities were booming industrial centers.

• Racism and prejudice towards blacks was slightly less prevalent in the North as well.

• Many Southern blacks will take this opportunity to escape the prejudices of life in the South and seek job opportunities in the North.

• This is the “Great Migration.”

ECONOMICS IN THE NORTH

• Henry Ford’s use of the assembly line is adopted by most American industries.

• As a result American manufacturing output increases at a dramatic rate during the 1920s.

• With the availability of cheap goods America becomes a massive consumer society and the economy booms. • People were buying cars, radios,

electric ice-boxes, fans, vacuum cleaners…

MASS PRODUCTION AND CONSUMERISM

• Farmers bought more land and more machines accruing more debt in the process.

• With more land and more machines farmers began to overproduce.

• This naturally forced the price of agricultural products down.

AGRICULTURAL OVERPRODUCTION

• People began purchasing luxury items on credit and racking up huge debt.

BUYING ON MARGIN• People began buying

stocks with money they borrowed from a broker thinking that they would pay off the loan when they sold the shares.

BUYING ON CREDIT

• American manufacturers are mass producing goods.

• American consumers are buying tons of stuff, much of it on credit.

• Farmers are producing massive amounts of agricultural products.

• People speculate that the stock market will continue to grow indefinitely and make risky decisions.

BOOM Bull Market

• The optimism and financial gains of the great bull market were shaken on September 18, 1929, when share prices on the New York Stock Exchange (NYSE) abruptly fell.

• People were scared of the Smoot-Hawley Tariff being passed, which raised tariff rates.

• Fearing what the Tariff might do to their stocks people began rapidly selling their stocks.

• Other countries might retaliate by raising their tariffs and decreasing U.S. exports and hurt American business.

CRASH

• October 29, 1929,

• Rumor was that U.S. President Herbert Hoover would not veto the pending Smoot–Hawley Tariff Act

• 16 million shares were traded, and the stock market lost an additional 30 points, or 12%

CRASH

Black Tuesday

• The Twenties were a time of extravagant living.

• Major Causes of the Crash and Depression:

• Overproduction/Falling Prices

• Buying goods on credit

• Speculating

• Buying stocks on margin.

IN SUM Boom

Crash

THE GREAT DEPRESSION BEGINS